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San Diego’s Office Rents Grow Above Long-Term Average

CoStar Insights: Life Science and Tech Firms Spurred Rent Growth in San Diego's Tech Corridor

Article Via: CoStar

San Diego’s office rents grew 3.6% in the 12 months ending after the third quarter. Although rent growth further decelerated after recording more than 5% growth after the first quarter this year, it is still an improvement over the long-term average of 2.6%. Office rents have now grown for 31 straight quarters in San Diego.

In a nod to the strength of San Diego’s life science and tech demand, most of the submarkets at the top of the leaderboard in the past year are tech centric.

Sorrento Valley, UTC, Del Mar Heights/Carmel Valley, Sorrento Mesa, Scripps Ranch, Torrey Pines and Rancho Bernardo all posted annual rent growth at or above 4.5%. The average rent growth in this group was 5% with an average market rent of $3.15 per square foot gross, compared to $2.84 per square foot gross for the region.

Del Mar Heights/Carmel Valley has recovered to post one of the strongest growth rates in the metropolitan area. At the end of the first quarter, it was the only submarket in San Diego where trailing 12-month rent growth was negative.

But strong demand fueled by new construction at One Paseo, where asking rates are above $6 per square foot, has supported that robust growth. For instance, Retrophin signed one of San Diego’s biggest office deals in 2019 at Kilroy Centre Del Mar at an effective rate of nearly $4.75 modified gross per square foot.

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