Q4 2014 San Diego Office Market Statistics: Market dynamics pave the way for speculative construction

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The San Diego economy continues to add jobs with November having the largest annual job growth so far this year.

Q4 Highlights:



  • San Diego added 43,000 jobs in the last twelve months, the highest level for 2014. Office-using Professional and Business Services super-sector reported the largest employment gains over the year, adding 13,300 jobs.
  • The San Diego office market reported positive net absorption of 224,903 SF this quarter. Absorption in Class B assets represent nearly 75% of this quarter’s positive absorption.
  • 1 million SF of tenants are currently in the market, the majority of which are technology companies. 2.8 million SF of tenants are expected to land or sign deal in the next 12 months.
  • Largest concentration of tenants in the market are looking in the North Cities market
  • Overall asking rent growth continues at 0.8% quarter-over-quarter and 6.0% year-over year. Class A rent growth even larger at 1.0% quarter-over-quarter.


  • Two new speculative construction projects started this quarter, increasing speculative office construction to a total of 558,164 SF. Cruzan’s MAKE in Carlsbad is a 177,269 SF office redevelopment project that is scheduled to deliver in 2015. Kilroy’s The Heights Del Mar is a 74,895 SF, 3-story office building set to deliver in Q4 2015. No pre-leasing has been announced.
  • Construction continues on Sempra Energy’s new headquarters in Downtown. The 320,000 SF building is scheduled to deliver Q3 2015.
  • The installation of the building skin is complete on The Irvine Company’s One La Jolla Centre. The 14-story office tower is set to deliver Q2 2015, adding 306,000 SF of new office inventory to the UTC submarket.  No pre-leasing has been announced.
  • Occupancy county-wide is at 88.2%, returning to pre-recession levels.
  • There is 899,131 SF of office space under construction, including Sempra Energy’s BTS and the three speculative office projects.  American Assets is working on a small project in Del Mar Heights as well. 50% of these properties are pre-leased.

Capital Markets

  • Sales volume increased 8.5% quarter-over-quarter.
  • Cap rates increase to 6.74%, up from 6.72% average QoQ, up from 6.62% YoY
  • Average Price per SF down to $210
  • Canada, Japan, and the United Kingdom were all cross-border investors in 2014.
  • Buyer type YTD split between institutional (51%) and private (38%).
  • Starwood Capital, Prudential RE Investors top buyers in prior 24 months
  • Blackstone, Kilroy Realty Corp top sellers in prior 24 months

Click here for more market insight on our San Diego research group web page: San Diego – Research.

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