MARKET DRIVERS
The San Diego office market vacancy rate was essentially flat quarter-over-quarter (QOQ), dipping roughly 10 basis points (bps) to 13.6% in 1Q26, but remained 60 bps above the 13.0% rate recorded one year ago. Total availability climbed 60 bps over the quarter and 50 bps year-over-year (YOY), reaching 17.1%, indicating that while vacancy has stabilized, more space continues to be marketed.
Leasing activity totaled 1.0M SF in 1Q26, a 16.2% decrease from the 1.2M SF recorded in 1Q25 and a 21.8% drop from 4Q25. Even so, direct net absorption returned to positive territory at 61.3K SF after posting a negative figure last quarter, suggesting that tenant demand remains selective but is still supporting pockets of stabilization in the market.
Office sales reached 2.3M SF of transactions in 1Q26, down only 5.1% from the unusually active 2.4M SF recorded in 4Q25 but up 186.4% from 1Q25. Pricing was far more normalized than a year ago, with the average price per square foot landing at $215.21 compared to $462.67 in 1Q25, reinforcing that capital is still active but remains highly price-sensitive.
ECONOMIC REVIEW
In December 2025, San Diego County’s unemployment rate was 4.4%, down 50 bps from September but 20 bps above the year-ago level. California’s unemployment rate was 5.5% in the same month, down 10 bps from September and unchanged year-over-year.
The San Diego metro area added 5.5K jobs over the year, bringing total nonfarm employment to 1,584.1K in December 2025. Office-using sectors were mixed: Professional and Business Services declined by 6.2K jobs and Trade, Transportation, and Utilities fell by 1.4K, while Education and Health Services added 15.1K jobs and Government expanded by 4.1K.
NEAR-TERM OUTLOOK
San Diego’s office market is expected to remain uneven in the near term, as cautious occupiers continue to prioritize higher-quality space and limit overall leasing activity. Demand should persist for well-located, upgraded assets, while older or less competitive properties face continued pressure. Investment activity will likely focus on discounted urban opportunities and value-add suburban assets, with limited new development concentrated in medical office.
1Q 2026 San Diego Office Market: Key Data Points
Explore our full San Diego office market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Holds Steady: San Diego’s office vacancy rate registered 13.6% in 1Q 2026, down 10 basis points quarter-over-quarter but 60 bps higher year-over-year.
- Availability Continues to Rise: Total availability increased to 17.1%, reflecting more space being actively marketed even as overall vacancy stabilizes.
- Leasing Activity Slows: Leasing volume totaled approximately 1.0M SF in 1Q 2026, a 16.2% decline year-over-year as occupiers remain cautious and selective.
- Net Absorption Turns Positive: Direct net absorption posted a gain of 61,344 SF, reversing negative absorption from the prior quarter and signaling early demand stabilization.
- Sales Activity Rebounds: Office sales volume surged to 2.M SF, up 186.4% year-over-year, though average pricing normalized to $215 per square foot.
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