LEASING ACTIVITY PICKED UP in the first half of 2021, although still below prepandemic levels. Much of the activity in the San Diego market comes from the tech industry, with further commitments from tech giants such as Google and Apple, as well as startups expanding into the market such as Flock Freight in Encinitas.
SUBLET SPACE HAS INCREASED BY 30% since 20Q2, however it decreased in the second quarter for the first time since the COVID-19 pandemic hit last year. With nearly 1M SF of sublease space that has come on the market due to the COVID-19 pandemic, large corporations have been able to take advantage of the opportunity of the discounted sublet space.
SALES VOLUME IN THE SECOND QUARTER SOARED TO 3.4M SF, a number the market hasn’t experienced in over five years. This can be largely attributed to the sale of a four-building office portfolio in Downtown, totaling 1.5M SF. Regent Properties purchased the properties in what is the largest sale in Downtown in over a decade.
THE SAN DIEGO MARKET CONTINUES TO GAIN FURTHER TRACTION from tech giants such as Apple and Google, and with the expansions and commitments come employment gains. Apple has pledged to hire 5,000 new employees in the region over the next five years and Google announced plans to create at least 10,000 new jobs throughout the U.S. (it did not give specifics about local jobs).
THE SAN DIEGO COUNTY UNEMPLOYMENT RATE in May dropped three basis points to 6.4% month-over-month, adding 2,000 jobs within the last month. This compares with an unadjusted unemployment rate of 7.5% for California and 5.5% for the nation. The leisure and hospitality sector added the most jobs, as the hotel occupancy rate continues to rise to almost double the rates from last year.
WITH WORKERS slowly transitioning back to the office, whether hybrid or full-time, firms are removing their sublet space and recommitting to their previous offices. As the San Diego office market continues to play out and COVID-19 related restrictions lift, we expect the market to continue its recovery well into 2021.
MANY TECH AND ENGINEERING COMPANIES are turning to San Diego because of its increasing talent pool from the nearby top universities, as well as the quality of life and cost of living when compared to the Bay Area, known to be one of the biggest tech hubs in the nation. With solid employment base buoyed by the tech, life sciences and healthcare sectors, the San Diego office market will continue to see growth in a positive direction.