As total office vacancy rate in San Diego hit 14% in the third quarter, its highest level since 2012, sales activity for the asset increased with high-profile transactions involving bargains that reflected plunging office valuations.
Investment sale prices have averaged $186 per SF over the past 12 months in San Diego, according to JLL's latest market report, with the most notable transaction of Q3—Irvine Company's sale of Symphony Towers—setting a bargain-basement benchmark of $84 per SF.
Sublease space in San Diego remains at an all-time high of 3.3M SF. JLL reported that no move-ins encompassing more than 25K SF occurred in the third quarter.
As office tenants downsize, consolidate, or exit a market with minimal large block move-ins, a recent investment sales transaction shows that a property that is almost fully leased can still command a price that is well above the average sales benchmark in the San Diego market.
The Highlands Corporate Center, a five-building Class A office campus encompassing 211K SF in Del Mar Heights traded this month for $77M, which is nearly $365 per SF.
A joint venture of Orange County-based investment firms Harbor Associates and F&F Capital Group acquired the campus, which is located at 12730-12780 High Bluff Drive. The Highlands Corporate Center, which opened in 1985, is about 90% leased, with tenants including Banner Bank and Keller Williams Realty.
In an announcement of the acquisition, Harbor said the property's proximity to the 23-acre One Paseo mixed-use development has enabled the campus to ink 40 new leases and renewals encompassing more than 150K SF over the past three years. One Paseo includes more than 40 restaurants
Gross leasing activity in San Diego stood at 1.2M SF in the third quarter, the same level as the previous two quarters.
Contributing to the rising vacancy rate in San Diego were office deliveries in the first half of 2024, including R&D space, which encompassed about 2.1M SF; about a third of the space was pre-leased. At the end of the third quarter, negative net absorption totaled minus 644K SF, JLL reported.
A 1.7M SF mega-project in downtown San Diego, IQHQ's waterfront complex known as the Research and Development District (RaDD), is nearing completion without having signed any life science tenants, the San Diego Union-Tribune reported.
The life science hub developer is having better success with the 200K SF retail portion of the mixed-use project. This month, IQHQ announced it has inked deals with tenants including luxury gym Equinox; a showroom for electric truck manufacturer Rivian; a high-end Mexican restaurant; and The Shade Store, a window treatment company.
RaDD takes up six blocks of the former Navy Broadway Complex, a swath of prime real estate south of Broadway between Pacific Highway and Harbor Drive.