1Q 2026 Update

San Diego’s office vacancy rate was largely unchanged quarter-over-quarter, ticking down just 10 basis points to 13.6% in Q1 2026, though it remains modestly higher than the 13.0% recorded one year ago. At the same time, total availability rose to 17.1%, up both quarter-over-quarter and year-over-year, signaling that while vacancy has stabilized on paper, more space continues to come to market. Leasing activity reflected a more cautious tenant base, totaling 1.0 million square feet—down meaningfully from both the prior quarter and the same period last year. Still, direct net absorption turned positive at 61,300 square feet after a negative prior quarter, suggesting that while demand is selective, it has not disappeared and is beginning to stabilize in targeted pockets.

Looking ahead, the San Diego office market is expected to remain uneven. Demand is consolidating around high-quality, well-located assets, while older or less competitive buildings continue to face pressure.

Office demand isn’t disappearing rather it’s evolving with purpose. Companies may not need more space, but they will need to use their space more effectively. For landlords and developers willing to adapt, this creates a meaningful opportunity to deliver product aligned with how tenants actually use space today.

For occupiers, particularly those with leases expiring in the next 12–24 months, current market dynamics are compelling.  Companies that are still waiting for broader market clarity will be left behind, deals getting done today look very different than those of prior cycles, marked by aggressive economics, concession packages, and greater flexibility. This leverage won’t last indefinitely, and those who act strategically in the near-term stand to benefit the most.