Downtown San Diego's office market is set to receive the biggest wave of new inventory in over 20 years.

About 2.8 million square feet of newly-developed space scheduled to be delivered by 2024, increasing the total inventory by 19.3%.

These statistics don’t bode well for traditional office landlords, however they do look favorable for tenants looking to secure above market concessions in lease negotiations.

Historically, Downtown San Diego has been home to law firms, and personal service businesses but there is a new player in the mix. San Diego has cemented its position as the number three biotech hub in the country. Along with the new deliveries are: Campus at Horton, a 750,000-square-foot office and life science project — which includes an additional 300,000 square feet of retail and experiential space to deliver by the end of the year, the RaDD ("Research and Development District”) project, a 1.7 million-square-foot project boasting a mix of office, life science and retail space in the Marina district at San Diego's waterfront, and Genesis, a 203,000-square-foot building at Island Ave which leased a full floor (27,000 SF) to Endeavor BioMedicines. Downtown San Diego is positioning itself to become an important hub within a hub for life science tenants.

Additionally, the area also has a well-educated resident base filled with young professionals who are attracted to the cultural amenities, nightlife and walkability. According to an analysis completed by the Downtown San Diego Partnership and released in a report, “More than 41 percent of downtown’s 24,000 working residents are employed in occupations within management, business, science or the arts, which is around five percentage points greater than the rest of San Diego County.” And the “fastest growing occupation for downtown working residents within [those sectors] are life scientists.”

While traditional office leasing activity remains sluggish with the effects of the pandemic largely at the forefront, Life Science leasing may be the key to reviving spending and interest in the downtown neighborhoods. Downtown also has roughly 6.5 million square feet of space available for lease, or more than 38% of total inventory. That has led to the region’s highest vacancy rate of almost 25%. Available sublet space has also added pressure here, with more than 350,000 square feet available for sublease, more than double the average from 2016 through 2019. It should also be noted that downtown faces long-term challenges that few other areas of San Diego are forced deal with. It is beset by a growing population of homelessness that has led the city council and the mayor to discuss enforcing encroachment laws.

The lack of and high cost of parking also lead many firms to choose other locations.