Downtown San Diego’s Office Pipeline Grows in Third Quarter

Joshua Ohl

September 24, 2021

New Inventory To Add Pressure to Downtown Vacancy Rate

Downtown San Diego’s office pipeline thickened up during the third quarter after a few long-awaited projects broke ground. And like many of the office buildings under development in San Diego’s central business district, no tenants have been announced or reportedly signed ahead of groundbreaking.

The new developments bring downtown’s pipeline to more than 1.5 million square feet, which is entirely available for lease. That’s the most amount of office space under construction in downtown San Diego in 20 years.

The pipeline will apply upward pressure to the office vacancy rate, which rests above 23%, also the highest level locally in at least 20 years.

IQHQ poured the foundation for the first phase of its massive lab campus along the Embarcadero at the Research and Development District, or RaDD. The $1.5 billion campus will be located on eight acres and represents the largest urban commercial waterfront site along the California coastline, according to the developer. The fully built-out complex will consist of 1.7 million square feet of lab, office, retail and amenity space.

IQHQ’s executive chairman, Alan Gold, was a co-founder of Alexandria Real Estate Equities and founder of BioMed Realty Trust. Although no tenants have been announced prior to groundbreaking, discussions have reportedly been ongoing with several pharmaceutical firms. While San Diego’s life science region is concentrated to the north, few biotech firms have committed to downtown space.

The Courthouse Commons project also joined the pipeline in the third quarter when Holland Partner Group broke ground on the $400 million, mixed-use project. The 270,000-square-foot office portion was fully available at groundbreaking and is anticipated to be ready in 2024 beneath 431 apartments units. Holland won a bid from the county to redevelop the former courthouse after agreeing to build a tunnel between the downtown jail and new courthouse.

Those projects join others in the works, including 2100 Kettner. Kilroy is putting the finishing touches on the 234,000-square-foot building in Little Italy, and the certificate of occupancy is expected within weeks. The developer is hoping to lease the office property to a single tenant and will likely soon follow with another development across the street.

The Campus at Horton is a sprawling 1 million-square-foot, mixed-use project that is transforming the downtown core. Stockdale has not announced any tenants for the project that will include 750,000 square feet of office space and the balance consisting of retail and lifestyle space. The developer has suggested that the property will be an ideal fit for life science and tech firms and will have the requisite parking to accommodate thousands of employees, an important component for downtown office space.

But luring enough biotech firms to San Diego’s downtown may be a challenge. Recent lease agreements for new developments have been signed by Sorrento Therapeutics for 163,000 square feet in Sorrento Mesa during the third quarter and by Turning Point Therapeutics for 185,000 square feet in Torrey Pines during the second quarter. Both of those developments will be built by Healthpeak Properties.