Office Leasing Volume Reaches a 15 Year High
October 13, 2021
New office leasing activity in San Diego exceeded 2 million square feet during the third quarter for just the fifth time in the past 15 years.
It was easily the highest level of new leasing activity amid the pandemic, although momentum has been increasing since the fourth quarter of last year. The first half of 2021 recorded 3 million square feet of new leases, and the third quarter figure will certainly increase from its quarter-end tally of 2.2 million square feet after CoStar research gathers more lease deals signed before the quarter’s end, particularly as earnings season is upon us and new leases are often announced in filings.
As it currently stands, the 2.2 million square feet is already a 15-year high, and based on recent history, that the number could rise an additional 200,000 square feet.
Once again, expansions by life sciences and technology firms highlighted San Diego leasing activity in the third quarter.
According to a report released by industry group Biocom, roughly 1 in 30 San Diegans work in the life science field. The region’s workforce in that sector grew from roughly 68,000 in 2019 to nearly 72,500 at the end of 2020, representing a 6% increase. Over that same period, the county’s overall workforce declined by 10%, according to data from the Bureau of Labor Statistics, and that number is still down by more than 7%, according to the latest jobs report.
Although the center of gravity for the industry is the University of California San Diego and Sorrento Mesa, the Del Mar Heights and Carmel Valley neighborhoods were the focus of biotech expansions during the third quarter. The market has become a natural extension of the campus and could gather further steam among biotech firms with new developments along State Route 56 that include the soon-to-deliver Aperture Del Mar and two proposed projects, Merge 56 and Santa Fe Summit, which could add more than 1.5 million square feet of life science space to the area when fully built out.
During the third quarter, DermTech, which develops technologies geared to early detection of skin cancer, leased 90,000 square feet in the Del Mar Corporate Centre II at 12340 El Camino Real that will serve as the firm’s principal office and be a significant expansion from Torrey Pines, where it occupies almost 30,000 square feet.
Tandem Diabetes leased almost 182,000 square feet at 12400 High Bluff Drive and will relocate from roughly 80,000 square feet across several buildings in Sorrento Valley. AMN Healthcare, the former occupant of Tandem’s new space, was bought out of its remaining lease term as the healthcare company had not occupied the building since the start of the pandemic.
Apple was also at the forefront of leasing activity, particularly in the University Town Center area. The tech giant signed a deal for 73,000 square feet of sublet space at La Jolla Commons Tower I that was put on the market by Illumina at the end of last year. And all signs point to Apple as having signed a lease for space in two buildings at La Jolla Reserve totaling 140,000 square feet where it already occupied one-and-a-half floors.
Although new leasing momentum in the fourth quarter may not rise to the 15-year high recorded during the third quarter, some of these trends are likely to persist.
Already in October, Janux Therapeutics leased almost 48,000 square feet in the Pacific Plaza at Torrey Pines building at 10955 Vista Sorrento Parkway. And an unnamed firm pre-leased a 70,000-square-foot build-to-suit by Kilroy Realty at 9514 Towne Centre Drive, across the street from the 156,000-square-foot property that Kilroy built for Apple in 2021.