(From Costar Group)
San Diego’s medical office market sector ended 2025 on a strong note, with vacancy falling quarter over quarter to the lowest level of the year. Leasing volume during the fourth quarter climbed to its highest level in nearly two years.
Medical offices have generally outperformed their traditional counterpart in recent years, and vacancy has run nearly 50% below the overall office market. The sector has not been consumed by the wave of speculative inventory that the traditional sector has, and most developments have been built-to-suit, including Sharp Rees-Stealy’s new site in Otay Ranch that opened in mid-2025.
At the end of 2025, the only office inventory under construction across the San Diego region was medical office properties. One, for San Ysidro Health in National City, is scheduled to be completed this year, marking the first notable medical office development in that city in over 20 years.
In Chula Vista, Sharp Healthcare was nearing completion on a project on H Street that will replace two existing Sharp buildings. A smaller property in Carlsbad is scheduled to be completed in the coming year.
Sublet space has been stubbornly elevated since 2022. The amount available inched up at the end of 2025, and it was roughly double what typically trended before 2020. The pre-pandemic level rarely exceeded 100,000 square feet.
Medical office rent growth outperformed the traditional office sector in 2025, although it cooled to its slowest pace in more than a decade.
Looking ahead, the medical office sector is positioned to remain stable as San Diego’s older population outgrows the younger age cohort in the county.
