Downtown San Diego Office Leasing Hits a Five-year Low
By Joshua Ohl
CoStar Analytics
August 11, 2026 | 8:07 AM
Downtown San Diego endured its weakest quarter for office leasing volume in over five years during the second quarter. The last time that quarterly leasing volume fell below 125,000 square feet was during the height of the pandemic in mid-2020.
During the last cycle, between 2015 and 2019, leasing volume averaged nearly 300,000 square feet. It has exceeded that level only once since 2020.
Downtown’s vacancy increased 60 basis points year over year after the second quarter to 32.4%. That’s more than double the 2019 year-end rate. Vacancy peaked at the end of last year at 33%, although most market participants agree that the actual vacancy rate is likely closer to 50% when accounting for uncompetitive shadow space that proliferates in the central business district. Vacancy and availability have also been aided by recent sales of office towers intended for conversion, pulling them out of the rental market.
Not only has leasing volume fallen but so have average lease sizes and the number of transactions compared with the pre-pandemic norm. Since the beginning of last year, the average new lease size downtown has been 4,000 square feet, a nearly 20% drop compared with the average new lease size between 2015 and 2019. Similarly, the average number of new leases signed on a quarterly basis since last year has been around 30, marking a 37% decline versus last cycle’s average.
Downtown brokers have pointed to move-in-ready spaces leasing more quickly than ones that require tenant improvements. Smaller tenants below 10,000 square feet with more flexibility to move on shorter notice have shown a preference for these spaces, although not all landlords have the ability to invest in move-in-ready spaces without a lease in place.
Stakeholders show renewed optimism for properties along Broadway after a new ownership class has taken over. The vacancy rate is more than 10 percentage points below the overall downtown rate, or the rate along the B Street corridor. Many of these buildings are, or approach, trophy status, and they have accounted for over half of downtown’s leasing volume this year while containing only about a quarter of downtown’s inventory.
The construction pipeline has been shut off, although nowhere else in San Diego has as much new inventory available as downtown does. With the RaDD campus complete, roughly 2.7 million square feet of office space has been built, over two-thirds of which was still available at the midway point of 2026.
Although market participants are hopeful that downtown’s long-term prospects will improve, particularly with the vibrant cultural amenities and sprawling multifamily properties filled with younger renters, it will likely continue to be a challenging stretch for landlords. Tenants in recent years have shown a clear preference for areas north of downtown, from Carmel Valley and Del Mar Heights to Rancho Bernardo and Kearny Mesa. Retail amenities, quality schools and proximity to single-family neighborhoods have made them appealing to tenants and employees alike.
