Del Mar Heights sits at the top of San Diego office leasing submarkets. Net absorption has totaled nearly 900,000 square feet since 2020. Quarterly leasing volume in 2024 aligned with the average observed between 2015 and 2019, and the year-over-year vacancy rate in 2024 was unchanged, remaining consistent with pre-pandemic levels
SUBLEASE SPACE
The availability of sublease space is trending at 350,000 square feet during the first quarter. It decreased from the 390,000 square feet recorded 12 months prior. Neurocrine Biosciences accounts for a significant portion of this space following the consolidation of several local offices into its new corporate campus at Aperture Del Mar.
LEASE ACTIVITY
This submarket has been the most active area outside of Downtown for new construction in recent years. Neurocrine Biosciences leased the entirety of the Aperture Del Mar campus, exceeding 500,000 square feet, as the initial buildings were delivered in 2022. This transaction nearly doubled the company’s existing submarket footprint. The 500,000-square-foot Torrey View campus commenced speculative development and was fully pre-leased prior to its 2024 delivery, with Pfizer leasing 230,000 square feet for an expansion from Torrey Pines. With these new campuses fully occupied, significant supply-side pressure from ground-up development on rent growth and vacancy is not anticipated in the near term.
CONCESSIONS
Tenant concessions typically include five months of free rent for a five- or seven-year lease term. Build-out allowances have increased by over 50% since 2022. Annual escalations are generally near 4%. Rent grew by 0.2% over the past 12 months, while embedded rent growth has measured 9.8% over the preceding five years.
RENT GROWTH
The submarket has not been immune to the broader regional deceleration in rent growth. Rent growth is projected to remain below the long-term benchmark into 2026. Nevertheless, tenants continue to pay premium rates to occupy space within this submarket. This is particularly evident at One Paseo, where occupancy is near 100%. Quoted rental rates at that project approach $7 per square foot.
ADDITIONAL INSIGHTS
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