San Diego office vacancy is 14.3%. If you stopped reading there, you'd conclude the market is broken and move on.
That's the wrong read.
Dig one layer deeper into the Q1 2026 data and a different picture emerges: asking rents are up 4.8% year-over-year, the market just posted its first quarter of positive net absorption since Q4 2024, and downtown San Diego recorded its second consecutive quarter of positive demand. The worst of the post-pandemic office correction may be behind us — not ahead.
That doesn't mean the San Diego office market is healthy. It isn't. But there's a meaningful difference between a market that's deteriorating and one that's bottoming. Right now, the data suggests the latter. Here's what that means if you're a tenant, investor, or landlord.
The Numbers (Q1 2026)
All figures from CBRE San Diego Office Market, Q1 2026, cross-referenced against Cushman & Wakefield San Diego MarketBeat Q1 2026.
Vacancy: 14.3%, down 20 basis points quarter-over-quarter — the first quarterly improvement in recent memory. Year-over-year it's still up 40 basis points, which puts the full picture in context: the market has been grinding higher on vacancy for over a year, but Q1 2026 shows the first sign of a turn. Cushman & Wakefield's broader methodology puts vacancy at 15.4% including sublease space — same directional story. Asking rents: $3.49 per square foot, up 1.7% quarter-over-quarter and up 4.8% year-over-year. This is the number that surprises people. Rising rents alongside 14% vacancy sounds contradictory — it isn't. Landlords of Class A buildings are holding firm on asking rates because the tenants who are leasing space right now are quality tenants choosing quality buildings. The vacancy pain is concentrated in older, lower-quality product. Class A asking rents reflect that bifurcation. Net absorption: Positive 16,231 square feet in Q1 2026 — a modest number, but directionally significant. It's a 106,000 square foot improvement from Q4 2025, and 131,000 square feet better than Q1 2025. After cumulative net losses of 609,000 square feet in 2025, any positive quarter matters. Downtown San Diego: Posted its second consecutive quarter of positive net absorption — a meaningful signal for a submarket that took the hardest hit during the post-pandemic office reset.
Why Rents Are Rising While Vacancy Is High
This is the question worth answering, because it shapes how you should approach the market whether you're a tenant, investor, or landlord.
San Diego's office market is bifurcating. On one side: newer, well-located, amenity-rich Class A buildings — particularly in UTC, Del Mar Heights, and coastal North County — where tenants are competing for the best space and landlords have pricing power. On the other side: older Class B and C buildings — particularly in suburban submarkets and downtown's less desirable corridors — where vacancy is elevated, concessions are significant, and landlords are struggling to hold tenants.
The 14.3% vacancy figure is an average of both. The 4.8% rent growth figure reflects what's happening in the top tier.
This bifurcation is not unique to San Diego — it's playing out in virtually every major U.S. office market. But it has specific implications here:
Tenants who need Class A space in the best locations have less leverage than the headline vacancy number suggests. The buildings they actually want to be in are not 14% vacant. Investors evaluating office acquisitions need to underwrite the specific building and submarket — not the market average. A Class A UTC building and a Class B Kearny Mesa building are different investment theses right now. Landlords of older product need to be honest about where their building sits in the hierarchy. Pricing to Class A comps in a Class B building doesn't work when tenants have options.
What This Means If You're a Tenant
The office market in San Diego offers real opportunities for tenants right now — but they're submarket and building-specific.
If you need Class A space in a core location: Move fast and be realistic about leverage. UTC, Del Mar Heights, and La Jolla coastal are running tighter than the county average. The best available spaces in the best buildings are not sitting vacant for long. Waiting for a better market may mean waiting for a market that doesn't come. If you're flexible on location or quality: This is your market. Class B vacancy in suburban submarkets is elevated, landlords are motivated, and concessions — free rent, TI allowances, flexible term structures — are available in ways they weren't in 2022. If your business can operate from a well-located Class B building, the gap between what you'll pay and what an equivalent Class A tenant pays is meaningful. On lease term: Shorter terms are possible in softer submarkets, but landlords offering the best concessions typically want 5+ year commitments. If you need a 2–3 year term, expect to pay closer to asking or accept a space that's been sitting. On timing: The absorption data suggests the market may be stabilizing. If Q2 and Q3 2026 continue positive absorption, expect landlords to tighten concessions. The window for aggressive tenant-favorable deals in secondary locations is open now — not indefinitely.
What This Means If You're an Investor
Office is the asset class everyone is uncertain about, and San Diego is no exception. But uncertainty creates pricing gaps — and pricing gaps create opportunities for buyers who know what they're underwriting.
A few considerations for buyers looking at San Diego office right now:
Class A in core locations is defensible. UTC and the coastal North County corridor have the demand drivers — life sciences adjacency, defense contractors, tech, financial services — to sustain occupancy through the cycle. These buildings trade at premium cap rates, but the risk profile is different from suburban Class B. Class B in transitional submarkets requires a clear thesis. What's your path to stabilization? If the answer is "the market recovers," that's not a thesis — that's a hope. The buildings that will perform are the ones where you can articulate a specific demand driver, a realistic lease-up timeline, and a basis that works even if rents stay flat. Sublease space is an opportunity signal. When quality tenants return sublease space, it sometimes creates below-market deals for other tenants — which means buildings with sublease availability can stabilize faster than their direct vacancy suggests. Track which buildings have active sublease listings and what the effective rents are. CBRE's H2 2025 Cap Rate Survey found that cap rates held steady across asset classes in the second half of 2025, with respondents broadly believing rates have peaked. For office, that means the repricing that happened from 2022–2024 has likely run its course — but recovery in values requires occupancy recovery, which is just beginning.
What This Means If You're a Landlord
Q1 2026's positive absorption is encouraging, but one quarter doesn't change the strategic reality for office landlords: you're operating in a market where tenants have options, remote and hybrid work have permanently reduced space demand per employee, and the flight to quality is real.
The flight to quality is not reversible. Tenants who are leasing space right now want modern, well-amenitized buildings in accessible locations. If your building doesn't have updated common areas, good natural light, and building systems that meet current expectations — the answer is capital investment, not marketing. Price concessions vs. capital investment. There's a decision landlords of older product face: discount the rent to compete, or invest capital to reposition the building. Both can work. Neither works indefinitely without addressing the fundamental quality gap. Renewal strategy matters more than ever. Tenants who are in your building and paying rent are the most valuable asset you have right now. Starting renewal conversations 18–24 months before expiration — before tenants start touring alternatives — is the difference between a smooth renewal and a vacancy you spend 18 months filling. Downtown is worth watching. Two consecutive quarters of positive absorption in downtown San Diego is a meaningful signal. If that continues through 2026, downtown could be an early-recovery submarket — which matters for landlords pricing renewals and for investors evaluating acquisitions there.
The Submarket View
San Diego office submarkets are running materially different cycles:
- UTC / University City — Life sciences and tech adjacency, coastal talent draw. Tightest vacancy in the county for Class A. Landlords have real pricing power here.
- Del Mar Heights / Carmel Valley — Corporate campus and professional services cluster. Strong demand from financial services and regional HQs. Quality product moves.
- La Jolla / Torrey Pines — Biotech and life sciences corridor. Demand tied to the venture cycle — softer than 2022 but fundamentals remain.
- Downtown San Diego — Two consecutive quarters of positive absorption. Still elevated overall vacancy, but direction has shifted. Best opportunity for investors with a repositioning thesis.
- Kearny Mesa / Mission Valley — Class B suburban product. Elevated vacancy, motivated landlords, tenant-favorable concessions. Right market for cost-sensitive tenants with location flexibility.
- Carlsbad / North County — Defense, technology, and healthcare demand. Constrained land limits new supply. Holds up better in downturns than central county submarkets.
The Bottom Line
San Diego office at 14.3% vacancy looks broken if you only read the headline. Look at the direction — positive absorption for the first time since Q4 2024, rents up 4.8% year-over-year, downtown showing consecutive quarters of improvement — and a more nuanced picture emerges.
This is a market in early stabilization, not freefall. The opportunities are real, but they're specific: the right submarket, the right building class, the right timing.
If you're a tenant, the window for favorable deals in secondary locations is open now. If you're an investor, the repricing has likely run its course and selective acquisitions make sense with the right thesis. If you're a landlord, one good quarter doesn't change the strategic imperative — invest in your building or price to reality.
Working through a specific office deal in San Diego — lease negotiation, acquisition underwriting, or landlord strategy? I offer free 30-minute consultations. Book a time here.
*Sources: CBRE San Diego Office Market Figures, Q1 2026. Cushman & Wakefield San Diego MarketBeat, Q1 2026. CBRE U.S. Cap Rate Survey, H2 2025.*
*Data reflects market-level averages. Individual submarket and property conditions vary. Verify current comps before making leasing or investment decisions.*