San Diego Office Market — Q2 2026: Early Stabilization, Uneven Recovery

San Diego office vacancy sits at 14.3% with total availability at 19.5%. Those are not good numbers — but for the first time in several quarters, the direction is showing signs of change. Q1 2026 posted positive net absorption of 61,344 sf, reversing a string of negative quarters. Downtown is seeing its second consecutive quarter of positive Class A leasing. Suburban submarkets are outperforming.

The San Diego office market is not recovering. But it may be stabilizing — and stabilization is the first step.

The Numbers (Q1/Q2 2026)

• Vacancy: 14.3% direct; total availability 19.5%
• Asking rents: $45.23/sf annually — above the national average of $32.79/sf
• Net absorption: +61,344 sf in Q1 2026 — first positive quarter since Q4 2024
• Downtown vacancy: ~33% availability — among the highest CBDs in the nation
• UTC/Sorrento Valley: Single digits to low teens for Class A; life science vacancy rose to 21.7%
• Most active submarkets: Kearny Mesa, College Area, Del Mar Heights, Carmel Valley

The Two-Speed Market

San Diego office in 2026 is not one market — it's two markets with very different trajectories.

Downtown San Diego is the epicenter of stress. Roughly 33% of existing office space was available at the start of 2026 — among the highest availability rates of any major downtown in the country. A nearly 2,000-basis-point gap exists between downtown and suburban vacancy. The work-from-home shift hit downtown hardest, and the recovery there is slower and more uncertain than in suburban submarkets.

That said, downtown is not completely stalled. Class A leasing drove positive net absorption in each of the past two years, and downtown posted its second consecutive quarter of positive absorption in Q1 2026. The recovery is real — it's just concentrated in top-quality space and is happening much more slowly than in suburban markets.

Suburban San Diego is a different story. Kearny Mesa, Del Mar Heights, Carmel Valley, and the College Area are seeing the most leasing activity. The largest leases in Q2 2026 are concentrated in small- to mid-size spaces in these submarkets. Companies haven't abandoned offices — they've rightsized and moved toward quality suburban locations.

The Life Science Factor

UTC and Sorrento Valley historically function as San Diego's innovation corridor — biotech, tech, and life science anchor tenants support lower vacancy and stronger rents than the broader office market.

That picture has complicated in 2026. Life science vacancy rose to 21.7% in the UTC corridor by late 2025, driven by lab and R&D space returning to market as biotech companies consolidated after a difficult funding environment. This is a real risk for investors and landlords in the life science submarket — the tenant base is contracting even in San Diego's strongest innovation cluster.

Class A office in UTC for non-life-science users remains in better shape, with vacancy in the single digits to low teens for well-located, quality product.

What This Means for Tenants

The office market is still working in tenants' favor in most submarkets. At 14.3% vacancy and 19.5% availability, landlords need tenants — and the concession environment reflects that.

Flight to quality is real and still accelerating: The leases getting done are in Class A and Class B+ buildings in amenity-rich locations. If you're renewing in a Class B or C building, your landlord is more motivated than they'll admit. Use that.

Downtown is a buyer's market for tenants: 33% availability means significant landlord flexibility on rent, TI, free rent, and lease term. If your business can operate downtown — and many can, especially professional services and legal — the economic terms available right now are exceptional compared to what you'll find in suburban submarkets.

Suburban premium is real but negotiable: Del Mar Heights and Carmel Valley command higher rents and tighter vacancy. But even here, landlords are offering TI packages and free rent periods that weren't available 24 months ago.

Shorter initial terms with renewal options: In an uncertain market, shorter initial lease terms with multiple renewal options give you flexibility without sacrificing the economics. Landlords in a 14% vacancy market will take a shorter initial term to fill the space.

What This Means for Investors

San Diego office is a market for specialized investors with long time horizons and strong convictions about specific submarkets — not a broad-based opportunity.

Suburban Class A is the safest thesis: Del Mar Heights, Carmel Valley, and Kearny Mesa are seeing real leasing activity. Quality buildings in these submarkets have a viable path to stabilization. Downtown and life science submarkets require more patience and more specific expertise.

Distressed pricing creates opportunity for the right buyer: At 19.5% total availability, some buildings are priced to reflect significant distress. Buyers who can underwrite a realistic lease-up timeline — 3–5 years, not 12–18 months — and have the capital to carry the asset through the recovery can find basis that wasn't available during the 2018–2022 cycle.

Life science exposure needs careful underwriting: The 21.7% life science vacancy in UTC is a specific risk for buyers in that submarket. The biotech funding cycle is the key variable — and it's uncertain. Buyers should underwrite life science buildings to conventional office use as a stress test.

What This Means for Landlords

At 19.5% availability, the honest assessment is that the office market is still working against landlords in most submarkets. The Q1 2026 positive absorption signal is encouraging — but one quarter of positive absorption at +61,344 sf doesn't offset the structural reset that's happened since 2020.

Concessions are the price of leasing: TI packages, free rent periods, and below-ask rents are not negotiating losses — they're the cost of doing business in a 14% vacancy market. Landlords who aren't competitive on concessions are not getting deals done.

Amenitization matters: The leases getting signed in San Diego office are in buildings that offer something — proximity to retail and restaurants, quality common areas, outdoor space, conference facilities. Deferred capital investment in a high-vacancy market is a choice that shows up in longer lease-up timelines.

Renewal retention is everything: Tenant retention in a high-vacancy market costs less than new leasing. If you have tenants rolling in the next 18 months, offer them something real before they start looking. A below-market renewal is almost always better than vacancy at 14%.

The Bottom Line

San Diego office is showing its first genuine signs of stabilization in several quarters — positive absorption, suburban leasing activity, and Class A demand that suggests the floor may be in. But stabilization is not recovery. Downtown vacancy at 33% availability will take years to work through. Life science softness adds uncertainty to San Diego's strongest innovation cluster.

For tenants, the concession environment is still favorable. For investors, the opportunity is specific and requires conviction. For landlords, the work of stabilizing at current vacancy levels is ongoing.

Working through a San Diego office lease or acquisition? I offer free 30-minute consultations — no sales pitch, just a direct conversation about your deal. [Book a time here.](/book)

Sources: Kidder Mathews San Diego Office Market Report Q1 2026; CBRE San Diego Office Figures Q1 2026; GlobeSt San Diego Office Market 2026; Voit Real Estate Services Office Outlook 2026.

Data reflects market-level averages. Individual submarket and property conditions vary. Verify current comps before making leasing or investment decisions.