Net Absorption Negative in 2024
- In Q3, the Central San Diego laboratory market recorded 352,928 sf of negative net absorption, primarily driven by new significant vacancies in Sorrento Mesa. This follows 3 straight quarters of positive net absorption, which followed 4 straight negative quarters. 2024 YTD figure is also now in the red, standing at negative 159,022 sf.
- Central San Diego leasing activity had been down since late 2022, but thus far in 2024 we’ve seen over 1 million sf of leasing activity (nearly 300,000 sf in Q3), the largest over a two-quarter span since the first half of 2022. 2024 ytd has nearly doubled the overall total for 2023.
Rental Rates Feeling The Pressure
- Asking rental rates in Central San Diego have leveled off over the last 2 years, as demand has slowed significantly from the highs during the Covid-19 years. Now $6.28 NNN.
- Downward pressure on effective rents is accelerating, as concessions continue to increase with the rise in available inventory
Large Pharma Helps Demand Levels
- –Tenants looking for lab space remain cautious, as they continue to extend their existing cash runway and take a more conservative approach in the short term.
- Big pharma requirements have kept demand above historical pre-pandemic levels, as 2 requirements make up 50% of the overall tenant demand (1.88 msf at end of Q3).
- VC funding has been very solid in 2024, despite the economic environment, as San Diego firms raised nearly $1.11b in Q3, pushing the YTD total to $3.26b…on pace to finish the year as the 2nd highest yearly figure of all time, and over 3x the annual average over the last 21 years.
