Indoor/Outdoor Areas Hugely Popular in SD


July 28, 2015
Author: Carrie Rossenfeld

Indoor/Outdoor Areas Hugely Popular in SD

SAN DIEGO—Whether office tenants are seeking high-end class-A corporate campuses or more-affordable class-B space, in San Diego they all seek park-like settings with outdoor workspaces and an amenity-rich environment, head of JLL’s tenant-rep team Steve Holland tells Following the release of the firm’s Q2 office report for the region, we spoke with Holland exclusively about the types of office tenants moving into the area and the impact of Verizon’s lease at Enclave Sorrento on the surrounding office market. What kinds of tenants will we see leasing space in San Diego’s newly constructed office buildings?

Holland: For class-A office space, especially in Del Mar Heights and UTC, the types of tenants who will lease these buildings will be professional-services firms, law firms, financial-services companies, real estate companies, accounting firms and healthcare-related companies. For class-B office buildings, you will see technology companies, life-science companies, credit unions, engineering firms, mortgage companies, defense and other more rent-sensitive tenants. Regardless of class-A or –B office buildings, tenants are interested in larger floor plates to foster open and collaborative workplace environments, sustainability features/LEED-certified buildings, amenity-rich environments to attract and retain top talent, plenty of natural light in the workspace, a park-like setting with outdoor work spaces, campus-wide WiFi, an on-site fitness center, on-site upscale dining options, collaboration/gathering areas and indoor/outdoor common areas. They want an amenity-rich campus environment. What kind of rents are they willing to pay in a market with a 13% vacancy rate?

Holland: Although the overall office vacancy rate for San Diego County is 13%, the office vacancy rate is in the single digits for the high-quality office submarkets of Del Mar Heights and UTC. For example, Kilroy Realty’s new speculative Del Mar Heights office project—the Heights—will consist of 76,000 square feet of class-A space with an asking lease rate of $4.85 per square foot. In UTC, tenants can expect to pay $4 to $4.50 per square foot for new class-A office space. What impact will Verizon’s lease at Enclave Sorrento have on the surrounding office market and on San Diego’s economy in general?

Holland: McCarthy Cook, the developer of Enclave Sorrento, has done an exceptional job revitalizing this two-building office project consisting of 213,000 square feet to create a connected workplace in a booming business district with great amenities and modern design. From the inviting new entrances to collaborative outside and inside gathering places, as well as large efficient floor plates with interconnecting bridges, Enclave offer a revitalized energy to Sorrento Mesa’s burgeoning technology community. It’s an all-encompassing workplace environment where the Verizon employees can work or work out, collaborate or focus, eat or relax in a connected office technology campus. Verizon’s consolidation from multiple sites to one building is further evidence technology companies are focused and creating workplace environments for their employees that foster collaboration and creativity in an amenity-rich corporate campus. The ability to eliminate redundant shared services will help Verizon lower their occupancy costs and gain greater operational efficiencies. Having Verizon choose Sorrento Mesa for their new San Diego location further validates Sorrento Mesa as the technology hub for San Diego in an environment where the best and brightest workers innovate and create cutting-edge technologies. What else should our readers know about the Q2 report? Holland: We’ve had five years of positive net absorption for office space in San Diego, and our unemployment rate has reached the lowest level in seven years. As such, our economy continues to generate solid job growth and demand for office space. In 2015, we should see San Diego add approximately 40,000 jobs.