08/06/2026
After years of rising vacancy, the office market may finally be finding its footing — both nationally and here in Southern California.
Nationally, CoStar reports that U.S. office leasing held steady in Q2 2026, and the national vacancy rate eased to 17.7%, aided by slower construction and record levels of office-to-multifamily conversions.
San Diego
• Vacancy sits at 13.40%, essentially flat year over year, a sign the market may be stabilizing
• Kearny Mesa (8.4%) and UTC (10.22%) are significantly outperforming Downtown, which remains challenged at 33.26% vacancy
• No new traditional office deliveries in 2026, and none currently under construction, a tailwind for absorption
• Owner-user sales are surging, with 27 transactions this quarter matching the highest total in four years
• Investment sales remain active, on pace for a second straight year above $1 billion
• Ryan Bracker summed up the mood: “The coming quarters will determine whether market vacancy has truly peaked and whether the office market has indeed found its bottom. For now, however, the early signs are encouraging.”
Orange County
• Vacancy has dropped sharply — from 15.79% to 13.03% — over four straight quarters of positive absorption
• More than 6 million SF of outdated office inventory has been removed from the market through demolition, conversion, or owner-user acquisition
• Asking rates are up 5.4% year over year to $2.92 PSF, with Class A commanding a premium at $3.26 PSF
• Demand is being fueled by aerospace/defense expansion, AI-economy tenants, and major mixed-use investment
• Chris Drzyzga, SIOR put it well: “A shrinking inventory base, continued flight to quality, major private investment, and a diversified innovation economy all point in the same direction: Orange County's office market has stabilized and is beginning its next cycle.”
Both markets are showing real momentum heading into the second half of 2026.
Read this week’s blog post for a full breakdown: https://f.mtr.cool/pqbpaxvrpv
