Tuesday, May 5, 2026
San Diego medical office market holds steady as suburban growth drives demand
The direct vacancy rate of medical office space in San Diego declined from 6.7% a year ago to 6.4% in the first quarter, according to a JLL report.
The medical office market remained one of San Diego's most stable commercial real estate sectors in the first quarter of 2026, with steady demand, rising rents and continued expansion by health care providers, according to a report from JLL.
Overall market fundamentals showed modest improvement. The direct vacancy rate declined from 6.7% a year go to 6.4%, while asking rents rose 1.4% to an average of $4.34 per square foot in the first quarter, according to the report.
Net absorption of medical office space totaled 44,034 square feet for the quarter and 156,546 square feet for the past 12 months, representing about 1.1% of total inventory.
Growth, however, varied significantly by submarket.
South County led the region with 52,062 square feet of net absorption in the first quarter and nearly 95,500 square feet over the past year, the strongest performance in the county, JLL said. The vacancy rate in South County stood at 6.0%, with average rents at $3.37 per square foot.
East County and the Kearny Mesa/Mission Valley area also posted solid gains, with 19,255 square feet and 10,631 square feet of quarterly absorption, respectively. The vacancy rate in Kearny Mesa/Mission Valley dropped to 4.0%, according to JLL, among the lowest in the region.
In North County, performance was mixed, the brokerage found.
Escondido and San Marcos recorded positive absorption and a sharp drop in vacancy to 2.8%, while coastal North County posted negative absorption and a slightly higher vacancy rate at 6.2%. Oceanside and Vista saw modest gains but continued to report the highest vacancy rate in the county at 11.3%.
Central submarkets showed softer conditions for medical office space. The La Jolla/UTC/Sorrento area and Uptown/Hillcrest both recorded negative absorption during the quarter, with vacancy rising to 9.4% and 6.2%, respectively, according to the report.
JLL found suburban markets continued to outperform overall, reflecting an ongoing shift toward outpatient care delivery closer to where patients live.
Off-campus medical office buildings remained particularly strong, with vacancy at 5.8% and rents averaging $4.49 per square foot, both outperforming on-campus and adjacent-to-campus properties.
Leasing and development activity in the quarter was led by Sharp HealthCare, which drove much of the region's net absorption with the opening of a new 75,000-square-foot facility in Chula Vista. The project highlights a broader trend of health care systems acting as owner-users, developing and acquiring properties to expand their footprint, JLL said.
During the past five years, Sharp has built or acquired more than 300,000 square feet of medical office space across the region, with a focus on underserved suburban communities.
New construction remains limited due to elevated costs, with much of the recent growth in clinical space coming from conversions of traditional office buildings. Some investors are also repositioning properties into medical office condominiums for individual sale, the brokerage said.
Health care employment growth continues to underpin demand. The San Diego region added about 12,500 health care jobs throughout the past year, outpacing national growth and supporting long-term expansion in the sector.
Total leasing activity reached 67,548 square feet in the first quarter, a slight decline from the previous quarter, though activity is expected to rebound in the coming months, particularly in high-quality, Class A properties, according to JLL.
Rents for top-tier buildings remain elevated. Class A asking rents surpassed $5 per square foot for the first time in 2025 and have held near that level entering 2026.
Investment activity was selective, with deals largely driven by owner-users. In one of the quarter's largest transactions, Scripps Health acquired a 39,193-square-foot medical office building in Del Mar Heights for $21 million, a move expected to support its regional expansion.
Looking ahead, analysts expect the market to remain stable, supported by population growth, aging demographics and rising health care spending, with suburban submarkets continuing to lead the way.
Overall market fundamentals showed modest improvement. The direct vacancy rate declined from 6.7% a year go to 6.4%, while asking rents rose 1.4% to an average of $4.34 per square foot in the first quarter, according to the report.
Net absorption of medical office space totaled 44,034 square feet for the quarter and 156,546 square feet for the past 12 months, representing about 1.1% of total inventory.
Growth, however, varied significantly by submarket.
South County led the region with 52,062 square feet of net absorption in the first quarter and nearly 95,500 square feet over the past year, the strongest performance in the county, JLL said. The vacancy rate in South County stood at 6.0%, with average rents at $3.37 per square foot.
East County and the Kearny Mesa/Mission Valley area also posted solid gains, with 19,255 square feet and 10,631 square feet of quarterly absorption, respectively. The vacancy rate in Kearny Mesa/Mission Valley dropped to 4.0%, according to JLL, among the lowest in the region.
In North County, performance was mixed, the brokerage found.
Escondido and San Marcos recorded positive absorption and a sharp drop in vacancy to 2.8%, while coastal North County posted negative absorption and a slightly higher vacancy rate at 6.2%. Oceanside and Vista saw modest gains but continued to report the highest vacancy rate in the county at 11.3%.
Central submarkets showed softer conditions for medical office space. The La Jolla/UTC/Sorrento area and Uptown/Hillcrest both recorded negative absorption during the quarter, with vacancy rising to 9.4% and 6.2%, respectively, according to the report.
JLL found suburban markets continued to outperform overall, reflecting an ongoing shift toward outpatient care delivery closer to where patients live.
Off-campus medical office buildings remained particularly strong, with vacancy at 5.8% and rents averaging $4.49 per square foot, both outperforming on-campus and adjacent-to-campus properties.
Leasing and development activity in the quarter was led by Sharp HealthCare, which drove much of the region's net absorption with the opening of a new 75,000-square-foot facility in Chula Vista. The project highlights a broader trend of health care systems acting as owner-users, developing and acquiring properties to expand their footprint, JLL said.
During the past five years, Sharp has built or acquired more than 300,000 square feet of medical office space across the region, with a focus on underserved suburban communities.
New construction remains limited due to elevated costs, with much of the recent growth in clinical space coming from conversions of traditional office buildings. Some investors are also repositioning properties into medical office condominiums for individual sale, the brokerage said.
Health care employment growth continues to underpin demand. The San Diego region added about 12,500 health care jobs throughout the past year, outpacing national growth and supporting long-term expansion in the sector.
Total leasing activity reached 67,548 square feet in the first quarter, a slight decline from the previous quarter, though activity is expected to rebound in the coming months, particularly in high-quality, Class A properties, according to JLL.
Rents for top-tier buildings remain elevated. Class A asking rents surpassed $5 per square foot for the first time in 2025 and have held near that level entering 2026.
Investment activity was selective, with deals largely driven by owner-users. In one of the quarter's largest transactions, Scripps Health acquired a 39,193-square-foot medical office building in Del Mar Heights for $21 million, a move expected to support its regional expansion.
Looking ahead, analysts expect the market to remain stable, supported by population growth, aging demographics and rising health care spending, with suburban submarkets continuing to lead the way.
