San Diego Medical Office Market Shifts Toward Built-Out Space

Overview: Medical Office Market Tightens in San Diego

San Diego’s Class A medical office sector is seeing a notable shift. While the flight-to-quality trend continues, a quieter force is now driving leasing behavior: flight-to-built-out space. According to JLL’s Q4 report, average asking rents for Class A medical office space have surpassed $5 per square foot gross for the first time in San Diego County. Vacancy among top-tier buildings compressed to just 4%, highlighting limited availability.

The Rise of Ready-to-Use Clinical Space

Small to mid-sized tenants, especially those needing 1,800 to 4,000 square feet, are leading demand. These tenants now prioritize move-in-ready clinical space due to:

• High construction costs
• Permitting delays
• Lack of turnkey suites

“Tenants now prioritize space that is ready or nearly ready for immediate occupancy,” said Ben Schiesl, Vice President at JLL. This demand shift favors landlords with capital to deliver speculative build-outs or turnkey solutions. While Class A landlords tighten vacancy, Class B and C buildings are losing ground—not from poor quality, but from underinvestment at the suite level.

Opportunity in Turnkey and Speculative Buildouts

Landlords who invest in ready-to-use clinical suites or offer strong tenant improvement (TI) packages are capturing the most attention.

At the submarket level:

• Vacancy decreased in:
  • Kearny Mesa: 6.5% → 4.5%
  • Escondido/San Marcos: 5.8% → 3.6%
• Vacancy increased in:
  • Uptown/Hillcrest: Net absorption –28,910 SF
  • I-15 Corridor: Net absorption –31,559 SF

This trend highlights strengthening fundamentals in submarkets offering flexible, modernized medical space.

What’s Ahead for San Diego Medical Office Space

New medical office development and adaptive reuse is expected in areas like Kearny Mesa and San Marcos, where demand is growing. Still, with no short-term relief from construction costs or permitting timelines, lease renewals will remain the default choice for many medical tenants—even those looking to expand.

“Owners who can deliver high-quality clinical space or provide substantial tenant improvement allowances will be best positioned to capture demand,” Schiesl emphasized.

Key Takeaway

The San Diego medical office market is evolving. Turnkey, built-out space is now the key differentiator. For landlords and investors, this means:

• Invest in speculative buildouts or flexible improvements
• Target strong submarkets like Kearny Mesa and San Marcos
• Understand that tenant needs are shifting from raw space to ready-to-use clinics

For medical office real estate in 2026, efficiency and immediacy will drive leasing decisions.