A regional planning agency’s nearly 90,000-square-foot lease in San Diego is among the largest downtown office leases signed in the past seven years and a rare big leasing for an otherwise troubled urban-core office neighborhood.

With help from a development team led by Holland Partner Group, the San Diego Association of Governments, also known as SANDAG, leased 87,000 square feet at West, a $450 million mixed-use, speculative office project under construction at 1011 Union St. The building is expected to rise 37 stories upon completion in the first quarter of 2024.

Developers are expecting the high-profile government tenant to help draw corporate tenants to the property, though no other office tenants have been announced. Plans for the large development call for 289,000 square feet of office space, 10,000 square feet of retail space and 431 apartments.

“The lease with SANDAG affirms that companies want to be in a vibrant mixed-use environment that caters to their employees by offering a higher standard in amenities, wellness, stability and collaboration while maximizing the efficiency of their usable space,” Holland Partner Group managing director Brent Schertzer said in a statement.

Public filings showed SANDAG signed a 15-year lease for approximately $4.15 per square foot. The agency will eventually relocate from its current downtown headquarters at 401 B. St., where it currently leases about 114,000 square feet, according to CoStar and public data.

Brokers at JLL, who represented the developers, said the office lease transaction is the largest by square footage in downtown San Diego in the past seven years, and West is the only speculative downtown building to do any office pre-leasing in 20 years.

Like the downtowns of other major cities, San Diego’s urban core is now posting historically high office vacancy rates as companies downsize real estate footprints amid persistent work-from-home trends stemming from the pandemic.

CoStar data as of August 17 showed the SANDAG lease is the first new downtown San Diego office lease of more than 40,000 square feet in more than five years. Downtown San Diego’s office vacancy is among the region’s highest, at a historic high of 25.9%. The downtown office availability rate, with available sublease space factored in, is now 38.1%.

Those numbers could actually move higher, depending on leasing patterns for another 1.8 million square feet of new office space slated to be completed in the downtown area by year’s end, with even more speculative space in the construction pipeline.

“Almost the entirety of the swollen 2.7 million-square-foot pipeline downtown is available for lease, and that is easily the most inventory under construction here in 20 years,” Joshua Ohl, CoStar’s senior director of market analytics in San Diego, said in a market report.

West’s developers and brokers are looking for downtown San Diego office demand to increase, particularly as the city's core residential population grows and those residents look to work in modern, tech-enabled spaces. They are also counting on tenants of older downtown properties to migrate to newer facilities in transit-friendly locations, with West located four blocks from the regional Santa Fe Depot train station.

JLL Executive Vice President Richard Gonor said brokers are expecting a “flight to quality” as workplace trends evolve and office users seek updated amenities. “Over the next several years, we will see mixed-use properties emerge as leaders for the new wave of employees,” Gonor said in a JLL statement.

West’s developers are seeking to compete with other new downtown developments and older office properties by incorporating amenities such as indoor and outdoor fitness facilities, a dog run, a pet spa and a top-floor pool deck.

“Tenants are looking for the best projects with the best amenities to welcome their employees back into the office, and West provides that,” JLL Managing Director Tony Russell said in the broker's statement.

Vancouver, Washington-based Holland Partner Group is building West with Los Angeles-based mixed-use developer Lowe and the North American division of residential builder Sekisui House, headquartered in Osaka, Japan.

The project is competing with other large-scale office developments in downtown San Diego that are under construction but have yet to announce tenants. Those projects include Stockdale Capital Partners’ $500 million mixed-use overhaul of the former Horton Plaza retail mall near the Gaslamp Quarter and IQHQ’s $1.5 billion biotech campus near the downtown waterfront.