Q1 2024 San Diego Industrial Market Report

San Diego’s industrial market is grappling with prolonged negative absorption, reaching its fifth consecutive quarter, the longest streak since the height of the Great Recession. Notable vacancies from Amazon and biotech firms have propelled total vacancy rates. The industrial sector, particularly for spaces above 50,000 square feet, struggles to rebound, with leasing still below pre-pandemic levels. Landlords of large spaces are prioritizing cost control over leasing activity, contributing to rising availability rates. Multi-tenant, small-bay properties maintain low vacancy and high demand, particularly in North County incubator parks. Sublet space has surged to a 20-year high, notably in flex and lab buildings.

Construction activity in 2024 will add substantial flex and industrial space, primarily concentrated in South County near the port of entry. Demand-drivers in Otay Mesa remain strong, yet broader economic uncertainties may delay significant recovery until 2025.

Rent growth has moderated to long-term averages, mirroring the market’s overall stabilization. San Diego’s market dynamics are increasingly defined by the contrasting fortunes of small-bay properties versus large logistics facilities. Overall, the market is navigating a complex landscape shaped by evolving demand patterns and economic uncertainties.

Download the full market report to learn more.