Q4 2023: San Diego Industrial Market Report
San Diego’s vacancy rate has almost doubled since the beginning of 2023, a drastic change from low rates in 2022. Over 1.4 million square feet is available in new speculative deliveries, contributing to the highest availability rate since 2014. New supply entering the pipeline, along with returned space to landlords, has led to a rise in availability across all size cohorts.
Major West Coast markets, including San Diego, have experienced a faster rise in availability than the U.S. average. Leasing in buildings above 100,000 square feet has hit its lowest level since 2019, while leasing in small-bay properties remains strong.
Asking rents only grew by 0.6 percent in the fourth quarter of 2023, marking the weakest quarterly growth in the past decade. Although rents have risen 5.6 percent year over-year as of the fourth quarter, most of these gains occurred in the first half of 2023. The market anticipates rent growth moderating as demand fills new inventory.
Construction levels are high compared to historical norms. While some developers in Otay Mesa are delaying projects, other areas of the region lack the demand drivers the Port of Entry and the Mexican labor force offer. As consumer confidence improves and recessionary concerns ease, momentum for demand is expected to return.
Major West Coast markets, including San Diego, have experienced a faster rise in availability than the U.S. average. Leasing in buildings above 100,000 square feet has hit its lowest level since 2019, while leasing in small-bay properties remains strong.
Asking rents only grew by 0.6 percent in the fourth quarter of 2023, marking the weakest quarterly growth in the past decade. Although rents have risen 5.6 percent year over-year as of the fourth quarter, most of these gains occurred in the first half of 2023. The market anticipates rent growth moderating as demand fills new inventory.
Construction levels are high compared to historical norms. While some developers in Otay Mesa are delaying projects, other areas of the region lack the demand drivers the Port of Entry and the Mexican labor force offer. As consumer confidence improves and recessionary concerns ease, momentum for demand is expected to return.