Q2 2025 San Diego Industrial Market Report
The San Diego industrial market continues to favor tenants, with vacancy rising for the 10th consecutive quarter to 9.1%, the highest rate since 2012. Tariff-related uncertainty has dampened leasing momentum, especially in the Otay Mesa submarket, where vacancy has surged from 2% in 2022 to 14.4%. This pause in occupier decision-making is most pronounced among large tenants who are delaying moves until conditions stabilize. Despite the overall softness, demand for spaces under 10,000 square feet remains relatively stable, with lease-up times averaging 3.5 months.
Construction activity has slowed. Approximately 15% of the 1.4 million square feet currently under construction remains available, much of it near the border. Rent growth has slowed significantly to just 0.7% year-over-year, well below the long-term average of 3.9%. San Diego’s Central County has remained more resilient, with continued leasing activity and tighter availability.
Sublease availability remains elevated at 5.2 million square feet, a reflection of occupiers shedding underutilized space. Flex and biotech-heavy submarkets like Torrey Pines and Sorrento Mesa are facing especially high vacancy amid retrenchment in lab space demand. On the investment side, sales volume has cooled, with property values down an estimated 30% and transaction counts 40% below the last cycle average. Institutional and REIT buyers have largely retreated, leaving local and regional players more active. That said, some opportunistic investors are entering the market to capitalize on below-market rents and upcoming lease rollover.
Looking ahead, if trade uncertainties persist, vacancy could continue to climb, keeping pressure on rents. For occupiers, this presents a strategic window to negotiate favorable lease terms and right-size footprints with minimal competition.
Construction activity has slowed. Approximately 15% of the 1.4 million square feet currently under construction remains available, much of it near the border. Rent growth has slowed significantly to just 0.7% year-over-year, well below the long-term average of 3.9%. San Diego’s Central County has remained more resilient, with continued leasing activity and tighter availability.
Sublease availability remains elevated at 5.2 million square feet, a reflection of occupiers shedding underutilized space. Flex and biotech-heavy submarkets like Torrey Pines and Sorrento Mesa are facing especially high vacancy amid retrenchment in lab space demand. On the investment side, sales volume has cooled, with property values down an estimated 30% and transaction counts 40% below the last cycle average. Institutional and REIT buyers have largely retreated, leaving local and regional players more active. That said, some opportunistic investors are entering the market to capitalize on below-market rents and upcoming lease rollover.
Looking ahead, if trade uncertainties persist, vacancy could continue to climb, keeping pressure on rents. For occupiers, this presents a strategic window to negotiate favorable lease terms and right-size footprints with minimal competition.