— By Bryce Aberg and Brant Aberg of Cushman & Wakefield —
Optimism is returning to the San Diego industrial market after a few quarters of recalibration. Buyer appetite has resurfaced in core submarkets like Otay Mesa, Miramar and Carlsbad, which has created a ripple effect across the Greater San Diego industrial market. With an inventory of 162 million square feet as of the second quarter, San Diego is beginning to see the benefit of limited supply.
Natural barriers like Mexico, the Pacific Ocean, Camp Pendleton and the nearby mountains are driving the San Diego industrial market toward full build-out. There is currently only 2.4 million square feet of inventory under construction, with not much more proposed.
Following the all-time highs in rent growth and positive absorption seen in 2021 and 2022, San Diego’s enduring fundamentals and built-in advantages have kept it in place as one of the most stable and competitive in Southern California. With a diversified tenant base, high barriers to entry and a strategic position on the U.S.-Mexico border, fundamentals have held while others in the Southern California region have struggled in comparison.
Bid-ask spreads are also starting to narrow as buyer and seller sentiments begin to align. With deeper bid sheets and more institutions needing to deploy capital, the current state of interest rates has become the new normal.
Leasing activity also remains strong, despite the elevated vacancy in the South County submarket (10.7 percent). The stand-out is Otay Mesa, which accounted for 39 percent of all deals over 20,000 square feet so far this year in San Diego. By comparison, the Miramar and Carlsbad submarkets only accounted for a combined 13 percent of deal activity. A major contributor to the upcoming supply is Amazon’s 1-million-square-foot, built-to-suit owner-user project in Otay Mesa that’s slated for delivery later this year.
Since 2020, more than 11.6 million square feet of new product has delivered across San Diego County, with 81 percent located in South County. There is 2.4 million square feet under construction now, including nearly 1 million square feet of speculative space at Otay Business Park. North County has minimal construction underway, led by smaller projects, such as 1430 Decision Street in Vista and the Evolve campus in Carlsbad.
As a binational logistics hub, San Diego’s market continues to be influenced by trade policy, particularly for third-party logistics (3PL) providers. Even so, the region’s industrial base remains diversified, supported by a strong presence in defense, life sciences and telecommunications. There are no material new construction deliveries slated for 2025, and asking rents remain stable at $1.52 per square foot, triple-net, with moderate growth expected over the next 24 months.
— By Bryce Aberg and Brant Aberg, Vice Chairs of Cushman & Wakefield’s Industrial Capital Markets and Leasing Team. Charles Jacobs, Conor Boyle, Ryan Downing and Trent Smith of Cushman & Wakefield also contributed to this story. This article was originally published in the July 2025 issue of Western Real Estate Business.