The San Diego Commercial Real Estate Market

Investors and tenants across sectors are turning to San Diego, California, as a commercial real estate market ripe with opportunities.

The Southern California city is among the top ten most populous in the country, home to sizable employers and small businesses. Crexi offers investors, tenants, and other property seekers a window into San Diego's bustling commercial real estate market, giving them the tools to identify and acquire the best assets.

Crexi also aids brokers and those representing San Diego property with a powerful marketing vehicle, including tools to maximize assets' exposure and close more deals. To date, brokers have used Crexi to close more than $615 billion in commercial real estate listings and to market over $7 trillion in property value.

Crexi proudly supports San Diego, Escondido, Carlsbad, El Cajon, Chula Vista, and the surrounding communities as the region's fastest-growing digital CRE platform.

The State of San Diego Commercial Real Estate 

Perched on the Pacific Ocean's edge and gracing the border with Mexico, San Diego is a scenic city and a hub of cultural, economic, and social activity. 

Its strategic location has fostered a rich tapestry of cultural influences, making it a vibrant, diverse community that appeals to residents, visitors, and investors alike. The city's economy thrives on a mix of sectors, including biotechnology, healthcare, international trade, and tourism, underpinned by its famous attractions and nearly perfect climate year-round.

San Diego's real estate and development sectors emphasize sustainable living and innovative urban planning. The city's commitment to maintaining its beautiful environment while accommodating growth has led to exciting developments in both residential and commercial spaces. 

This balance of growth and quality of life makes San Diego an attractive destination for tourists, a promising area for investment, and a cherished home for its residents. The city's evolution continues to be guided by a vision of diversity, innovation, and sustainability, making it a compelling place to live, work, and invest.

San Diego Regional Breakdown

The San Diego metropolitan area has experienced a consistent increase in population, with growth in both the city and county outpacing California's population increase. The area continues to attract individuals and families drawn to its vibrant culture, employment opportunities, and natural beauty. 

However, it also faces the challenges typical of popular urban areas, including housing affordability and infrastructure demands. Nevertheless, San Diego's strategic initiatives to enhance livability, such as investments in public transportation and sustainable development, demonstrate the region's commitment to accommodating growth responsibly. 

• San Diego is home to 1.4 million people in the city and nearly 3.3 million people in the San Diego County metropolitan area.
• Since 2010, the city population has increased by 5.7% and the county has grown by 5.9%, versus a state-wide population growth of 4.8%.
• The largest cities in the metro area include San Diego, Chula Vista, Oceanside, Escondido, and Carlsbad.
• Median age is 37.3, a little less than the figure in the US, according to data on CensusReporter.org.
• Per capita income is $48,258, about 20% higher than the US.
• The median household income is $98,928, about 1.3 times the amount in the US.
• Nearly 50% of the households have a median income of more than $100,000 annually.

San Diego Job Market

The economy of San Diego is robust and diversified, with significant strides in sectors such as advanced industries. The region also stands out for its innovation, being recognized for its leading position in sports and active lifestyle patents. 

Amidst the challenges posed by global events, San Diego has demonstrated resilience and adaptability, with artificial intelligence catalyzing a 10% employment growth in its transportation cluster throughout the pandemic. 

The city's commitment to economic expansion is projected to increase nonfarm employment, adding nearly 207,600 jobs this year alone. 

• The total real domestic product (GDP) for the San Diego-Carlsbad MSA is $257.3 billion, increasing by nearly 15% over the past ten years, based on St. Louis Federal Reserve (FRED) data.
• The unemployment rate is 4.7% (January 2024), with mining and logging, construction, and education and health services reporting the strongest job gains.
• The 32nd St Naval Station, Collins Aerospace, General Dynamics Nassco, Illumina Inc., Kaiser Permanente Vandever Med, and Merchants Building Maintenance are among the major employers in San Diego County.
• San Diego has been ranked #1 in concentration of world military/defense assets, #2 as the most inventive city in the world, and #4 for top life science and biosciences locations, according to SanDiego.gov.
• WalletHub ranks the metro area as one of the top areas for STEM (science, technology, engineering, and math) professionals.
• Suffolk's decision to move its office downtown is part of a broader trend of businesses across various sectors revitalizing San Diego's downtown area. 
• A developer is proposing to redo two state-owned blocks in downtown San Diego with two residential towers alongside an all-new civic complex for city leaders and workers.
• The three largest universities in the area are San Diego State University (SDSU), the University of California, San Diego (UCSD), and the University of San Diego, each contributing significantly to the region's academic prestige, research capabilities, and workforce development.
• About 43% of residents hold a bachelor’s degree or advanced degree, about 20% higher than the US.
• The transportation infrastructure includes the Interstate 5 and Interstate 8 highways, the Port of San Diego, and the San Diego International Airport (SAN).
• San Diego's proximity to Mexico, particularly the bustling border crossing at San Ysidro, facilitates cross-border commerce and cultural exchange, bolstering both local and bi-national economies.

San Diego Industrial Market

The industrial and flex market in San Diego has experienced a notable change, with an increase in vacancy rates driven by softening demand and a significant surge in new construction. This is a departure from the typically low vacancy rates of previous quarters. 

Despite the year-over-year increase in asking rental rates, there's been a recent dip, reflecting the market's response to the evolving dynamics of supply and demand, alongside a substantial volume of new construction that is yet to be fully absorbed by the market.

Market overview (Colliers Q4 2023) 

• Inventory: 203,441,562 SF
• Vacancy rate: 4.3%
• Absorption: -2,349,664 SF (in 2023)
• Deliveries: 2,695,312 SF (YTD)
• Key leases by tenant: K1 Speed, SMAC, K-Flex
• Under construction: 7,382,946 SF 
• Largest submarkets: Otay Mesa, Carlsbad, Kearny Mesa, South Bay

Crexi Insights

These are the most recent industrial lease and sales trends from Crexi Insights (as of March 2024):

For Lease (active)

• Asking rate/SqFt (median): $19 per year
• Median SqFt/listing: 4,658
• Days on market: 134
• Total listings on Crexi: 310 spaces

For Sale (active)

• Median asking price: $2.9 million
• Price/SqFt: $325
• Asking cap rate: 5.4%
• Days on market: 100
• Total listings on Crexi: 36

Sales Comps (past 12 months)

• Median sold price: $3.9 million
• Sold price/SqFt: $397
• Total sales volume: $575 million
• Sold cap rate: 4.1%
• Median SqFt sold/transaction: 8,432
• Total SqFt sold: 1.0 million 
• Days on market (median): 218

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San Diego Office Market

The San Diego office market is undergoing significant adjustment, with an unprecedented rise in availability rates to historical highs and a substantial decrease in leasing volume. Additionally, new inventory coming to market may drive vacancies higher, with increased investor activity targeting distressed sales. The trend towards smaller lease sizes also persists, indicating a shift in how businesses approach office space in response to post-pandemic realities and evolving workplace strategies.

Market overview (Kidder Matthews 4th Quarter 2023)

• Inventory: 106,358,916 SF
• Vacancy rate: 11.8%
• Net absorption: -227,706 SF (in 2023)
• Leasing activity: 6,477,672 SF
• Key leases by tenant: County of San Diego, ESET, Northwestern Mutual
• Largest submarkets: Kearny Mesa, UTC, Sorrento Mesa, Mission Valley

Crexi Insights

For the latest updates on the office market in San Diego, turn to Crexi Insights. Here is the detailed information on the recent sales and leasing trends as of March 2024.

For Lease (active)

• Asking rate/SqFt (median): $27 per year
• Median SqFt/listing: 1,784 SF
• Days on market: 234
• Total listings on Crexi: 1,000 spaces

For Sale (active)

• Median asking price: $3.66 million
• Price/SqFt: $436 
• Asking cap rate: 5.8%
• Days on market: 282
• Total listings on Crexi: 52

Sales Comps (past 12 months)

• Median sold price: $1.3 million
• Sold price/SqFt: $544
• Total sales volume: $111 million
• Sold cap rate: 7.0%
• Median SqFt sold/transaction: 2,085 SF
• Days on market (median): 180

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San Diego Retail Market

The San Diego retail market is demonstrating resilience and growth. A notable decrease in overall vacancy rates and an uptick in occupancy across various center types indicate a healthy demand for retail space in the region. This positive momentum is increasing by asking rents, as the sector continues to adapt and thrive amidst changing consumer behaviors and economic conditions.

Market overview (Cushman & Wakefield Q4 2023) 

• Inventory: 80,659,610 SF
• Vacancy rate: 4.5%
• Net absorption: 111,024 SF (in 2023)
• Key leases by tenant: Ninja Factory, Amvets, Wheelhouse Athletics, Century Auto Group
• Under construction: 323,464 SF
• Largest submarkets: North County, Central County, South County, East County

Crexi Insights

Retail lease and sales trends from Crexi Insights (as of March 2024):

For Lease (active)

• Asking rate/SqFt (median): $27 per year
• Median SqFt/listing: 1,652 SF
• Days on market: 269
• Total listings on Crexi: 540 spaces

For Sale (active)

• Median asking price: $2.95 million
• Price/SqFt: $585
• Asking cap rate: 4.6%
• Days on market: 131
• Total listings on Crexi: 51 

Sales Comps (past 12 months)

• Median sold price: $2.5 million
• Sold price/SqFt: $610
• Total sales volume: $966 million
• Sold cap rate: 3.7%
• Median SqFt sold/transaction: 4,352 SF
• Days on market (median): 110

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San Diego Multifamily Market

The multifamily market in San Diego experienced a period of adjustment last year, with a slight increase in vacancy rates and a modest decrease in asking rents, marking a departure from the historically steady performance. Part of this shift was caused by delivery totals that outstripped demand. 

However, the pace of construction is expected to decelerate, leading to a potential easing of inventory growth. Despite these changes, the market remains resilient, with an uptick in transactions and adjustments in cap rates and median prices.

Market overview (NAI Q4 Multi-Family Report)

• Total housing units: 1,247,279
• Multi-unit inventory: 276,901 units
• Vacancy rate: 4.6%
• Average rent per unit: $2,381
• Absorption: 1,803
• Unit delivered: 3,982
• Units under construction: 7,397
• Recent transactions: Waterleaf Apartment Homes 456 units, Alina La Jolla 400 units, Veranda La Jolla 354 units

Crexi Insights

Here are the most recent multifamily Insights from Crexi (as of March 2024):

For Sale (active)

• Median asking price: $2.99 million
• Price/SqFt: $575
• Price/Unit: $406,000
• Asking cap rate: 4.4%
• Days on market: 122
• Total listings on Crexi: 89

Sales Comps (past 12 months)

• Median sold price: $1.43 million
• Sold price/SqFt: $616
• Sold price/unit: $468,000
• Total sales volume: $1.75 billion
• Sold cap rate: 4.1%
• Total SqFt sold: 2.11 million
• Days on market (median): 76

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