San Diego Industrial Vacancy Climbs to 9.7% as Rents Fall 4.5% Year-Over-Year

Third-quarter leasing activity reaches 2.1 million square feet despite softening fundamentals

San Diego’s industrial real estate market continues adjusting to oversupply conditions as businesses seek modern warehouse space while landlords face mounting pressure on occupancy rates. The region’s industrial vacancy rate reached 9.7 percent in the third quarter, representing a 260-basis-point increase from the same period last year, according to a Q3 market report from Kidder Mathews. Average asking rents declined 4.5 percent year-over-year to $1.48 per square foot NNN. 

“San Diego’s industrial market saw fundamentals hold relatively steady in the third quarter, with vacancy inching up to 9.7 percent while average rents softened slightly to $1.48 per square foot NNN,” the report stated. 

The quarter-over-quarter vacancy increase of 30 basis points suggests the rate of deterioration may be moderating. Leasing activity totaled 2.1 million square feet in the third quarter, bringing year-to-date volume nearly level with the same period in 2024. The largest lease transaction of the quarter involved Jeld-Wen renewing its 140,969-square-foot commitment at 1875 Ord Way in Oceanside, a property owned by BGO, completed in July. 

Other notable leases include the following deals: 

• Solar Turbines leased 123,492 square feet at 8888 Balboa Ave in Kearny Mesa from landlord Rexford Industrial in July. 

• In Vista, SJ Distributors, LLC took 96,745 square feet at 1201 Park Center Drive from US Foods, Inc. in September.

• Defense technology company Saronic Technologies, Inc. leased 83,649 square feet at 2727 Kurtz St in the Old Town/Sports Arena/Point Loma submarket from Realterm in July. 

• Babaji Central Company signed for 55,296 square feet at 2611 Commerce Way in Vista from landlord Hamann in August.

Meanwhile, direct net absorption registered negative 454,600 square feet in the third quarter, an improvement from the negative 732,200 square feet recorded in Q3 2024. Year-to-date direct net absorption stands at negative 1.7 million square feet, positioning 2025 to become the third consecutive year of negative absorption for the San Diego industrial market.

Kidder Mathews points out that investment sales volume declined 13.9 percent year-over-year to 835,000 square feet, though cumulative sales are down 19.6 percent for the year. Despite reduced transaction activity, the average price per square foot rose to $312.86, exceeding both last year’s $304.27 and the five-year average of $305.13. Q3 2025 major sales:

• GID Industrial Advisors, LLC acquired a 78,143-square-foot property at 2793 Loker Ave W in Carlsbad from MetLife, Inc. for $17.8 million, or $227.79 per square foot. 

• Foster Display Group purchased 1332 Rocky Point Dr in Oceanside, a 51,081-square-foot facility, from Rexford Industrial Realty, Inc. for $14.715 million, or $288.07 per square foot.

• Raleigh Ventures, LLC paid $10.5 million for the 46,000-square-foot building at 495 Raleigh Ave in El Cajon, translating to $228.26 per square foot. The seller was M. House Family LTD Partnership. 

• Atomic Investments, Inc. bought 1230 Avenida Chelsea in Vista, totaling 38,802 square feet, from The Paskin Group for $8.9185 million, or $229.85 per square foot. 

• In Escondido, Excelsior Partners, LLC acquired 950 Borra Pl, a 27,980-square-foot property, from Meridian Properties Real Estate, Inc. for $8.55 million, or $305.58 per square foot.

Based on the report, the construction pipeline remains active with over 2.1 million square feet under development. Amazon’s 1.077-million-square-foot facility at 6980 Otay Mesa Road in Otay Mesa is scheduled for fourth-quarter 2025 completion. Amistad Holdings, LLC is developing Otay Business Park at 1–3 Via De La Amistad Rd in Otay Mesa, comprising 612,240 square feet with a second-quarter 2026 delivery target.

In addition, Oxford Properties Group’s project at 2830/2836 Whiptail Loop in Carlsbad spans 165,000 square feet and was slated for third-quarter 2025 delivery. RD Business Center, LP is constructing 133,933 square feet at 7373–7363 Britannia Ct in Otay Mesa for second-quarter 2026 completion, while LBA Logistics is developing 123,705 square feet at 1430 Decision St in Vista, also targeting second-quarter 2026 delivery.

Overall, the San Diego industrial market shows signs of stabilization as vacancy growth slows and transaction prices hold firm despite reduced leasing velocity and persistent negative absorption. The substantial construction pipeline entering a market with rising vacancy rates will test whether tenant demand for modern facilities can absorb new supply without further weakening fundamentals.