San Diego Industrial Market Report
Robust Demand Apparent for Border-Proximate
and Lower-Cost Industrial Space
Southern zone becomes San Diego’s largest submarket. Adjacent to the U.S.-Mexico border, South Bay’s industrial inventory grew by nearly 20 percent over the past 24 months ending in March. Demand for new space, however, has been strong with industrial users absorbing a net of more than 6 million square feet, reducing vacancy by 220 basis points. The construction of Otay Mesa East, a new 10-lane port of entry, is fueling this level of demand, as the project’s completion next year will significantly increase cross-border truck crossings into San Diego. With South Bay vacancy at 2.9 percent in March, the nearly 1.8 million square feet slated for 2023 completion should be well received. Speculative projects unable to secure a tenant this year may benefit from what appears to be a pullback in local construction. As of mid-June, just 300,000 square feet was ongoing and slated for 2024 completion in South Bay.