MARKET DRIVERS
The San Diego industrial market experienced negative 454.6K SF of direct net absorption in 3Q25, which is slightly better than the negative 732.2K SF in in 3Q24. Cumulatively, direct net absorption reached negative 1.7M SF this year, indicating that 2025 will likely be the third straight year of negative net absorption for the industrial market.
The total vacancy rate continues to reach new heights, a year-over-year (YOY) increase of 260 basis points (bps) brought it to 9.7%. Quarter-over-quarter (QOQ) vacancies grew by 30 bps, hopefully a sign that these rates are beginning to even out. Lease transaction volume decreased QOQ and YOY, recording 2.1M SF on the quarter. Despite this slight decrease, cumulative transaction volume is nearly identical to this point last year.
Industrial sales volume also saw a QOQ and YOY decrease. Unlike lease volume, sales are down cumulatively 19.6%. Although sales volume has slowed, the average price/SF for these transactions were measured at $312.86, higher than last year, $304.27, and the five year average, $305.13, indicating that although demand has slowed, prices remain stable.
ECONOMIC REVIEW
In August 2025, San Diego County’s unemployment rate was recorded at 5.0%, up 100 basis points since May and up 10 basis points year-over-year. Similarly, California recorded a 5.5% rate, 20 basis points higher than the previous quarter and 10 basis points higher than the same time last year.
The San Diego-Carlsbad-San Marcos Metropolitan Statistical Area (MSA) industrial jobs have seen mixed performances over the past year. The Manufacturing sector reported 109.5K jobs, marking a 2.5% decrease YOY, but a 0.3% increase from 2Q25. Similarly, the Transportation and Utilities sector is down 0.4% YOY, but up 0.4% QOQ to 220.6K jobs.
NEAR-TERM OUTLOOK
San Diego’s industrial market saw fundamentals hold relatively steady in the third quarter, with vacancy inching up to 9.7% while average rents softened slightly to $1.48 PSF NNN. Despite modest rent compression, leasing activity remained healthy as tenants continued to target modern facilities. Rexford Industrial Realty’s redevelopment strategy reflected this trend, with the firm signing a 123,000 SF lease to a solar turbine tenant in San Diego, part of over 1.1 million square feet of redeveloped space leased year-to-date across Southern California. These results underscore continued demand for high-quality, well-located space even as broader vacancies rise.
Investor and developer confidence in San Diego’s industrial market remains strong. Lincoln Property Co. and Brasa Capital Management’s $26.25M acquisition of the Spectrum Tech Center in Kearny Mesa will transform the site into the Spectrum Logistics Center, featuring a 3.7-acre outdoor storage yard tailored to logistics users. The redevelopment highlights the enduring appeal of San Diego’s central submarkets and the ongoing shift toward adaptive reuse and modernization in the region’s supply-constrained industrial landscape.
3Q 2025 San Diego Industrial Market: Key Data Points
Explore our full San Diego industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Hits 9.7%: San Diego’s industrial vacancy rate rose 260 bps year-over-year, reaching 9.7%.
- Net Absorption Remains Negative: Direct net absorption totaled -454K SF in Q3, contributing to a YTD figure of -1.7M SF.
- Asking Rents Decline: Average asking rent fell 4.5% year-over-year to $1.48 PSF NNN.
- Leasing Volume Holds Steady: Leasing activity reached 2.1M SF in Q3, with YTD volume nearly unchanged from 2024.
- Sales Volume Down, Prices Up: Sales volume dropped 13.9% YOY to 835K SF, but average price/SF rose to $312.86.
- Construction Pipeline Active: Over 2.1M SF is under construction, including major projects in Otay Mesa and Carlsbad.
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