MARKET DRIVERS
The San Diego industrial market posted positive 612.8K SF of direct net absorption in 4Q25, reversing the prior quarter’s negative 361.9K SF and improving from the negative 167.1K SF recorded in 4Q24. Despite the better quarter, cumulative 2025 absorption remained negative at 1.0M SF, marking a third consecutive year of negative net absorption for the industrial market.
Total vacancy edged down 30 basis points (bps) quarter over quarter to 9.3% in 4Q25, but remains 170 bps higher than the same time last year. New supply continued to add pressure, with 427.0K SF delivered in the quarter and roughly 2.1M SF still under construction, keeping tenant leverage concentrated in larger, newer blocks of space.
Lease transaction volume cooled after a strong 3Q25, totaling 1.6M SF across 268 deals in 4Q25. Leasing was down 35.8% quarter over quarter and 3.5% year over year, yet asking rents held firm at $1.49 PSF NNN. On a year-over-year basis, overall asking rents decreased 2.6%, but pricing power for well located, modern logistics products.
Industrial investment sales activity rebounded in 4Q25, with 2.8M SF trading across 68 transactions, totaling $839.3M in dollar volume. Average pricing rose to $337 PSF, up 15.2% year over year, indicating that buyers remain selective but willing to pay for functional, infill assets.
ECONOMIC REVIEW
In September 2025, manufacturing employment in the San Diego Chula Vista Carlsbad MSA measured 109.0K jobs, down 2.3% year over year. Trade, transportation, and utilities employment totaled 221.4K jobs, down 0.4% year over year, highlighting a modest cooling in several industrial linked sectors.
The unemployment rate remained at 4.9% since last quarter, 50 bps higher than last year. While near term job growth has moderated, San Diego’s diversified base across defense, life sciences, tourism, and cross border trade continues to support long term demand for industrial and logistics space.
NEAR-TERM OUTLOOK
San Diego’s industrial market ended the year with a notable improvement in absorption, suggesting that occupiers are beginning to take advantage of expanded availability to secure space ahead of 2026 needs. With vacancy still elevated, tenants remain disciplined, prioritizing functionality and location and negotiating harder on concession packages, especially for second generation product. For landlords, the most competitive assets continue to be modern buildings in infill submarkets, where clear heights, dock configurations, and yard or trailer parking options align with the region’s logistics constraints.
Developer and investor activity continues to signal long term conviction in supply constrained submarkets. In Kearny Mesa, Lincoln Property Co. and Brasa Capital acquired Spectrum Tech Center and announced plans to reposition it as Spectrum Logistics Center, underscoring the market’s ongoing shift toward redevelopment and adaptive reuse. In Otay Mesa, vertical construction is advancing at Otay Business Park, a large scale industrial project that is expected to deliver first phase space in 2026, reflecting continued focus on the region’s cross border trade corridor.
4Q 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 Edged Down: Direct vacancy decreased to 9.3%, though still 170 bps higher year-over-year.
- Availability Rate Elevated: Total availability held at 12.6%, up 150 bps year-over-year.
- Asking Lease Rates Declined: Average asking rent was $1.49/SF/month, down 2.6% year-over-year.
- Leasing Activity Slowed: Quarterly leasing volume totaled 1.57M SF, down 35.8% from Q3 and 3.5% year-over-year.
- Sales Volume Strong: Industrial sales reached 2.8M SF in Q4, totaling $839.3M, with average pricing up 15.2% year-over-year to $337/SF.
- Positive Absorption After Declines: Q4 posted +612.8K SF net absorption, but 2025 ended at -1.09M SF, marking the third consecutive year of negative annual absorption.
Click here to subscribe to Kidder Mathews market research.