HEIGHTENED DEMAND in the market compressed vacancies and availabilities to record lows. The severe lack of availability in the central county specifically, pushed tenants to seek space directly north. Traditional e-commerce, HQ users, and biotech firms alike have rapidly expanded into North County, resulting in a tightened market.
THE AVERAGE ASKING RENTAL RATE climbed to an all-time high in the second quarter and shows no signs of slowing in the highly competitive nature of the current market. Logistics as well as lab inventory have been the main drivers of rent growth, with rents growing 6-6.5% YOY.
WHILE DEMAND AND INTEREST from owner/users and investors has remained high, sales transactions have decreased by virtue of a lack of sale inventory, down 30% over the past six months when compared to last year. The low inventory is a direct correlation to the high prices experienced throughout the county.
THE SAN DIEGO COUNTY UNEMPLOYMENT RATE in May dropped three basis points to 6.4% month-over-month, adding 2,000 jobs within the last month. This compares with an unadjusted unemployment rate of 7.5% for California and 5.5% for the nation.
SAN DIEGO’S REPUTATION as a top life science and biotech market has grown exponentially over recent years. Furthermore, the heightened demand for logistics space throughout the county for e-commerce and last-mile distribution continues to increase. These two leading sectors will help the industrial market remain strong and flourish.
VACANCIES MAY INCREASE due to the new supply in 2021 but only slightly as over half the development pipeline has already been committed to. It is not likely to apply substantial upward pressure to the vacancy rate given the level of recent demand.
THE INDUSTRIAL MARKET may experience some tightening of fundamentals in the near future as demand continues to surge, rent growth remains above the long-term average, and supply remains low.