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2019 Q2 San Diego Industrial Market Report

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2019 Q1 industrial hero

Demand retains strength in a tightening market

Behind the Numbers

  • Vacancy decreased slightly in Q2 to 5.3% (+0.2%) as net absorption of 458,293 SF outpaced new construction completions of 76,512 SF.
  • An additional 1.13 million SF of new construction is slated for completion during the second half of 2019.
  • Countywide average asking NNN rental remained flat in Q2 to stand at $1.17/SF/month – a 11% year-over-year increase.

Net Absorption

Combined Industrial/R&D net absorption in San Diego County totaled 458,239 SF during Q2 2019. Industrial buildings (manufacturing, warehouse, distribution and multi-tenant/incubator uses) posted 319,590 SF of positive net absorption and R&D buildings (flex, wet lab and R&D uses) posted positive net absorption of 138,649 SF.

For a second consecutive quarter, Otay Mesa posted the greatest net absorption (+325,454 SF). R.L. Jones leased 94,686 SF at 2020 Piper Ranch Rd. Two large expansions included kSaria into 133,773 SF at 2055 Sanyo Ave and JD Group into 94,626 SF at 2001 Sanyo Ave. Intelligent Blends occupied 24,408 SF at 1440 Innovative Dr.

Campus Point/Eastgate (+201,257 SF) and Kearny Mesa (+142,733 SF) had the second and third highest levels of absorption during the quarter. In Campus Point/Eastgate, Samumed subleased 71,390 SF at 9360 Towne Centre Dr. Truvian occupied 33,116 SF at 10300 Campus Point Dr. and Oracle occupied 15,119 SF at 9890 Towne Centre Dr. In Kearny Mesa, Tire’s Warehouse moved into 106,451 SF at 4400 Ruffin Rd.

Vista posted the most negative net absorption (-428,645 SF) during the quarter. This activity was driven by a few large move-outs including Zodiac Pool Systems vacating 197,414 SF at 2620 Commerce Way to relocate to 2882 Whiptail Loop E. in Carlsbad (+106,122 SF). Denso Wireless vacated the 221,660 SF building at 3250 Business Park Dr, while Newport Blue moved out of 42,260 SF at 2258 Rutherford Rd.


Countywide combined industrial/R&D vacancy stood at 5.3% at the end of Q2 - a 20 basis points decrease from the prior quarter. Direct vacancy made up 4.9% of the inventory, while sublease vacancy stood at 0.4%.

Torrey Pines (16.6%), Sorrento Mesa (10.6%), and Carlsbad (10.5%) were the only submarkets with double-digit vacancy rates. The initial increase in Carlsbad’s vacancy occurred in Q1 and was driven by new construction that was completed that quarter. However, the vacancy came down by 38 basis points in Q2. Similarly, Sorrento Mesa’s vacancy increased in Q1 and remained flat in Q2. Torrey Pines’ vacancy was concentrated exclusively in life science and wet lab space.

New Supply

After a particularly strong Q1 where 1.13 million SF of new construction was completed, Q2 saw only 76,512 SF completed in two projects. In Poway, four buildings totaling 39,073 SF in Techbilt Companies’ Poway Tech Center were completed. Additionally, Hamann Construction completed a 37,439 SF building at 2842 Whiptail Loop.

At the end of Q2, there was 1.84 million SF under construction throughout the county. Approximately 1.13 million SF of that is expected to be completed by year-end, potentially bringing total completions to 2.33 million SF for the year. Along with last year’s newly completed inventory of 2.47 million SF, this will be the most construction completed since 2007 (2.97 million SF).

Trends, Forecast & Outlook

The San Diego County vacancy rate has been in the 4% range for the four years leading up to Q3 2018, when it reached its lowest rate ever (4.2%). Over the past nine months, the vacancy rate increased a percentage point due to increased construction completions of around 2 million SF, while net absorption was under 784,000 SF. By year-end, the vacancy will continue increasing a small amount as new construction gets completed, but it is expected to remain below 6%.

For a second consecutive quarter, the countywide average asking NNN rental rate stood at $1.17/SF/month. This was the fifth consecutive quarter where rents have maintained their increasing trend since remaining flat in the prior three quarters of Q3 2017 through Q1 2018. This trend of increasing rents is expected to continue if vacancy remains at historically low levels.

2019 Q1 industrial hero

2019 Q2 San Diego Industrial Market Report

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Related Experts

Conor Boyle

Senior Vice President


Conor Boyle is a Vice President with Colliers International, specializing in Industrial/R&D leasing and sales in North San Diego County.  Conor has nine years of experience in the commercial real estate industry and is currently responsible for the leasing and/or sale of over 1,000,000 square feet of property in North San Diego County.

Prior to working in commercial real estate, Conor was an officer in the United States Army and achieved the rank of Captain before leaving the Service.  Conor served two Tours of Duty in Iraq, including one as a tank Platoon Leader in Baghdad.

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Joe Crotty

Brokerage Senior Vice-President


Joe Crotty, a 13 year commercial real estate veteran, specializes in Industrial and R&D sales and leasing in North San Diego County.  Completing an average of over 80 transactions a year and currently responsible for the sale and leasing of over 1,000,000 square feet of industrial property, Joe is widely considered a market expert in his field.  Joe has been involved with several ground-up land development projects ranging from multi-tenant incubator space to land sales and large build-to-suits.  His market knowledge and work ethic were instrumental in their successes.  

Joe was recruited by Colliers International in January 2010. Prior to joining Colliers, Joe was with Coldwell Banker Commercial for seven years, during which he was recognized as San Diego’s 2004 “Rookie of the Year” company-wide.  Since his rookie year, Joe has been honored annually with Coldwell Banker Commercial’s Circle of Distinction designation which recognizes the top commercial real estate professionals worldwide.  In 2008 and 2009 Joe was recognized with the most lease/sale transactions company-wide, and led the Colliers Carlsbad office in 2010 with his partner Josh McFadyen.  Joe has been an integral part of a team that has successfully marketed a 400 acre development consisting of over 400,000 square feet of buildings for sale and another 125,000 square feet of multi tenant industrial suites for lease.  This same team was awarded the 2006 “Largest Transaction:” award for the successful sale of the 24.6 acre Seagate Corporate Center to the Rockefeller Group.  Due to his successes Joe was approached by the Koll Company to handle the leasing of one of their struggling projects where he brought the occupancy rate up from 65% to where it currently sits at 96%, in a market where the average vacancy rate sits at approximately 14%.  Since 2004, Joe has been involved in over 550 sale and lease transactions totaling more than $2,500,000 square feet.

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