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Industrial market thrives despite COVID pandemic

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San Diego County | Industrial

Behind the Numbers

  • Countywide vacancy dropped to 5.0% increased driven by 1.5 million SF of positive net absorption in Q4.
  • Nearly 5.8 million SF is currently under construction, including 3.3 million SF preleased by Amazon in Otay Mesa.
  • Countywide average asking NNN rental rate increased by $0.07/SF in Q4 to reach an all-time high of $1.37/SF/month - a 9.6% increase year-over-year. The increase was also the single-highest quarterly nominal increase on record. Rents in industrial space increased by 5.1% ($1.03/SF), whereas R&D space increased by 16.5% ($2.19/SF).

Net Absorption

Industrial buildings (manufacturing, warehouse, distribution and multitenant/incubator uses) posted 734,956 SF of net absorption and R&D buildings (flex, wet lab and R&D uses) posted 764,920 SF, for a combined industrial/R&D net absorption of 1.50 million SF in Q4 and overall annual net absorption to 1.64 million SF in 2020. Combined industrial/R&D net absorption in Q4 2020 was the highest amount ever recorded for a single quarter, narrowly outpacing the 1.47 million SF (Q2 2005) recorded 14½ years ago.

Five submarkets recorded more than 100,000 SF during the quarter with Sorrento Mesa (+450,982 SF) and Carlsbad (+342,196 SF) taking the top spots. A few of the largest move-ins during Q4 were Alphatec (+121,541 SF) at 1950 Camino Vida Roble in Carlsbad, GenMark Diagnostics (+73,057 SF) at 6221 El Camino Real in Carlsbad, and Quidel Corporation (+106,412 SF) at 10015 Waples Ct in Sorrento Mesa which was listed by Colliers International.

Carlsbad (+533,977 SF) and Poway (+529,417) recorded the most net absorption for the year. Additionally, at 1.3%, Poway has the lowest vacancy of any major submarket in the county. In fact, Sorrento Valley (14.1%) is the only submarket countywide to have a vacancy rate in double digits. However, with the current trend toward conversion of flex/R&D space into much sought after lab and life science space, it is expected that even Sorrento Valley will begin to see its net absorption trend positive and vacancy slide downward over the next year.


Countywide combined industrial/R&D vacancy stood at 5.0% at the end of Q4 - a 76-basis point (BPS) decrease from the prior quarter. Direct vacancy made up 4.6% (-63 BPS) of the inventory, while sublease vacancy stood at 0.4% (-13 BPS). Vacancy in the industrial inventory decreased by 52 BPS to 4.0% and the R&D inventory decreased by 140 BPS to 7.5%.

13 out of San Diego County’s 21 submarkets posted vacancy less than 5% and only Sorrento Valley (14.1%) posted a double-digit rate. Sublease vacancy increased slightly in Q3 but dropped back below 0.5% at year-end. Even as the local economy has slowed significantly due to a pandemic that has affected all other property sectors, the industrial market has not only remained resilient, but has continued to thrive. There is a strong potential for vacancy to reach its lowest level on record by the end of 2021.


A single 9,000 SF build-to-suit for Enstrom Mold and Engineering was completed on Trade St in San Marcos in the last quarter of the year. This added to a total of 1.29 million SF completed in 2020.

There are currently eleven projects totaling 5.77 million SF under construction countywide. Otay Mesa makes up 93% (5.34 million SF) of all the space currently under construction countywide. The largest project under construction is the 3.3 million SF building being developed by Seefried Properties for Amazon in Otay Mesa. The e-commerce giant will be occupying nearly 4 million SF countywide in 2020 and 2021 in new construction. Amazon’s total presence countywide will reach nearly 5 million SF, making it the region’s largest corporate tenant. Additional, projects being built in Otay Mesa include Landmark at Otay (845,830 SF), Majestic Sunroad Center (227,268 SF), Otay Crossings (151,423 SF), and Airway Industrial Park (135,623 SF) – all with leasing being represented by Colliers International – along with, Brown Field Technology Park (229,063 SF), and California Crossings (453,330 SF).

Otay Mesa’s neighboring South County submarket of Chula Vista has 95,500 SF under construction at Otay River Business Park, while 69,388 SF is nearing completion at River Run Business Park in Lakeside. Life science space continues to see soaring construction in Torrey Pines as Alexandria Real Estate Equities nears completion on Spectrum III (146,456 SF) and Healthpeak Properties is underway on The Boardwalk (191,709 SF).

Trends and Outlook

Relative to other property types such as office and retail, the industrial and R&D market sector has not been as adversely affected by the COVID pandemic fueled recession. Growing industries such defense, life science and e-commerce have benefited from demand in San Diego County, which has a strong base in these sectors.

The relative strength of San Diego industrial and R&D base is one of the primary reasons asking rental rates continue experience increasing growth and are expected to continue to do so for the foreseeable future. A shrinking supply of industrially zoned raw land is placing a constraint on future ground-up development, which puts additional upward pressure on rents.

Because of the growing demand for life science space, many of the North City submarkets such as Sorrento Mesa, Sorrento Valley, Torrey Pines and Campus Point are seeing a trend toward converting low-rise office and flex/R&D space into life science space to support the sector’s accelerating growth.

In Q4, Longfellow Real Estate Partners purchased the “The Foundry” – a 281,000 SF two-building Class A office mid-rise project in Sorrento Mesa – with plans to convert the project to life science space. Additionally, Longfellow is converting 23-buildings with 660,000 SF of R&D space into high-end lab space in the neighboring Sorrento Valley market. Over the next year, we can expect more redevelopment of office space and new ground up life science construction.

Demand will continue to be strong well into 2021 and rents will continue to increase at the steady rate they have been experiencing over the last decade. Most of the absorption will be concentrated on new construction coming online throughout the year. In fact, 5.6 million SF will be completed by year-end and account for 3.3 million SF of net absorption just based off the nearly 60% of pre-leasing already completed. In addition, continued demand in existing buildings, vacancy will likely drop to nearly 4% by the end of 2021.


Industrial market thrives despite COVID pandemic

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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

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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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Ted Cuthbert

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Ted is an industrial sales and leasing specialist and has been in commercial real estate for over 30 years. Ted was Colliers International San Diego Region’s #1 Top Producer of 2016, 2017 and 2019. In 2017, he earned the title of Senior Executive Vice President, one of only three in the San Diego region. He has been involved in the sale of major business park land sales totaling over 1,200 acres, as well as 70 build-to-suits, the sale of commercial buildings totaling over 3 million SF and the leasing of over 15 million SF. During his tenure, Ted has been involved in over 1,500 transactions with total transaction consideration in excess of $3 billion.

Ted joined CBRE- San Diego in 1988 and Colliers International- Carlsbad in 2005 and achieved the title of Senior Vice President at both Commercial Real Estate Brokerage Companies (based upon income, tenure and experience). Ted is a Top 10 performer in the San Diego County Region, year in and year out. His highly successful record of accomplishment and his strategic focus and market knowledge accelerates the success of his clients.


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Mike Erwin

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Mike Erwin is a commercial real estate expert specializing in San Diego County Industrial/R&D properties and investments, representing buyers, sellers, landlords, tenants, developers, and investors.  Mike is a member of the Society of Industrial and Office Realtors (SIOR), the leading global professional industrial real estate association. Mike's career started as a bank regulator where he evaluated the safety and soundness of national banks and audited banks' commercial loan and OREO portfolios from 1992 to 1998. He began commercial real estate sales and leasing in 1998.

Mike now provides clients with a wide range of services, including development, consultation, financial analysis, lease analysis, market analysis, sale and lease negotiations, and value assessment of commercial properties. Focused on exceeding client expectations, Mike fosters productive strategic relationships and grows sales with new marketing strategies and techniques.  Mike's undergraduate and graduate degrees from San Diego State University have been valuable in both his career aspirations and in fostering connections within the San Diego region.

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Tucker Hohenstein

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Tucker Hohenstein is a Senior Executive Vice President with Colliers International in the San Diego region. He is  an industry expert with respect to industrial and R&D/flex markets within the North County area and  is a member of the Society of Industrial and Office Realtors (SIOR), the leading global professional industrial real estate association. He strives to deliver Service Excellence to his client base of Landlords, Tenants, Developers, and Lenders. With over 28 years of experience and a highly successful track record, his strategic vision and market knowledge provide solutions to the challenging commercial real estate market. Tucker is committed to accelerating the success of each and every client. 

Tucker is involved in private client and institutional relationships.  He controls a large market share and is intent on developing new business opportunities.  Tucker’s determination to succeed drives him to produce creative solutions for his clients.  By combining his market expertise with the Colliers International platform, he is able to deliver superior performance.   

Tucker has held senior sales positions with Cushman & Wakefield, Burnham Real Estate Company and Grubb & Ellis. He has achieved numerous sales and service awards recognizing his contributions. Tucker’s commitment to his clients has been evident throughout his career, resulting in a high degree of client satisfaction and repeat business.

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