2022 Q4 Industrial San Diego Region
Key Takeaways
- Countywide average asking monthly rental rates increased by 10% in Q4 to $1.62/SF triple-net (NNN), equating to a 12.5% year-over-year (YoY) increase.
- Overall vacancy increased by 26 basis points (BPS) to 2.82%. The increase was driven by a few existing projects in specific markets while overall demand generally continues to be positive.
- Pure industrial vacancy increased to 2.14% while flex vacancy is 4.54%.
- Over 2.54 million SF of new construction was completed in 2022 of which 83% was preleased and occupied. The South County market made up nearly two-thirds of the new space.
San Diego’s industrial market remained strong in 2022
The industrial and flex property segments continue to display positive demand notwithstanding some negative absorption in a few select submarkets. Industrial and flex vacancy rates remain at historically low levels with industrial posting over 192,000 SF of positive net absorption and flex recording less than 7,000 SF of negative net absorption. Flex demand had been particularly strong in life science/wet lab space where office conversions continued to create the most viable options for addressing demand and increasing inventory, but there are indications of this slowing down in 2023. Barring a national recession or other major economic correction, the industrial/flex market can be expected to continue to be strong well into 2023.
