The San Diego industrial leasing activity remains concentrated in small to mid-sized spaces as vacancy remains elevated, according to a JLL Q2 market report.
Central San Diego County saw robust new construction industrial lease-up, while South San Diego County continues to see mid-sized industrial lease-up of first-gen space, a positive trend as the pipeline falls to near-record lows, according to Logan Hood, JLL senior research analyst.
The Q2 figures highlight the fact that it is currently a tenant’s market, Jackson Childers, a JLL associate, told GlobeSt.com.
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“Warehouse vacancy is up, and rental rates are down,” Childers said. “However, this dynamic should shift quickly as speculative development hits a 20-year low.
“Looking ahead, we can expect newly built, vacant Class A spaces to perform well as tenants in older buildings relocate upon their lease expirations.”
Landlords continue to offer higher concession packages, exercising creativity to fill vacancies. However, rents are holding steady in the small and midsize segments of South County and in large blocks of Central County.
Life science and logistics in Central County drove negative absorption of 185,000 square feet in the second quarter. Occupancy for the remainder of the market was relatively flat.
Owner-user sales activity is growing, as SD Food Bank in Vista made a major 60,000 square-foot acquisition.
Additionally, the Trump administration’s funding and focus on defense and domestic manufacturing mean those sectors are expanding in San Diego.
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