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Market Report

San Diego Industrial Investment Forecast

2022 Outlook

Cross-Border Trade Projections Foster Leasing Surge and Sales Activity in San Diego's South Bay

Demand in Otay Mesa supports historic fundamentals. San Diego's industrial sector entered 2022 on a high note after users absorbed 6.4 million square feet in the second half of last year — a figure that exceeded the total from the prior 15 quarters. Heightened demand for warehouse and distribution space near the U.S.-Mexico border fueled this strong level of absorption with e-commerce retailers and logistics providers inking leases in Otay Mesa. As more industrial firms seek tax incentives from cross-border distribution and manufacturing channels demand in the area is poised to remain robust. Additionally the expansion of the Otay Mesa Port of Entry will be completed in 2023 bolstering cross-border trade. Expectations for steady user demand have prompted development with most of San Diego's pipeline concentrated near the border. Sparse construction elsewhere and growing demand for last-mile and biotech-suitable flex space will steer users to a limited stock of available space this year compressing vacancy below 3 percent.
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