San Diego Retail Market Report

Mainstays of local retail demand poised for growth. San Diego leasing activity increased last year as economic recovery and a lack of supply additions steered expanding vendors to existing properties. The resulting absorption enabled San Diego to enter 2023 as one of the West Coast’s tightest major retail markets, a standing that will be preserved this year. A foundation of the local economy, business and convention-related travel to the metro is slated to increase by 10 percent on an annual basis, with leisure visitations expected to nearly match last year’s rebound spike. Aiding the latter category, a full slate of cruise ship departures are lined up for 2023, bringing additional consumers to waterfront and downtown shops. Outside of tourism, the metro’s high share of well-paying jobs is poised to rise slightly this year, spurred by life science-related hiring. An increase in the number of higher-earning households should aid near-term retail spending, with the longer-term outlook bolstered by major expansion projects across area universities. Encouraged by these drivers, retailers will support a level of demand in 2023 that outpaces construction, generating the strongest rate of rent growth among California markets.