San Diego Industrial Market Report

Trump administration’s policies have exaggerated impact on local demand. San Diego’s industrial sector is set to grapple with a third straight year of notable vacancy increase; however, the demand outlook beyond 2025 remains optimistic. Tariffs in place as of June and the potential for higher country-specific rates are expected to favor markets linked to Canada and Mexico under USMCA, especially if companies recalibrate manufacturing and shipping operations in mass. With this in mind, San Diego appears well-positioned. Recent progress on the Otay Mesa East Port of Entry project is also bolstering prospects for warehouse and distribution space. After facing numerous delays, the project received a $150 million grant from the Department of Transportation this April, with Biden-era clean construction requirements also removed. The new 12-lane port of entry is now slated to break ground this fall with a tentative completion date of 2027. Construction commencement alone is likely to benefit leasing velocity proximate to the border — a boon for South Bay, where vacancy is more than 400 basis points above its long-term average.