CRE Investment Guide: San Diego Market Overview
San Diego's 3.3 million residents drive one of the strongest job markets on the West Coast. Defense spending anchors the economy while life sciences clusters around Torrey Pines create serious rent growth. Land's expensive but buyers keep showing up for anything coastal. Here's what's moving and where the money's going.
Market Snapshot
population
Metro population of 3.3 million with steady 1.2% annual growth. City proper sits at 1.4 million. Young demographics with median age of 35 keeps rental demand strong.
gdp growth
GDP growth averaging 2.8% annually, outpacing California at 2.1%. Unemployment at 3.2% as of Q4 2025, down from pandemic highs.
major employers
Qualcomm leads tech at 15,000 employees. UC San Diego employs 45,000. Naval Base San Diego and Camp Pendleton drive defense sector. Illumina, Thermo Fisher, and Takeda anchor life sciences.
employment trends
Life sciences jobs up 12% year-over-year. Defense steady but aging workforce. Tourism rebounding to pre-2020 levels. Tech hiring slowed but wages still climbing.
infrastructure
Airport expansion adding gates through 2028. Transit still car-dependent despite trolley extensions. Port handles $45 billion in trade annually. Water supply improving with new desalination.
demographic profile
Median household income $75,400. College educated population at 47%. Military families create stable rental base. Tech workers drive luxury housing demand.
Property Type Performance
Multifamily
4.0% - 5.5% capVacancy
3.8%
Rent Trend
Up 8.2% year-over-year
Supply Pipeline
4,200 units under construction. Land costs limiting new starts to luxury product.
Investment Thesis
Coastal properties trade at 4% caps. Job growth and housing shortage support rent increases.
Risks
Rent control expansion risk. High replacement costs limit development.
Life Science
5.5% - 7.0% capVacancy
6.2%
Rent Trend
Up 15% in Torrey Pines submarket
Supply Pipeline
2.1 million SF under construction, mostly UTC and Sorrento Mesa.
Investment Thesis
Torrey Pines commands $4.50+ NNN. Biotech funding cycles create volatility but long-term demand solid.
Risks
Tenant concentration in biotech sector. High buildout costs for specialized spaces.
Office
6.0% - 8.5% capVacancy
18.4%
Rent Trend
Down 5% from 2024 peaks
Supply Pipeline
Limited new construction. Some office-to-residential conversions downtown.
Investment Thesis
Downtown Class A struggling. Suburban tech campuses holding value better than expected.
Risks
Remote work permanently reducing demand. Obsolescence risk for older product.
Industrial
5.0% - 6.5% capVacancy
2.1%
Rent Trend
Up 12% for last-mile facilities
Supply Pipeline
800,000 SF under construction in Otay Mesa.
Investment Thesis
Defense contractors need security clearance space. E-commerce driving last-mile demand.
Risks
Limited developable land. Competition from Inland Empire for logistics users.
Retail
5.5% - 7.5% capVacancy
7.8%
Rent Trend
Flat to down 2%
Supply Pipeline
Minimal new construction. Focus on redevelopment of dead malls.
Investment Thesis
Neighborhood centers in affluent areas performing well. Beach communities show resilience.
Risks
E-commerce pressure continues. Tourist-dependent retail still recovering.
Investment Thesis
San Diego's economy runs on defense dollars and venture capital, creating two distinct real estate markets. Life science space trades like gold while traditional office struggles with remote work reality. Coastal multifamily benefits from job growth and supply constraints.
Risk Factors
California regulatory environment
HighFocus on markets with business-friendly local governments. Budget for extended approval timelines.
Seismic activity and natural disasters
MediumRequire current seismic studies. Insurance costs rising but coverage available.
Military base realignment
MediumDefense spending remains priority. Diversify tenant base beyond military contractors.
Biotech funding cycles
MediumTarget established companies with multiple funding rounds. Avoid early-stage startups.
Water supply constraints
LowNew desalination capacity coming online. Drought restrictions impact industrial users most.
Recent Transactions
| Property | Type | Price | Cap Rate | Date |
|---|---|---|---|---|
Torrey Pines Science Park Building 7 200,000 SF fully leased to Illumina subsidiary. 10-year lease with bumps. | Life Science | $142.5M | 5.8% | 2026-01-15 |
Pacific Beach Apartments 180 units built in 2019. Two blocks from beach, young professional tenant base. | Multifamily | $87.3M | 4.2% | 2025-12-08 |
Kearny Mesa Industrial Portfolio 235,000 SF across 4 buildings. Defense contractor tenants with security clearance requirements. | Industrial | $64.8M | 5.4% | 2025-11-22 |
UTC Corporate Center 307,000 SF tech campus. Qualcomm anchor tenant, 15% vacancy at sale. | Office | $95.2M | 7.1% | 2025-10-30 |
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