Data Center Investment in San Diego
San Diego's data center market got hot when hyperscalers discovered they could build cheaper here than LA or Silicon Valley. You've got solid power infrastructure from SDG&E, decent fiber connectivity, and AI workloads driving crazy demand. Cross-border connectivity to Mexico matters more than people think. Cap rates are running tight but power capacity constraints keep supply in check.
Market Context
Cap Rate Range
5.2% - 6.8%
Current Vacancy
8%
Rent Trend
Up 18% year-over-year
Absorption
2.1M sf absorbed in 2025
Price Per Unit Trend
$185-$220 per KW capacity
Transaction Volume
$840M in 2025, up 45% from prior year
Submarket Analysis
Kearny Mesa
5.4% capVacancy
5%
Avg Rent (1BR)
$28 per KW/month
Hot. Close to Qualcomm, good power access, most new construction happening here.
OM Tip
Show distance to major fiber routes and SDG&E substations
Sorrento Valley
5.8% capVacancy
12%
Avg Rent (1BR)
$32 per KW/month
Premium pricing but limited expansion room. Biotech companies want local edge capacity.
OM Tip
Life science tenant base supports higher rents, emphasize research connectivity
Otay Mesa
6.2% capVacancy
15%
Avg Rent (1BR)
$24 per KW/month
Border proximity driving Latin American connectivity demand. Cheaper land for hyperscale.
OM Tip
Cross-border fiber routes are the selling point here
Downtown/East Village
5.6% capVacancy
8%
Avg Rent (1BR)
$35 per KW/month
Edge applications, financial services. Limited supply keeps rates high.
OM Tip
Low latency to financial district matters for enterprise tenants
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What Your OM Needs to Address
Power Infrastructure Detail
SDG&E power availability and redundancy levels
Data to Include
Total MW capacity, N+1 or 2N redundancy, backup generator capacity, utility rate schedules and demand charges
Cooling System Specs
PUE ratings and cooling redundancy for high-density racks
Data to Include
Current PUE, design PUE at full capacity, cooling redundancy level, rack density support up to X kW
Fiber Connectivity Map
On-net carriers and latency to major connectivity hubs
Data to Include
List of on-net carriers, latency to LA, Phoenix, cross-border fiber routes to Mexico
Tenant Credit Analysis
Credit quality and lease terms of major tenants
Data to Include
Tenant credit ratings, lease escalations, expansion options, early termination provisions
Expansion Capacity
Available land and utility capacity for future phases
Data to Include
Developable land area, additional power capacity available from utility, zoning restrictions
SLA Performance History
Uptime track record and service level compliance
Data to Include
Historical uptime percentage, SLA credits paid, planned vs unplanned downtime hours
Investment Outlook
Short Term
AI demand keeps pushing rents up but watch utility costs. SDG&E rates are climbing faster than other California markets. New supply in Kearny Mesa might soften vacancy by Q4 2026.
Medium Term
Cross-border connectivity becomes bigger differentiator as nearshoring grows. Mexican enterprises want US-based edge capacity. Power constraints will limit new supply through 2028.
Long Term
San Diego becomes the connectivity hub for Pacific Rim and Latin America. Defense spending around military bases supports steady enterprise demand. Climate advantages over Phoenix and Vegas matter more as cooling costs rise.
Buyer Profile
Institutional buyers want stabilized assets with investment-grade tenants. Opportunity funds are buying value-add properties that need AI infrastructure upgrades. Foreign capital interested in cross-border connectivity plays.
Marketing a data center property in San Diego?
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