Industrial Real Estate in San Diego, CA

Cap rates for industrial properties in San Diego vary by submarket, property class, and occupancy levels. The overall San Diego market average cap rate is approximately 5.1%. Class A properties typically trade at lower cap rates than value-add opportunities.

Industrial has benefited from structural demand drivers including e-commerce growth (which requires 3x more logistics space than brick-and-mortar retail), supply chain reshoring and nearshoring trends, inventory stockpiling following pandemic-era disruptions, and limited developable land in infill locations. These factors have driven vacancy rates below 4% nationally and pushed rent growth well above historical averages in most markets.

Bulk warehouses are large-scale distribution centers (typically 200,000+ SF) located along major transportation corridors, used for regional storage and distribution. Last-mile facilities are smaller (20,000-150,000 SF), located closer to dense population centers, and serve the final leg of delivery to end consumers. Last-mile properties typically command higher rents per square foot due to land scarcity and proximity to customers but offer lower overall NOI given their smaller footprint.

San Diego has the highest concentration of biotech companies per capita in the US, anchored by the Salk Institute, Scripps Research, and UC San Diego. The Torrey Pines mesa has an unmatched cluster of research institutions within walking distance, creating a network effect that attracts talent and investment. Purpose-built lab space in this corridor commands premium rents and trades at cap rates often below 5%.

The military is San Diego's largest employer, with over 100,000 active duty and civilian personnel. This creates consistent demand for housing, retail, and services that is largely recession-proof. Areas near Camp Pendleton (Oceanside, Vista) and Naval Base San Diego benefit from steady housing demand. Defense contractors like General Atomics and Northrop Grumman also drive office and R&D space demand.