San Diego Commercial Office Space for Rent

Q1 2026

San Diego Commercial Real Estate Market Report

Focus: Q1 2026 Market Trends

Executive Summary

The San Diego commercial real estate (CRE) market is entering a stabilization phase in Q1 2026, characterized by highly localized performance and a definitive flight to quality across sectors [1], [2]. The Office sector is experiencing elevated overall vacancy, particularly in downtown, though high-quality suburban assets are successfully capturing tenant demand [1]. Industrial fundamentals are improving; after an extended period of negative net absorption, the market has turned positive, signaling that occupiers are digesting the wave of new supply [3]. Retail remains highly resilient, anchored by a sub-6% vacancy rate and steady asking rent growth [4], [8]. Meanwhile, the Multifamily market is managing peak supply deliveries with steady demand from its massive 20-to-34-year-old demographic, maintaining tight vacancy rates relative to the national average [5], [6].

TenantBase Proprietary Data [7] highlights the distribution of active tenant demand over the last 90 days:

  • Retail/Storefront dominated market activity with 53.72% of all searches [7].
  • Warehouse was the second most active sector at 30.17% [7].
  • Office accounted for 16.12% of total search volume [7].

Office Market

Market Overview The San Diego office market is highly bifurcated in Q1 2026, experiencing a pronounced flight-to-quality that continues to pressure older inventory [1], [2].

  • Vacancy & Absorption: The overall market vacancy rate sits near 20.2%, heavily skewed by the Downtown submarket, which is grappling with vacancy exceeding 35% [1]. Conversely, northern and central submarkets like Kearny Mesa remain competitive with single-digit vacancy [1].
  • Rental Rates: Despite broader availability, top-tier Class A demand is pushing overall average asking rents up slightly to $3.50 per SF (Full Service Gross) [2].
  • Construction: The development pipeline has plummeted to a multi-year low of roughly 942,000 SF, allowing the market time to slowly absorb existing space [1].

TenantBase Activity [7]

  • Demand Share: Office accounted for 16.12% of total search volume [7].
  • Lease Term Preference: Tenant demand shows an overwhelming preference for short-term flexibility, led by Less than one year (56.41%), followed by 2-3 Years (17.95%) and an even split between 3-5 Years and 5+ Years (each at 10.26%) [7].
  • Size Requirements: Space needs expand considerably for tenants willing to sign longer leases. The average lower-bound requirement for a 3-5 Year term is exactly 100% larger than the requirement for short-term leases of Less than one year [7].

Industrial & Warehouse Market

Market Overview San Diego's industrial market is finally turning a corner in early 2026, transitioning into a stabilized phase as tenant demand returns [3].

  • Vacancy & Absorption: Total vacancy retreated slightly to between 7.4% and 9.3%, down from recent peaks [3]. The market posted robust positive net absorption, breaking a long streak of negative quarters [3].
  • Rental Rates: Average asking rents have settled around $1.42 to $1.49 per SF NNN, marking a healthy correction from 2023 peaks but establishing firm pricing for modern logistics products [3].
  • Development: With nearly 2.1 million SF still under construction, tenants retain strong leverage when negotiating concession packages, particularly for second-generation spaces [3].

TenantBase Activity [7]

  • Demand Share: Warehouse accounted for 30.17% of total search volume [7].
  • Lease Term Preference: Industrial tenant demand strongly favors the short-to-mid-term range [7]:
    • 1-2 Years: 43.75% of searches.
    • 2-3 Years: 25.00% of searches.
    • 5+ Years: 15.63% of searches.
  • Size Requirements: Space requirements jump dramatically for standard mid-term leases. The average lower-bound space requirement for 2-3 Year terms is more than 10 times larger than the average requirement for 1-2 Year terms [7].

Retail Market

Market Overview Retail continues to demonstrate steady performance in San Diego heading into Q1 2026, bolstered by high consumer confidence and limited new construction [4], [8].

  • Vacancy & Availability: Retail vacancy remains highly constrained at 5.4% countywide, dropping to a very tight 3.8% in Central San Diego [4].
  • Rental Rates: Strong performance has resulted in steady rent growth, ticking up 3.7% year-over-year to an average of $2.26 per SF NNN [4].
  • Leasing Drivers: Experiential retail, quick-service concepts, and restaurants positioned near thriving Class A office hubs continue to dominate leasing activity [8].

TenantBase Activity [7]

  • Demand Share: Retail/Storefront activity dominated the San Diego market with 53.72% of all search volume [7].
  • Lease Term Preference: Retail tenants display a diverse but stable commitment horizon [7]:
    • 3-5 Years: 31.08% of searches.
    • 5+ Years: 25.68% of searches.
    • 2-3 Years: 17.57% of searches.
  • Top Locations: Out of the specifically requested submarkets, the core San Diego municipality captured the highest share of interest, followed by robust demand in Oceanside and Chula Vista [7].

Multifamily Market

Market Overview The San Diego multifamily sector is showing immense resilience in Q1 2026, absorbing peak supply levels with minimal disruption to occupancy [5], [9].

  • Vacancy & Rents: Despite a 52% year-over-year surge in deliveries in 2025, the vacancy rate remains tight at approximately 4.5% to 5.4% [5]. Asking rents experienced slight downward pressure or remained flat but are projected to stabilize and rise modestly as the year progresses [6].
  • Demand Demographics: San Diego benefits from a massive 20-to-34-year-old demographic cohort—the third-largest share nationally—which provides structural, long-term demand for rental housing due to steep barriers to homeownership [9].
  • Investment: Cap rates have held steady in the low-4% to low-5% range, reflecting sustained investor confidence in the market's underlying strength [6].

2026 Outlook

Moving further into 2026, the San Diego CRE market is positioned for measured stabilization.

  • Office Rebalance: Modest positive absorption is expected to continue as obsolete buildings are repurposed, directing leasing activity entirely toward upgraded, highly-amenitized product [1], [2].
  • Industrial Tightening: As the 2.1 million SF of under-construction product is delivered and absorbed, the supply pipeline will begin to thin, likely shifting leverage slowly back toward landlords by late 2026 [3].
  • Multifamily Normalization: New construction deliveries are forecast to cool significantly from their 2025 peak [5]. This drop in new supply will allow the market's strong demographic tailwinds to compress vacancy and resume standard rent growth cycles [9].

Sources

  1. Newmark: San Diego Office Market Report Q1 2026
  2. Voit Real Estate Services: How's the Office Market Doing? Q1 2026
  3. Kidder Mathews: San Diego Industrial Market Report Q1 2026
  4. Cushman & Wakefield: San Diego Retail MarketBeat Q4 2025/Q1 2026
  5. Northmarq: San Diego Multifamily Market Report Q1 2026
  6. J.P. Morgan: San Diego Multifamily Market Outlook 2026
  7. TenantBase Proprietary Market Data (Dashboard Export: SEO Market Reports)
  8. Allen Matkins: Across California, Retail Looks Strong Winter 2026
  9. Marcus & Millichap: San Diego Multifamily Investment Forecast 2026

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.