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Q2 2026

Q2 2026 San Diego Commercial Real Estate Market Report

Focus: Q2 2026 Market Trends

Executive Summary

The San Diego commercial real estate (CRE) market is entering a distinct stabilization phase in Q2 2026, characterized by highly localized submarket variations and a pronounced flight to quality across core sectors.[1] The Office sector is showing early signs of positive demand and demand stabilization, supported by positive net absorption in top-tier assets, though older inventory faces ongoing space marketing pressure.[1, 2] Industrial fundamentals are working through a structural inventory cycle, navigating mixed signals as a wave of recently delivered space alters overall absorption trends.[4] Retail continues to demonstrate resilient structural performance, characterized by stable countywide vacancies and resilient rent growth despite near-term shifts in tenant demand.[5] Meanwhile, the Multifamily market is successfully managing peak cyclical deliveries, holding vacancy metrics below the national average due to strong, long-term workforce housing demand.[6]

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

• Storefront/Retail dominated localized transaction activity with 55.91% of all searches (142 deals).[3]
• Warehouse was the second most active sector at 32.68% of demand (83 deals).[3]
• Office accounted for 12.99% of total search volume (33 deals).[3]

Office Market

Market Overview

The San Diego office market began the first half of 2026 by registering its first positive net demand turnaround since late 2024, signaling pocket stabilization as cautious occupiers selectively upgrade space.[1, 2]

• Vacancy & Availability: General metro vacancy held relatively flat quarter-over-quarter at 13.6% to 14.3%, though total active availability moved up slightly to 17.1% as landlords continue to put secondary blocks of space on the market.[1, 2]
• Flight to Quality: Occupier interest is intensely concentrated across central and northern value-add suburban nodes, alongside upgraded urban structures, while commodity Class B and non-amenitized assets face prolonged leasing cycles.[1]
• Rental Resilience: Asking rental pricing has shown remarkable resilience amidst mixed structural demand, expanding to a metropolitan average direct rate of $3.14 to $3.49 per SF, driven by core premium listings.[1, 2]

TenantBase Activity

• Demand Share: Office accounted for 12.99% of total search volume (33 deals).[3]
• Lease Term Preference: Tenant requirements heavily favor short-term flexible arrangements, led by brief immediate transaction horizons:[3]
  
  • Less than one year: 40.00% of deals (12 deals).[3]
  • 2-3 Years: 33.33% of deals (10 deals).[3]
  • 3-5 Years: 16.67% of deals (5 deals).[3]
  • 5+ Years: 10.00% of deals (3 deals).[3]
• Size Requirements: Space footprints fluctuate substantially across active term categories.[3] Short-term leases under one year required a compact average lower bound of 583.33 SF and an upper bound of 1,250.00 SF.[3] Intermediate 2-3 Year commitments scaled dramatically to a lower average bound of 4,857.14 SF and an upper bound of 5,250.00 SF, while long-term 5+ Year terms averaged a lower capacity of 1,167.00 SF up to an upper limit of 2,503.33 SF.[3]

Industrial & Warehouse Market

Market Overview

San Diego's industrial landscape is showing mixed but constructive demand signals as it integrates a substantial cycle of modern logistics space.[4]

• Supply & Absorption: Overall metropolitan vacancy edges up slightly into the 7.3% to 7.4% tier, heavily influenced by occupiers navigating substantial speculative delivery completions across primary submarkets like Otay Mesa.[4]
• Leasing Profiles: While mid-to-large box logistics absorption has experienced temporary plateaus, consistent user demand remains visible via major corporate space absorption, logistics renewals, and specialized manufacturing upgrades.[4]
• Asset Class Diversity: The regional life sciences and biotechnology real estate infrastructure remains a durable cornerstone of the local economic framework, supporting long-term specialized research space requirements.[1, 4]

TenantBase Activity

• Demand Share: Warehouse represented 32.68% of total search volume (83 deals).[3]
• Lease Term Preference: In contrast to long-term manufacturing configurations, mid-market industrial inquiries strongly favor short-to-mid curve durations:[3]
  
  • 1-2 Years: 43.18% of deals (19 deals).[3]
  • 2-3 Years: 20.45% of deals (9 deals).[3]
  • 3-5 Years: 18.18% of deals (8 deals).[3]
  • Less than one year: 13.64% of deals (6 deals).[3]
  • 5+ Years: 4.55% of deals (2 deals).[3]
• Size Requirements: Industrial floor configurations maintain small-to-mid-size boundaries before expanding on long terms.[3] Shorter-term 1-2 Year commitments averaged a lower bound footprint of 1,260.00 SF, while intermediate 3-5 Year terms required a lower bound average of 4,000.00 SF and reached an upper capacity of 9,700.00 SF.[3] Long-term commitments for 5+ Years requested massive layouts, tracking an average lower bound of 25,000.00 SF and an upper boundary of 100,000.00 SF.[3]

Retail Market

Market Overview

Retail remains one of San Diego’s most stable commercial sectors, well-supported by enduring consumer trends and a sharp contraction in new completions.[5]

• Inventory Balance: Overall retail availability metrics reflect tight baseline conditions, with countywide vacancy lingering comfortably around 5.4%, dropping even lower inside high-density infill corridors.[5, 6]
• Pipeline Pullback: Ground-up supply deliveries dropped significantly, logging a steep year-over-year contraction that minimizes the risk of local oversupply and preserves landlord pricing posture.[5]
• Rental Pricing: Average asking lease rates continue a steady upward trajectory across the market, pushing typical pricing dynamics toward resilient regional historical bars.[5]

TenantBase Activity

• Demand Share: Retail/Storefront activity led local transaction volume, capturing 55.91% of overall search counts (142 deals).[3]
• Lease Term Preference: Retail operators demonstrate a highly distributed commitment horizon across short and long horizons:[3]
  
  • Less than one year: 23.53% of deals (16 deals).[3]
  • 2-3 Years: 20.59% of deals (14 deals).[3]
  • 5+ Years: 20.59% of deals (14 deals).[3]
  • 1-2 Years: 17.65% of deals (12 deals).[3]
  • 3-5 Years: 17.65% of deals (12 deals).[3]
• Top Locations: Out of the submarkets explicitly tracked, the highest concentrations of local transaction interest centered on San Diego (45 deals), Carlsbad (10 deals), Chula Vista (10 deals), and Escondido (9 deals).[3]

Multifamily Market

Market Overview

The San Diego multifamily sector continues to showcase impressive demographic resilience, absorbing standard pipeline completions with low fundamental disruption.[6]

• Vacancy & Performance: Metro vacancies hold near 4.8% to 5.4%, charting well below the national average of 6.8% and highlighting healthy underlying demand.[6] Average metropolitan asking rents flatten out around a stable $2,417 per unit monthly base.[6]
• Workforce Stability: Durable demand is especially pronounced within Class B and Class C workforce housing properties, which track tight sub-4% vacancies compared to premium Class A luxury segments.[6]
• Homeownership Delays: With structural interest rates and single-family asset pricing placing homeownership out of reach for many, the metro's massive young professional demographic maintains a steady long-term rental pool.[6]

2026 Outlook

Moving through the remainder of 2026, the San Diego CRE market is positioned for continuing structural alignment across asset classes.[1, 6]

• Office Reconfiguration: Cautious tenants prioritizing high-quality spaces will continue to direct leasing activity toward highly amenitized suburban clusters and medical office products, while discounted urban properties present opportunistic value-add plays.[1]
• Industrial Integration: As upcoming pipeline development contracts, the steady absorption of modern, high-capacity distribution centers will allow existing logistics metrics to compress back toward equilibrium.[4]
• Multifamily Consistency: A projected decelerating forward construction pipeline will ease future multi-unit supply pressure, allowing strong regional household formation to protect long-term operator pricing power.[6]

Sources

[1] Innovation Properties Group (IPG) / Kidder Mathews: San Diego Commercial Office Market Reports 2026

[2] CBRE: San Diego Office Figures & Absorption Summaries 2026

[3] TenantBase Proprietary Market Data (Dashboard Export: SEO Market Reports SAN D, June 30, 2026)

[4] Cushman & Wakefield / Kidder Mathews: San Diego Regional Industrial & Life Sciences Tracking 2026

[5] Kidder Mathews: San Diego Retail Market Performance & Development Report 2026

[6] J.P. Morgan Chase / Moody's Analytics: San Diego Multifamily Market Outlook 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.