San Diego's once red-hot industrial market is hitting a clear slowdown in 2025, with vacancy climbing back to territory the region has not seen since 2012. The softening is uneven across the county, and a single massive lab move into University Town Center was enough to tip the final quarter into modestly positive absorption even as day-to-day leasing cooled. Landlords are now staring down higher availability, tougher negotiations, and growing pressure on rents and concessions heading into 2026.
According to CoStar, San Diego's industrial vacancy has climbed to its highest level since 2012, even as the market logged its first quarter of positive absorption in three years during Q4. That positive absorption largely came from one move: a 427,000-square-foot built-to-suit lab project in University Town Center that accounted for most of the quarter's net absorption.
Numbers Diverge by Measure
Not all yardsticks tell the same story. CBRE pegs overall industrial availability at about 9.2% in Q4, unchanged from the prior quarter and the highest rate recorded in more than a decade, and reports that leasing activity cooled to roughly 1.78 million square feet for the quarter. The firm highlights the gap between “availability,” which includes space on the market and sublease offerings, and pure physical vacancy, a distinction that helps explain why different providers post different vacancy readings for the same market.
Where Vacancy Is Concentrated
A vacancy measure that counts sublease space came in at about 7.2% for Q4, according to Cushman & Wakefield, up 70 basis points year over year while ticking down slightly from the previous quarter. Brokers are also watching a meaningful construction pipeline. Colliers reports roughly 1.4 million square feet under construction across the region, concentrated in South County and key logistics corridors, a wave that could keep upward pressure on availability as new projects deliver. At the same time, life science and lab build-outs in select submarkets are skewing absorption when big single-tenant deals hit the books.
Rents and Landlord Pressure
CBRE's Q4 figures show average asking rents easing modestly, down about $0.05 per square foot quarter over quarter. Elevated sublease listings are adding more competition to the mix, forcing many landlords to sweeten the pot with richer concession packages. In several submarkets, this translates into shorter lease terms and more aggressive incentives as owners jockey to keep buildings from sitting dark.
What to Watch in 2026
Heading into 2026, all eyes are on how much of the construction pipeline actually hits the market and how quickly sublease inventory clears, especially in flex and lab-convertible buildings. If more large tenants step in to absorb space, or if broader economic conditions ease, the market could find its footing again. If that does not materialize, elevated availability is likely to linger and keep steady pressure on industrial rents well into the year.
