Bingham’s Q3 CRE Snapshot: San Diego Market Shows Early Stabilization as Economic and Weather Pressures Persist
Market Overview
As we enter the third quarter, San Diego’s commercial real estate market is showing signs of stabilization in select sectors, even as broader market conditions remain uneven. Office fundamentals are improving gradually, industrial is normalizing after several strong years, and life science continues to adjust to a more disciplined capital environment.
Office Market Update
In San Diego office, vacancy held at 13.6% in Q1 2026, while availability rose to 17.1%, reflecting a market that is still carrying a meaningful amount of open space. At the same time, positive net absorption returned and average asking rents remained resilient at roughly $3.49 per square foot, suggesting that demand is beginning to stabilize in higher-quality space.
Industrial Market Trends
Industrial conditions are also shifting. San Diego industrial vacancy increased to 6.7% in Q1 2026 and rents eased to about $1.41 per square foot, while broader Southern California industrial markets continue to see softer fundamentals, more tenant leverage, and a more measured pace of leasing and investment activity.
Economic Conditions & Construction Costs
The regional economy is still providing support, but not enough to eliminate pressure on development and leasing decisions. San Diego County unemployment was 3.9% in May 2026, while elevated construction cost conditions continue to weigh on project budgets, timelines, and underwriting assumptions.
Weather Risk & Property Preparedness
Weather-related risk is also becoming a more important part of the CRE conversation. With El Niño conditions increasing the potential for concentrated rainfall and related site impacts, owners and developers should remain focused on drainage, waterproofing, and operational readiness as the region moves from extreme heat into storm season planning.
Looking Ahead
Bingham continues to see a market that rewards quality, discipline, and execution. In this environment, the strongest opportunities are likely to be found in projects and properties that are well positioned for changing tenant expectations, tighter capital conditions, and a more risk-aware operating landscape.