Through Q3 2025, the Southwest Region — spanning Phoenix, Denver, Las Vegas, and San Diego —continues to shift gears. After a decade marked by rapid absorption, development cycles, and population inflows, the region is now experiencing a measured recalibration. Industrial and retail remain comparatively steady, multifamily is navigating supply and rent pressures, and office keeps evolving as tenants refine their space strategies. Investor sentiment across the region is cautiously optimistic as many watch for signs of bottoming and repositioning opportunities.
Against this backdrop, San Diego stands out for its stability, disciplined supply pipeline, and long-term economic anchors, making it one of the more resilient metros in the Southwest.
San Diego’s commercial real estate landscape continues to be defined by disciplined development, high barriers to entry, and diverse demand drivers—including defense, biotech, tourism, and cross-border logistics. Across all property types, the market is demonstrating moderate softening, but remains fundamentally healthy.
Below is a sector-by-sector breakdown of Q3 2025 conditions and “what this means” for owners, investors, and brokers.
INDUSTRIAL — Still Tight, But Showing Hairline Cracks
San Diego’s industrial market remains one of the strongest in California, but 2025 has introduced selective softening—particularly in older product and in submarkets with big-box availability.
Key Themes
Investor & Owner Implications
What This Means for You:
RETAIL — More Availability, Stable Demand, and Select Big-Box Turnover
San Diego retail is in a transitional year. Availability has increased due to a wave of national retailer closures—including Macy’s, Joann, Kohls, Rite Aid, and Party City—pushing vacancy to its highest level since 2021. However, high-quality space continues to lease quickly.
Key Findings from Q3 Reports
What This Means for CRE Professionals
MULTIFAMILY — Supply Pressure Meets Affordability Limits
The San Diego multifamily market remains demand-heavy but is currently working through the same pressures seen nationally: elevated supply in certain pockets, flattening rents, and competition among Class A operators.
Q3 Multifamily Highlights
Implications
OFFICE — The Slow-Motion Reset Continues
San Diego’s office market continues its multiyear structural transition. Demand is uneven, with the strongest activity coming from professional services, medical office, and life science users.
Q3 Office Takeaways
What This Means for CRE
Across all sectors, San Diego continues to benefit from some of the strongest economic pillars in the country:
These deep, diversified anchors support a resilient CRE market even amid cyclical softening.
While Q3 reflects moderated demand across the board, San Diego’s extremely limited construction pipeline, land constraints, and high-cost entitlement environment continue to protect long-term values.
Investors: watching for repricing in retail and office
Owners: prioritize building quality and competitive pricing
Brokers: anticipate increased leasing activity in 2026 as space normalizes
San Diego remains a fundamentally strong market in the Southwest—one where stability, scarcity, and high barriers to entry continue to define long-term value.
Source: Costar
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