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San Diego Sees More Than 13 Million Square Feet of Industrial Space Leased Last Year

Available Space is Dwindling Amid Rapid Leasing.

By Joshua Ohl CoStar Analytics January 18, 2022 | 1:35 P.M.

San Diego’s industrial market recorded more than 13 million square feet of new leases signed in 2021, the highest level in more than 15 years. It was also a 30% increase from the average leasing volume of the five years prior to the pandemic.

Amazon signed new leases across the region, from Otay Mesa and Chula Vista to Kearny Mesa and Carlsbad, totaling almost 2 million square feet. After accounting for 9% of total new industrial leasing volume in San Diego during 2020, the e-commerce giant accounted for more than 13% of completed leases in 2021.

Supported by venture capital funding — which reached an all-time high in 2021 of more than $9.5 billion locally, according to industry group Connect/San Diego Venture Group — life sciences firms are among the primary sectors signing significant leases for lab space within flex buildings.

The race for high-end lab space has firms including Sorrento Therapeutics and Turning Point Therapeutics signing significant new expansion deals in the San Diego industrial market. Biotech firms accounted for more than 15% of new industrial leasing volume in 2021.

There is little to suggest that biotech firms and e-commerce tenants won’t continue driving industrial demand in 2022.

Median months to lease is an industry metric that tracks how quickly spaces are leased after coming on the market. During the fourth quarter in San Diego, the median industrial space that was leased had been on the market for only four months, far below the median number seen in the early 2010s.

Given the rate at which available space has been leased in San Diego, and that the vacancy and availability rates are trending at historic lows of 3.2% and 4.5%, respectively, it is expected that leasing volume will take a step back in the coming quarters.

Only about 9 million square feet is currently available in the market, with roughly 1 million square feet in the development pipeline. That’s approximately 1 million square feet less than the average annual leasing volume between 2015 to 2019.

In 2022, annual net absorption, measuring the difference in move-ins versus move-outs, will likely fall far short of last year's level of more than 8 million square feet absorbed.

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