San Diego's industrial market gave tenants more room to negotiate in the second quarter of 2026—but this is not a simple story of a market in free fall.
Leasing activity improved, asking rents softened, and vacancy remained above the exceptionally tight levels of the early 2020s. At the same time, the amount of leverage available to a tenant still depends heavily on the building, submarket, size range, and landlord.
For a business owner with a lease decision approaching, the practical takeaway is straightforward: there are more options than there were a few years ago, but the best opportunities still require an early, property-specific comparison.
One Market, Several Different Numbers
Commercial real estate reports do not all measure the market the same way. They may use different property inventories, minimum building sizes, ownership types, or definitions of vacancy and absorption. That is why reputable Q2 reports can show different headline figures for the same quarter.
This analysis uses Cushman & Wakefield as its primary countywide dataset. Its Q2 report placed San Diego industrial vacancy at 7.2% and direct availability at 8.8%, with average asking rent at $1.44 per square foot per month, NNN. Asking rent was down 1.8% from the prior quarter and 4.8% year over year.
Other major reports calculated vacancy at similar but not identical levels. Colliers reported approximately 7.3%, while Voit reported approximately 7.1%. CBRE emphasized a 9.6% availability rate, a broader measure that can include space being marketed before it becomes vacant.
The exact percentages differ, but the direction is consistent: tenants generally have more choices than they did at the market's recent peak, rent growth has cooled, and landlords are more willing to discuss concessions and flexible structures.
Leasing Improved, but the Recovery Is Uneven
Cushman & Wakefield recorded approximately 1.8 million square feet of Q2 leasing activity, up 37.4% quarter over quarter and 44.8% year over year. Manufacturing represented 30% of first-half leasing, followed by transportation, warehousing and utilities at 21%, and retail-related users at 17%.
CBRE also reported a better quarter, including five lease transactions larger than 100,000 square feet and 132,000 square feet of positive net absorption after negative absorption in Q1.
That does not mean every dataset showed expansion. Colliers reported 464,551 square feet of negative Q2 absorption, while Voit reported negative absorption of approximately 236,000 square feet. These differences are another reason not to make a lease or acquisition decision from a single headline.
The more useful conclusion is that activity returned, but not evenly enough to eliminate tenant leverage across the county.
Where Tenants May Have More Leverage
The most important split is geographic.
Using Cushman & Wakefield's report, Central County vacancy was 5.1%, North County was 7.0%, and South County was 11.2%. South County's rate was still elevated, but it had improved from 13.6% one year earlier. Otay Mesa accounted for 17% of quarterly leasing activity, showing that elevated vacancy and active demand can exist at the same time.
This creates three distinct negotiating environments:
South County and Otay Mesa: Larger users may find more alternatives and stronger landlord motivation, particularly where competing buildings have similar functionality. That can create room to negotiate economics, timing, improvements, or lease flexibility.
Central San Diego: Infill locations such as Miramar and Kearny Mesa can remain competitive because of location, limited land, and demand from local businesses. A higher countywide vacancy rate does not automatically translate into abundant options for a specific size and use.
North County: Conditions vary by city and product type. Manufacturing, life-science support, defense, and local distribution requirements can keep certain buildings competitive even while the broader market softens.
The lesson is not simply to ask, "Is this a tenant's market?" The better question is, "How many realistic alternatives compete with this specific building for this specific requirement?"
The Construction Pipeline Is Still Important
Cushman & Wakefield reported approximately 1.4 million square feet under construction, concentrated largely in Otay Mesa and East County. Colliers and Voit each reported roughly 1.2 million square feet, while CBRE reported 944,000 square feet based on its tracked inventory.
Even with different totals, the reports point to a construction pipeline that is more concentrated and restrained than the wave that helped loosen the market. CBRE noted that since Q2 2023, San Diego had recorded approximately 2.4 million square feet of cumulative negative absorption while adding about 5.4 million square feet of new supply.
That history explains why tenant conditions improved. It also explains why today's leverage may not last indefinitely: fewer new starts would allow existing space to be absorbed over time.
What Tenants Should Do Now
If your industrial lease expires within the next 12 to 18 months, now is the time to define the requirement and compare alternatives.
Start with the operational facts: location, clear height, loading, yard requirements, power, parking, zoning, delivery access, and the cost of moving. Then compare at least a few viable buildings before deciding whether to relocate or renew.
More vacancy can improve the negotiation, but concessions are property-specific. Free rent, tenant improvements, early access, expansion rights, renewal options, and assignment language should be evaluated as part of the total economic package—not assumed from a countywide average.
The existing landlord also deserves attention. A renewal may avoid downtime, moving costs, permitting risk, and operational disruption. But without outside alternatives, it is difficult to know whether the renewal proposal reflects the current market.
What Owners and Investors Should Watch
For landlords, retention matters more in a softer market. Starting renewal conversations early and understanding a tenant's operational constraints can be less expensive than absorbing downtime, commissions, improvements, and carrying costs after a vacancy.
For buyers, the key risk is assuming that vacant space will lease immediately at the asking rate. Underwriting should account for submarket-specific downtime, realistic concessions, tenant improvements, leasing commissions, and the difference between quoted and achieved economics.
The long-term case for San Diego industrial remains supported by defense, manufacturing, life sciences, local distribution, and cross-border trade. But a durable demand story does not remove near-term leasing risk. Building functionality and basis matter.
The Bottom Line
Q2 2026 offered San Diego industrial tenants more choices and somewhat softer rents, while improved leasing activity showed that demand has not disappeared. The opportunity is real, but it is uneven.
Tenants should use the current environment to start earlier, compare credible alternatives, and negotiate the entire lease package. Owners and investors should underwrite the building and submarket in front of them—not rely on one countywide headline.
Primary source: Cushman & Wakefield, San Diego Industrial MarketBeat Q2 2026. Cross-checks: CBRE San Diego Industrial Figures Q2 2026, Colliers San Diego Industrial Market Research Report Q2 2026, and Voit San Diego Q2 Industrial Update.
Market reports use different tracked inventories and definitions. Figures are market-level indicators, not property-specific advice. Verify current availability, comps, concessions, and transaction terms before making a decision.