San Diego’s retail market in Q3 2025 reflected a challenging leasing environment marked by rising availability and moderated rent growth. More than 800,000 SF of space entered the market in the first half of the year, pushing availability to 5.3%, the highest since 2021. Much of this space came from older big-box closures, while newer Class A properties remained highly competitive with availability two points below the metro average. Leasing demand has been strongest for newer spaces, with nearly 60% of activity occurring in listings under f ive months old, reducing median lease-up times to seven months. Rent growth slowed to 1.5% annually, down from 2023’s 5% peak, though overall rents remain more than 33% higher than a decade ago.
Key Findings
- Despite headwinds, San Diego retail recorded $344M in sales volume with cap rates at 5.8%, reflecting continued investor confidence in well-located assets.
- Retail vacancies rose to 4.5% as closures drove negative absorption of 173K SF, but limited new supply has kept overall market stability intact.
- Asking rents averaged $36.28 per SF with 1.5% annual growth, moderating from pandemic highs, yet embedded growth remains strong across high-demand coastal submarkets.
San Diego Retail Supply & Demand Dynamics
Source: CoStar Group, Inc.
San Diego Demographics
Source: CoStar Group, Inc.
- Unemployment Rate: 4.3%
- Current Population: 3,316,542
- Households: 1,201,472
- Median Household Income: $110,139
In Q3 2025, San Diego’s economy remained anchored by its defense, innovation, and tourism sectors. The military continued to account for roughly one in four jobs, while life sciences and tech firms expanded their presence in the Golden Triangle and UTC areas. Tourism activity stabilized with visitor spending sustaining strong levels despite total visitation still below pre-pandemic highs. Infrastructure projects in Otay Mesa, including the airport redevelopment, advanced toward 2025 completion, positioning the region for greater trade growth. However, persistent housing shortages and high costs continued to strain household formation and workforce retention.
Population, Labor, & Income Growth
Source: CoStar Group, Inc.
San Diego Retail Construction
San Diego’s retail market has about 700,000 SF under construction, just 0.5% of inventory. Many sites are being repurposed for housing or mixed-use, with rents needing up to a 40% increase to justify speculative projects. Notable redevelopments include the former Sears in Chula Vista, Dixieline Lumber in Kearny Mesa, and Balboa Park restaurants, often taking up to five years to upzone. Between 2015–2019, net supply grew 1.5 million SF after a prior five-year decline. The 1 million-SF Campus at Horton adds 300,000 SF of retail, though completion is uncertain. Outside downtown, only 50,000 SF is available. Future retail will mostly be in mixed-use projects.
SF Construction Starts
Source: CoStar Group, Inc.
SF Under Construction
Source: CoStar Group, Inc.
San Diego Retail Sales
By Q3 2025, San Diego’s retail investment market showed stability after recent lows, with sales volume around $1.2 billion over the past year, consistent with pre-pandemic averages. Cap rates remained steady between 5.0% and 6.5%, despite rising interest rates. Institutional and REIT buyers represented 20% of purchases, while private investors targeted cash-flowing NNN-leased properties, often using 1031 exchanges. Availability increased slightly but remained historically tight. Notable recent deals included Primestor’s Chula Vista Center, Oceanside’s Plaza Rancho Del Oro, Decron’s Mira Mesa Market West, and freestanding properties in Poway and Mid City. Properties with entitlements or mixed-use potential attracted strong buyer interest.
San Diego Retail Sales Volume
Source: CoStar Group, Inc.
By the Numbers
Source: CoStar Group, Inc.
- Sales Volume: $334M
- Price Per SF: $267
- Cap Rate: 5.8%
- Vacancy Rate: 4.8%
- Rent Growth: 1.5%
- Asking Rent Per SF: $36.28
- Under Construction: 698K SF
- Delivered: 9.7K SF
- Absorbed: (173K) SF
