Like so many Southern California markets, San Diego is no different when it comes to industrial demand, and a new report from Kidder Mathews reflects that fact with average asking rental rates climbing to a record high of $1.40/SF in the third quarter. However, new developments and Amazon give backs, actually increased availability slightly to 5.1%.

Investors remain active throughout San Diego county, attracted to the diverse tenant pool and strong rent growth. Otay Mesa has been a favorite submarket, due to border proximity, while North County logistics buildings are also in high demand. In addition, the region’s prominence as a top tech and life science market has heightened logistics space demand for e-commerce and last-mile distribution.

Kidder concludes that the astronomical rent growth is not sustainable, with a near-future softening anticipated, as inflation slows e-commerce sales growth, coupled with rising interest rates and recession fears.