The new construction pipeline for industrial product in San Diego continued to grow in the third quarter even as the market vacancy increased. New construction activity grew to 4.2 million square feet in the market, according to a report from JLL, including nearly 1 million square feet of speculative development. Despite the destabilization in the market due to the pandemic, new industrial supply is in high demand and continues to lease quickly upon or even prior to delivery, and there is little fear of over development.

"Approximately 4.4 million square feet of new Low Finish warehouse product is expected to be built over the next three years," Greg Lewis, EVP at JLL, tells GlobeSt.com. "The vast majority of this product will be located in Otay Mesa where larger parcels of land still exist."

The vacancy rate has increased nominally during the pandemic, but over the last two years, the vacancy rate in the market has been stable at or near 4.5%. "Overall vacancy for industrial has remained steady at around 4.5% since the beginning of 2018 despite nearly 5 million square feet of new construction deliveries over the last three years," says Lewis.