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8 Key Trends In San Diego Real Estate As 2019 Gets Underway

    A year ago, few expected San Diego to attract Amazon HQ2 — and indeed, the city didn't even make the top 20 cut last January — but most expected the region to keep growing, attracting both new companies and people, which it did in 2018.

    Unless the bottom falls out of the U.S. economy this year, the outlook for San Diego is much the same now as a year ago, though different parts of the metro area and different property types will experience growth differently. 

    The following are eight trends that dominate local CRE at the beginning of 2019, as reported by Bisnow.

    Development Is Hard, But There Are Still Opportunities

    Allen Matkins' Timothy Hutter, Malick Infill's Andrew Malick, Housing on Merit's Jennifer Litwak, Sudberry Properties' Marco Sessa, Baldwin & Sons' Shawn Baldwin and Sunroad Asset Management's Dan Feldman.

    Development opportunities are still so great in San Diego that the industry presses on through the high costs, opposition to growth and red tape, the speakers at Bisnow's San Diego Construction & Development event last year said.

    According to the speakers at our State of the Market event, San Diego doesn't have as much space to grow as some other markets, but development opportunities exist, especially in Downtown areas, such as East Village. 

    For nonurban core opportunities, South Bay is also a good choice, the speakers said.

    The Quest For Last-Mile Logistics Fuels San Diego's Booming Industrial Market

    Investors are on the prowl in San Diego for strong industrial properties, including those that will serve the growing need for last-mile distribution. That is because demand for such properties is high among tenants, especially retailers and the logistics firms that help them get more goods to more consumers faster.

    Cannabis Will Also Help Drive Industrial Demand


    Industrial is now a darling property type in San Diego, and one of the industries that will help the sector grow even more is cannabis. Because of the industry's gray market status, however — legal according to California, illegal according to the United States — so far it is hard to determine the exact impact on local industrial properties. 

    If Denver and other early legalizing markets are any guide, cannabis is driving and will continue to drive demand for San Diego County warehouses.

    Tijuana Isn't A Foreign City, It's Part Of Greater San Diego

    Almost under the radar in recent years, but fueled by maquiladoras and then NAFTA, Tijuana has been a growth market almost as much as San Diego. More than that, according to the speakers at our Cross-Border Real Estate: Tijuana and San Diego event, Tijuana is an integral part of the region, a twin city to San Diego. 

    Tijuana-San Diego is a microcosm of the relationship between Mexico and the United States, and if that relationship weathers the current storm, the region will be even stronger for it as both sides of the border grow.

    San Diego Life Sciences Growing Rapidly

    San Diego's life science industry has kicked into high gear lately, with capital pouring into the market and employment in the sector up. The trend is driving demand for specialized space.

    About a year ago, employment in San Diego County’s life science industry surpassed Orange County for the first time, putting the area at No. 3 in the state as a life science employment node. Employment growth in the sector is expected to continue.

    Retail Is Doing Better Than Expected In San Diego

    Retail properties in many places suffer from closing stores and lack of demand, but not as much in San Diego. Demand for retail among both tenants and investors is strong. That is because people are still shopping in stores here as the population increases and — probably more importantly — the number of well-paying jobs is rising.

    The Suburbs Are Enjoying A Boom, Too

    Growth in San Diego isn't just for the urban core. A rising regional economy is spurring demand for office and residential properties in the suburbs as well, though differently in different submarkets.

    One factor in keeping suburban fundamentals strong, especially in the residential sector, is that not everyone — not even all millennials — wants to live in the urban core.

    Like The Rest Of California, San Diego Housing Is In Crisis

    The problem is easy to state: there isn't enough housing in San Diego that a large segment of the population can afford, including much of the middle class. The solution? Devilishly complicated. 

    Last year, San Diego took a baby step toward providing more housing, relaxing regulations concerning the development of granny flats. Even so, not everyone is sure there is the political will to take many further steps toward dealing with the crisis.