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Job Growth, Neighborhood Revitalization To Drive San Diego Real Estate This Year

The health of San Diego's commercial and residential properties in 2019 probably depends on job creation more than any other economic metric. Assuming that is true, San Diego real estate could have another healthy year.

San Diego skyline

"Job growth is the fundamental generator of demand for office space," Parallel Capital Partners Managing Partner Matt Root said. 

Parallel sold a major San Diego asset late last year, but it still has a significant stake in the local office market, especially in Sorrento.

"Tech-heavy markets with a lot of intellectual capital, a high quality of life and a STEM-oriented educational infrastructure — like San Diego — will continue to attract this talented labor pool," Root said. "Commercial landlords who provide a compelling workplace experience here will benefit meaningfully from tech growth."

Savills Studley's most recent report on the San Diego office market said workplace amenities are critical to the market, adding that amenities are sometimes more than what a single building can offer.

"The retail, nightlife and residences in the surrounding neighborhoods are often the most critical amenity for any property," the report said. "Typically North Cities locations such as La Jolla and Torrey Pines have enjoyed a competitive advantage in this respect."

“As a firm, we're optimistic about 2019," Fabric Investments principal Brendan Foote said. "We expect some corrections in the regional market, but see the coastal market staying strong for both office and retail."

In the first week of 2019, Encinitas-based Fabric Investments acquired the 15K SF 2110 South Coast Highway office and retail building in Oceanside for $3.75M. The company plans interior and exterior renovations to update the building.

"We place a high value on investing within neighborhoods," Foote said. "Our assets are in communities, and we see increasing demand for employers, residents and retailers to locate within these coastal towns in walkable settings and near public transit.”


The further growth of San Diego neighborhoods might not be confined to coastal locations.

For example, the El Cajon Boulevard Business Improvement Association is unveiling its new Blvd 20/20 Plan later this month, which will set a new vision for the El Cajon Boulevard corridor as a model for transit-oriented communities in San Diego.

“We believe that the Blvd 20/20 Plan will drive further growth to the ECB corridor," association President Tootie Thomas said.

According to Thomas, there is a lot of energy in the community to improve the district, such as by launching a pilot program for a dedicated transit lane and public art projects in the Little Saigon District.

"This is a community that welcomes high-density projects and multi-modal mobility, combined with an inventory of available lots that are prime for development," Thomas said.

In the apartment market, construction will continue unabated, except for a few markets that are overbuilt with high-end apartments — such as San Diego and Orange County, Xpera Group Director of Economic and Market Research Alan Nevin said. San Diego-based Xpera Group is a construction specialist and real estate consultancy.

"In those markets, I anticipate that high-end projects scheduled to move forward in 2019 will take a breather," Nevin said. "That is going to happen until the developers can be convinced that newly completed units are being rented, and without serious concessions and at rental rates that match their pro formas."

"At the same time, apartment lenders are tightening their requirements and requiring more equity and more assurance of demand," Nevin said.

In for-sale housing, a recent report by Zillow predicted that San Diego median home values would rise by around 4.3% by the fall of 2019.

That represents an increase, but also a slowing down of price increases. As of November 2018, the median home value in San Diego was $629,100, an increase of 6.2% compared with a year earlier.