A Kidder Mathews market report indicates that San Diego County industrial leasing activity has slowed in the 2nd quarter as fundamentals tighten, however, demand continues to outpace supply. Because of market conditions and strong competition, rental rates have climbed to a record high of $1.36 per square foot on a triple-net basis.

Vacancy in San Diego has fallen to an all-time low in Q2, now standing at 2.7% and sales activity is reflecting demand, with prices hovering at $3.67 per square foot. The Otay Mesa submarket remains very active for sales, with e-commerce and logistics companies driving demand in the region.

Despite continued demand in the 2nd quarter, Kidder predicts that a cooling in the market is possible as rising interest rates and a possible recession cause the venture capital industry to pull back and also lead to a slowing of e-commerce growth.