The commercial real estate market has been experiencing mixed performances, with some sectors doing better than others. That’s not about to change any time soon. The industrial sector is still going strong, the retail sector continues its recovery, and the office sector keeps lagging behind.
Already low vacancy rates in industry have dropped to near-zero, as what few vacancies remain are completely unusable. New construction isn’t focusing on the industrial sector, except in the Inland Empire, which nevertheless still has a mere 0.9% vacancy rate, down from 3.1% in 2020. San Diego has the highest vacancy rate in Southern California at 2.3%. In the retail sector, the vacancy rate didn’t change much, only increasing 0.2% in San Diego from 4.7% to 4.9%. However, the availability rate — which includes all properties on the market, whether vacant or currently leased — dropped from 6% to 5%. It’s likely that this is representative of off-market leases. Offices are still struggling, with vacancy rates above 12% and availability rates around 17%. The solution to the office problem will probably come in the form of conversions to residential or mixed-use property, which are far more in demand than office space.