Q2 2025 San Diego Retail Development Market Report

San Diego Retail Activity

• Available space increased by more than 600,000 square feet during the first quarter, which is the greatest amount of space added to the market in five years. The uptick is due to the rise in store closures and bankruptcies.
• Smaller spaces are in high demand as service-related and dining tenants made up 40% of leasing volume within the past year.

 

Pacific Beach Market Overview

The Pacific Beach submarket recorded a vacancy rate of 4.9% at the end of Q2 2025. Vacancy here has been on the rise since the end of 2024, due to negative absorption unable to keep up with new deliveries. About 2,000 square feet delivered over the past year, which led Pacific Beach to note 170,000 square feet of available space during the second quarter. There is no space under construction as of Q2 2025, and market rents are $40.00 per square foot.

 

Ocean Beach Market Overview

Ocean Beach recorded 4,300 square feet of net absorption in the second quarter, dropping the vacancy rate to 3.2%. Different retail subtypes in the submarket also note low vacancy levels, with power centers at no vacancy and general retail at a 3.0% vacancy rate. However, vacancy may see an uptick as 7,200 square feet is on the way. Across the submarket, market rent is at $37.00 per square foot. Rent growth in Ocean Beach changed by 2.9% year-over-year, outpacing San Diego which grew by 1.5%. Market rent is strongest in neighborhood centers at 4.7%, followed by strip center properties at 2.2%.

 

La Jolla Market Overview

The La Jolla submarket recorded stable performance metrics with vacancy at 4.5% at the end of Q2 2025. Absorption has outpaced deliveries, with 19,000 square feet absorbed compared to 10,000 square feet in deliveries. The submarket currently notes 2.1 million square feet in inventory, with 4,500 of space under construction across the submarket. Similar to Ocean Beach, rent growth is also outpacing the San Diego metro at 4.1%. Market rent here is at $57.00 per square foot, compared to the metro’s rent at $36.55 per square foot.

 

Pacific Beach Development Pipeline

Vela Project—970 Turquoise St

• 23-story tower, exceeds 30-foot coastal height limit
• Includes 74 residential units (10 affordable), 139 hotel rooms, and 7 levels of parking
• Proposed by Kalonymus LLC, a Los Angeles developer
• Legal & Approval Details: Uses California Density Bonus Law to bypass local zoning rules. Ministerial approval process—no public hearings required.
• Concerns & Opposition: Residents worry about infrastructure strain, traffic, and emergency response limits. Officials like Mayor Todd Gloria and Senator Catherine Blakespear oppose the project. Seen as a misuse of affordable housing law.

 

Rose Creek Village—2662 Garnet Ave

• Rose Creek Village received a $4 million loan approval from the San Diego City Council in August 2024
• The five-story project will include 77 affordable housing units (59 studios, 18 permanent supportive housing units)
• Proposed by Kalonymus LLC, a Los Angeles developer
• The building will exceed the 30-foot height limit, sparking community concerns
• Plans also include two levels of underground parking and ground-floor commercial space

 

Balboa Avenue Transit Center—870 Garnet Ave

• Balboa Avenue Transit Center opened in November 2021 as part of the Blue Line Mid-Coast Trolley extension
• Located between Interstate 5 and Morena Boulevard
• San Diego approved the Balboa Station Area Specific Plan in September 2019 to support transit-oriented development and connectivity in Pacific Beach and nearby areas
• These efforts aim to address housing and infrastructure needs, while also raising concerns about building height and neighborhood character
• Lot sold for $4.3 million in April 2025 as a development play with residential units and retail at the base level

 

Coastal Development Permits: 1913 Pacific Beach Drive and 2120 Oliver Ave

• Proposal to demolish an existing single dwelling unit and construct two three-story single dwelling units, each on its own pre-subdivided lot
• Recent applications include a proposal at 1913 Pacific Beach Drive for demolishing an existing single dwelling unit to construct two three-story single dwelling units on pre-subdivided lots
• Application for a Coastal Development Permit for a project within the Coastal Overlay Zone

 

Ocean Beach Development Pipeline

Current Market Conditions

• Total Housing Units in a 1 Mile Radius: 10,440
• 40 multi-unit executed ADUs in the last 4 years
• Current retail vacancy rate in Ocean Beach: 1.26%
• Average Newport Ave on market asking rent: $3.20 SF

 

Proposed Development

• 2169 Bacon St—15,000 SF, 11 units
• 1400 Rosecrans St—56,000 SF, 56 units
• 3747 Midway Dr—50,000 SF, 62 units
• 3500 Sports Area Blvd—250,000 SF multi-tenancy
• Ocean Beach Pier—Attracted roughly 500,000 visitors annually as the longest concrete pier on the West Coast. New development estimated to be permitted by the end of 2025.
• 1984 Sunset Cliffs Boulevard—Property set to be demolished and replaced with high density housing development.
• Point Loma Avenue—20-unit apartment building
• 4705 Point Loma Avenue—Demolishing existing retail structure to construct two four-unit buildings as part of an affordable housing density project.

 

La Jolla Blvd Development Pipeline

Adelante Townhomes—5575 La Jolla Blvd

• Type: 14-unit residential townhome development
• Details: This project involves the demolition of an existing office building to construct a two-story residential complex with a basement level, covered parking, and roof decks totaling 21,485 square feet. The development includes 13 market-rate units and one affordable unit for low-income residents. Notably, the project does not include ground-floor retail, which has been a point of contention due to the La Jolla Planned District Ordinance requiring retail on the ground floor in this zone.

 

Gravilla Townhomes—6710 La Jolla Blvd

• Type: 12-unit condominium development
• Details: This project proposes the construction of a two-story building with 12 for-sale condominiums, including one affordable unit for very low-income residents. The development also includes 13 below-grade parking spaces utilizing car stackers.

 

5721 La Jolla Blvd

• Currently under construction