East County San Diego Retail Market Report

Market Overview

East County San Diego is the fourth most populous region in the San Diego metro. Regarding the market as a whole, during H1 2023, Bed Bath & Beyond and Tuesday Morning made the decision to shut down all their stores in the San Diego area, resulting in the closure of over 300,000 square feet of retail space. This had a significant impact on the net absorption, causing it to turn negative for the first time in two years.

However, despite these closures, there is a widespread agreement among participants in the retail sector that the market is currently experiencing one of its strongest periods in years.

Highlights

• El Cajon has emerged as a highly dynamic investment market in the San Diego metro, primarily due to the involvement of local private entities. However, when it comes to market pricing, El Cajon significantly lags behind the rest of the region.
• The Santee retail submarket currently has a vacancy rate of 5.1%, which has experienced a 1.1% increase over the last year.
• In Lemon Grove/Spring Valley, there have been a total of 15 sales within the past year. These sales had an average price of $370 per square foot, while the estimated overall value of the submarket is $305 per square foot.
• Over the course of three years, there has been a cumulative increase of 12.8% in rents in Lakeside.
• La Mesa is a popular destination for retail investors in the San Diego area.

Rents | Vacancy | Construction

The average retail market rent per square foot in the included East County San Diego markets is $24. Santee and La Mesa have the highest market rent per square foot at $27, slightly below the San Diego market average of $34 per square foot. Santee has the highest year-over-year rent growth, currently at 5.5 percent. La Mesa closely follows Santee at 5.3 percent, while San Diego resides at 5.0 percent. The average retail vacancy rate for the markets is 3.42 percent, with Lakeside having the lowest. Lakeside’s vacancy rate of one percent is much lower than San Diego’s rate of 4.3 percent. Construction activity is slowing throughout the metro, which is a contributing factor in moderating demand. For the markets included, there have been 21,800 square feet of 12-month deliveries.

Sales

These submarkets combined sales volume makes up 10% of San Diego’s overall 12-month sales volume of $1.1 billion.

The markets included have a combined sales volume of $122,200,000, with El Cajon having the largest volume at $43,200,000. The average cap rate in the submarkets is 5.56 percent, almost directly on par with the San Diego metro average of 5.5 percent. East County San Diego is an area full of opportunities for investors, and retail activity remains robust despite volatile economic times.