Pacific Beach | San Diego County Retail Market Report
Market Overview
As one of San Diego’s top tourist destinations, Pacific Beach is filled with trendy restaurants, music venues, nightclubs, bars, and shopping. Pacific Beach’s premier location along the Pacific and Mission Bay makes the median home price above $1 million, resulting in high household incomes and buyer power potential. In contrast, the Morena district is known for its furniture retailers and is specifically targeted for denser residential development.
Highlights
- Three new trolly stops in Morena opened at the end of 2021, and the community plans to bring a mixed-use, urban village atmosphere in the coming years.
- The vacancy rate has shifted by -1.5 percent over the past 12 months, and it now sits at 2.2 percent compared to the five-year average of 3.8 percent. This is caused by the high turnover from the density of restaurants and boutique retailers.
- Rents have risen 3.4 percent year-over-year in Q2 2023 compared to the five-year average of 2.5 percent.
Rent | Construction | Vacancy
Compared to San Diego as a whole, retail rents are more expensive in the Pacific Beach/Morena submarket with an average asking rent of around $37.00 per square foot for NNN assets. Over the past 12 months, rents posted a gain of 3.4 percent and are expected to continue to rise. There is currently no construction in the submarket, and nothing is planned due to the lack of available land. There are only about 98,000 square feet of available space in Pacific Beach/Morena, dwindling the submarket to 3.0 percent of inventory. Turnover is common, due to a large number of restaurants and boutique retailers competing for space, which has resulted in a vacancy rate of 2.2 percent.
Sales
The investment market in Pacific Beach and Morena is strong, featuring steady deal flow. Private local buyers drive the investment market. High-interest rates are concerning investors, but the submarket averages about 19 retail trades annually and has done so for the past five years. For the past year, the average retail property sold for about $680 per square foot, and transaction cap rates are often near 5.0 percent. Annual sales volume averaged $31.5 million over the past five years, including a 12 month peak of $50.6 million during Q2 2021.
