The commercial real estate market continued its mixed performance in 2021, according to the Q4 2021 Voit Real Estate Services market reports for Southern California (SoCal).

While office and retail both experienced increased vacancies, industrial vacancies have hit historic lows. As the pandemic response escalated the move from in-person to online, demand for industrial property continues to reach new heights. This move has been led by Amazon fulfillment centers, which dominate SoCal.

Read on for details on how industrial, office and retail are faring in SoCal’s major markets during our ongoing hangover from the 2020 recession.


Industrial space has become uncomfortably tight going into 2022. SoCal is constrained by a lack of land zoned for industrial. Unable to keep up with demand, vacancy and availability has plummeted while the cost of industrial leases and purchases continue to skyrocket.

Vacancy rates continued to decline across SoCal markets in Q4 2021, falling to:

  • 0.9% in the Inland Empire, down from 3.1% a year earlier;
  • 1.1% in Los Angeles, down from 2.7% a year earlier;
  • 1.4% in Orange County, down from 3.0% a year earlier; and
  • 2.3% in San Diego, down from 4.2% a year earlier.

These extreme vacancy rates may as well be zero, as VOIT points out many of the vacant buildings are unmarketable, held back by age and obsolescence. As a result, industrial tenants with no alternatives are increasingly likely to renew their leases, reducing turnover.

Availability — property marketed for sale or lease including property still occupied — decreased in Q4 2021 to:

  • 1.7% in the IE, down from 4.0% a year earlier;
  • 2.2% in Los Angeles, down from 2.4% a year earlier;
  • 2.3% in Orange County, down from 4.1% a year earlier; and
  • 3.7% in San Diego, down from 6.5% a year earlier.

New construction remains limited in all major SoCal markets, with the exception of the Inland Empire. Roughly 18 million square feet were delivered in the Inland Empire during 2021, easily beating out all other SoCal regions. Still, this level of construction continues a steady decrease from the 2018 peak when nearly 25 million square feet were delivered in the Inland Empire.

While transaction activity continued to decline in 2021 compared to recent years, with fewer properties changing hands in all SoCal markets except the Inland Empire, the number of square feet sold and leased was up in San Diego due to large transactions driven by Amazon. Los Angeles and Orange County saw decreased transaction volume in terms of both volume and space in 2021.

Expect to see industrial’s tight market continue in 2022-2023, fueled by continued consumer reliance on distribution centers over brick-and-mortar retail. The ongoing pandemic has increased demand for industrial space, pushing industrial market factors from difficult to compete, to near impossible.


Unlike industrial, the office sector continued to hit obstacles in 2021. Demand for office space has declined as remote working has taken off, with many offices closing their doors for good.

Vacancy rates inched higher in Q4 2021, at:

  • 13.8% in Orange County, up from 12.3% a year earlier; and
  • 12.1% in San Diego, down slightly from 12.4% a year earlier but still up from the pre-pandemic vacancy rate of 10.3%.

The highest office availability rate is found in San Diego’s downtown area, where more than 30% of office space is being marketed for sale or lease. In total, the availability of office space in San Diego was 16.6% in Q4 2021, down slightly from 16.9% a year earlier. The availability rate was similarly high in Orange County, at 17.1% in Q4 2021, up from 16.8% a year earlier.

In a prime example of sticky pricing, office lease rates remain level-to-up, despite higher vacancy rates. Some of this may be due to higher demand for more expensive Class A space. But refusing to drop asking rates also comes back to landlords preferring to offer lease concessions like allowances for tenant improvements and temporary free rent in lieu of decreasing their monthly income.

Looking ahead, high vacancy rates are not sustainable for landlords — especially landlords of undesirable Class C space. For these types of spaces, a conversion into residential or mixed-use property may be in their future. Conversions reduce building costs by eliminating site acquisition and preparation costs, while meeting the demand from another sector where vacancies are low.

Related article:

California residential conversions limited by outdated zoning


In 2021, the retail sector continued to recover from the pandemic disruption of 2020.

At the end of 2021 in San Diego, retail space experienced:

  • a vacancy rate of 4.9%, up slightly from 4.7% a year earlier; and
  • an availability rate of 5.0%, down from 6.0% a year earlier.

Typically, the spread is wider between the vacancy and availability rate, as landlords prefer to advertise space before it becomes vacant. The narrow spread seen at the end of 2021 indicates more space may actually be available than is being advertised. VOIT speculates a significant number of lease transactions in San Diego may have occurred off the market in 2021.

The average asking triple-net lease rate in Q4 2021 was 8.2% lower than a year earlier. Still, San Diego sale and lease transactions in 2021 increased slightly from the prior year, when retail transactions hit an historic low. Many of these large transactions were completed for purchase and redevelopment, reflecting demand for other types of space.