East County Industrial Market

Walk the submarkets of El Cajon, Santee, and Lakeside right now and you’ll find something closer to a landlord’s market; however, it has loosened slightly as of early 2026. Generally, we are seeing tight vacancy, resilient rents, and a persistent shortage of quality small-bay product. However, average lease-up time is taking longer than historical averages. Here’s what’s actually happening on the ground.

The Numbers Tell Two Different Stories

Countywide, San Diego’s industrial vacancy has been grinding higher, landing in the high single digits to around 9% depending on the reporting source and quarter — among the highest levels the market has seen in over a decade. Much of that softness is concentrated in the larger logistics buildings (100,000+ SF) in submarkets like Otay Mesa, where speculative construction delivered a wave of big-box space right as demand cooled.

East County isn’t playing that game. Historically, vacancy across El Cajon, Santee, and Lakeside has consistently run in the 1-3% range — a fraction of the county average. It currently sits around 4-5%, which is the highest it’s been since 2008. Asking rents in East County have held in the low-to-mid $1.30s to $1.40s per square foot + NNN, and unlike the broader market, East County has seen virtually no new speculative supply hit the ground to dilute those numbers.

Why the disconnect? It comes down to product type and land constraints.

Small-Bay Is King, and Nobody’s Building It

The demand story in San Diego right now isn’t really about mega-distribution centers — it’s about small-bay industrial: buildings generally under 50,000 SF that serve local contractors, service businesses, light manufacturers, and owner-users who want a home base close to their crews and customers. That’s exactly the product East County specializes in, and it’s exactly the product in shortest supply across the county.

There are a few structural reasons East County keeps this advantage:

• Limited developable land. El Cajon, Santee and Lakeside are largely built out. There’s no meaningful industrial land left to absorb new speculative supply, which means existing inventory doesn’t face the same dilution risk that’s hit Otay Mesa and other submarkets with room to build.

• The Santee Drive In is the next development slated for 2027, when ± 280,000 SF
  of multi-tenant industrial product will be developed.

• To follow, the Lakeside Land Co is doing a build-to-suit (custom facility for
  specific Tenants) on three properties located off Riverford Road in Lakeside.

• Owner-user demand keeps growing. With SBA 504 financing still accessible and interest rates showing signs of easing off their peak, more East County businesses are choosing to buy rather than lease — taking supply off the market permanently rather than cycling it back through as vacancy. Furthermore, we are seeing Tenants renew on a short-term basis to remain flexible enough to purchase their own facility.

• Proximity matters for this tenant base. Contractors, trade businesses, and regional service companies want to be near their labor pool and customer base in East County, not in a 500,000 SF cross-dock facility 25 miles south.

What This Means If You’re a Tenant

Frankly, it means options are limited and you should be moving early. With vacancy this tight, quality small-bay space in the 2,000-15,000 SF range gets absorbed quickly, and you’re less likely to see landlords offering the concessions that are becoming standard in Otay Mesa and the broader South Bay and North County markets . If your lease is coming up for renewal in the next 12-18 months, this is the year to start that conversation rather than waiting.

What This Means If You’re an Owner or Investor

This is a landlord’s market, and it should stay that way as long as land constraints hold. Well-located buildings in El Cajon, Santee, and Lakeside are attracting sustained interest from both users and investors, particularly given how much harder it’s become to find comparable stability elsewhere in the county’s industrial stock. For owners weighing a sale, this is a favorable environment to test the market — and for 1031 exchange buyers looking to redeploy capital into durable NNN or owner-user product, East County remains one of the more defensible plays in San Diego industrial right now.

The Bigger Picture

None of this happens in a vacuum. Countywide, leasing activity has actually ticked up quarter-over-quarter even as vacancy has risen — a sign that demand hasn’t disappeared, it’s just become more selective and concentrated in functional, well-located space. That’s a trend that plays directly to East County’s strengths: unglamorous, well-located, functional buildings that keep local businesses running.

The submarkets making the biggest headlines this cycle — the massive spec deliveries, the big logistics renewals — aren’t the ones telling East County’s story. If you’re doing business in El Cajon, Santee, or Lakeside, the market underneath your feet looks a lot healthier than the countywide averages suggest.

Aidan James, Principal and Broker

Notable Properties & Deals

10926 N Woodside Ave | Santee

93,000 SF

Subleased for term of 8 years.

Sublessee represented by Aidan James
at Inland Pacific CRE.

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