Economic Overview
San Diego employment increased by 10,900 jobs, or 0.7% year over year (YOY), between August 2025 and August 2026, reflecting modest growth that continues to trail historical trends and reinforces a measured outlook for retail demand. Healthcare led job gains, adding 12,300 positions (+5.0% YOY) and providing a stable foundation for consumer spending, although growth in this sector is less directly associated with discretionary retail activity. Consumer-facing industries showed stronger momentum, with leisure and hospitality adding 5,500 jobs (+2.6% YOY), supporting foot traffic and demand for experiential retail. Conversely, several sectors contracted, led by government (-4,200 jobs YOY), along with declines in construction, financial activities, information and manufacturing, potentially constraining broader economic activity and consumer spending. The unemployment rate declined modestly to 4.9%¹ from 5.1% YOY but remained above the Q3 2026 average of 4.5%, reflecting a stable but not accelerating labor market. Looking ahead, employment is projected to grow by 1.0% in 2026 and 0.8% in 2027,² both below the five-year historical average of 1.8%, pointing to continued but moderate retail demand, with performance increasingly influenced by location quality, tenant mix and consumer spending patterns across the market.
Supply And Demand
Retail vacancy decreased by 10 basis points (bps) quarter over quarter (QOQ) but rose 10 bps YOY to 5.2%. While vacancy remains above the 10-year quarterly average of 4.7%, it is well below the cycle peak of 7.1% recorded in Q4 2009, reflecting relatively stable market fundamentals despite modest fluctuations in occupancy. Net absorption totaled 18,591 square feet (sf) across all center types in Q3 2026. Community centers accounted for most of the positive absorption, posting 82,484 sf, followed by gains in neighborhood centers,³ partially offsetting occupancy losses across other center types.
Pricing
Countywide asking rent averaged $2.27 per square foot (psf) per month on a triple net basis, increasing 0.4% QOQ and 4.1% YOY. Average rent remains $0.21 psf above the 10-year quarterly average of $2.06 psf, reflecting continued pricing resilience despite modest occupancy growth. By property type, power centers recorded the highest average asking rent at $2.77 psf, followed by neighborhood centers at $2.44 psf, underscoring sustained pricing strength in larger-format retail properties and centers anchored by daily-needs tenants.
