HomeMy WebLinkAbout2025-10-21; Economic Development Subcommittee; 02; State of Carlsbad Commercial Real Estate Meeting Date: Oct. 21, 2025
To: Economic Development Subcommittee
From: Matt Sanford, Economic Development Director
Staff Contact: Matt Sanford, Economic Development Director
matt.sanford@carlsbadca.gov, 442-339-5987
Subject: State of Carlsbad Commercial Real Estate
Recommended Action
Receive an informational report from CoStar Group regarding the current state of Carlsbad’s
commercial real estate portfolio, current challenges, and opportunities.
Executive Summary
Josh Ohl, Senior Director of Analytics for San Diego with the CoStar Group, will provide a high-level
view of property and economic trends in San Diego, while informing on Carlsbad's performance
compared to the broader region.
Explanation and Analysis
The CoStar Market Analytics presentation provides a comprehensive overview of current market
dynamics in Carlsbad’s commercial real estate sectors. Data indicates a local market that remains
resilient but is undergoing a measured period of adjustment as broader economic conditions
influence leasing, construction, and investment patterns.
In the office market, Carlsbad continues to experience moderate leasing activity as companies
reassess their physical space requirements. Leasing velocity remains below pre-pandemic averages,
and vacancy rates have increased, particularly among mid-tier Class B buildings. However, Carlsbad
has been supported by strong representation from life sciences, technology, and professional
services firms that continue to value Carlsbad’s quality of life and skilled labor pool, which has
helped the city sidestep some of the broader retrenchment relative to some regional peers. While
rents have stagnated, landlords are maintaining competitiveness through targeted concessions and
tenant improvement allowances.
The industrial segment, which underpins Carlsbad’s economy, has entered a more cautious phase
after several years of rapid growth. Slower trade activity, driven in part by tariff uncertainty and
shifting supply chain patterns, has tempered leasing momentum. Nevertheless, smaller flex and R&D
spaces in Carlsbad remain in demand, driven by medical device manufacturers, clean technology
firms, and research-oriented tenants. Larger warehouse spaces have seen longer lease-up times, and
developers are not building speculative projects. This is also in part due to constricted capital
markets. Despite these trends, industrial fundamentals remain healthy, supported by limited
available land and sustained long-term demand from innovative firms.
ECONOMIC DEVELOPMENT SUBCOMMITTEE
Oct. 21, 2025 Item #2 Page 1 of 2
Carlsbad’s retail market remains relatively tight compared to regional averages, even as availability
has increased modestly. Neighborhood and lifestyle centers continue to perform well, with steady
demand from food service, fitness, and healthcare tenants. However, many retailers have noted
more challenging conditions due to product cost increases and declining consumer sentiment. Rent
growth has cooled from earlier highs, reflecting a declining trend of consumer behavior and more
cautious expansion by retailers. The city’s coastal appeal and strong household incomes continue to
make Carlsbad a desirable location for both national and boutique operators, particularly in
destination-oriented areas such as the Village and La Costa.
Across all property types, sales and investment activity have slowed from prior years due to higher
borrowing costs and limited transaction volume. Investors remain selective, focusing on well-located
assets with stable cash flow. While overall sales volume is down, pricing in Carlsbad has remained
relatively firm, reflecting continued investor confidence in the city’s economic fundamentals, quality
tenant base, and long-term growth prospects.
Overall, CoStar’s analysis suggests that Carlsbad’s commercial real estate market is adjusting to new
economic realities while maintaining strong underlying fundamentals. The city’s balanced mix of
industries, desirable location, and thoughtful planning continue to support stability and position
Carlsbad for renewed growth as capital markets and business sentiment improve.
Fiscal Analysis
This action has no financial impact.
Next Steps
Staff will continue to monitor commercial real estate trends in Carlsbad and the surrounding region.
Staff are also actively implementing a site-selection tool to be more proactive in positioning Carlsbad
assets for companies interested in new space.
Exhibits
None
Oct. 21, 2025 Item #2 Page 2 of 2
No growth in the movement of goods nationally
Source: Freight Waves, Cass Information Systems, September 2025
Multifamily Key Performance Indicators
Retail Key Performance Indicators
Office Key Performance Indicators
Industrial Key Performance Indicators