Business Owner Forum: The New Commercial Real Estate Environment

Real estate is always a hot topic for San Diego’s business community, so we hosted a Business Owner Forum featuring a candid discussion on the region’s market and economy. Moderated by Pathfinder Partners’ co-founder Lorne Polger, the panel included Gary London (London Moeder Advisors) and Scott Peterson (CBRE), both longtime industry leaders.

The conversation began with San Diego’s impressive two decades of growth, fueled by tech, biotech, and education. Yet the region’s chronic housing shortage continues to ripple across the economy. Apartment vacancies reached just 1.25% in spring 2022, while the median home price climbed to $900,000. London estimated 50,000 additional units will be needed by 2025 to meet demand.

Panelists agreed, however, that the cycle is shifting. Inflation, higher interest rates, and broader macroeconomic pressures are slowing momentum. They cautioned that while a full recession may not be certain, a period of stalled growth appears likely. Capital remains available, but the rising cost of debt is stalling many deals. As Peterson put it, “Eight percent money doesn’t work.”

Office and industrial real estate illustrate the divide. Submarkets such as UTC and Del Mar Heights remain strong, supported by defense and biotech tenants requiring on-site work. Downtown tells a different story. Vacancy rates could approach 50% once large projects deliver, leaving many older buildings candidates for repurposing. While adaptive reuse is being explored, conversion costs remain prohibitive.

Land and regulatory constraints add another challenge. Although San Diego covers a wide geography, much of its “developable” land is limited by zoning, politics, or community resistance. This restricts housing growth, drives up prices, and forces long commutes — ironically undermining environmental goals.

Other sectors offer brighter spots. Industrial space is in high demand, especially in Kearny Mesa and Otay Mesa, with vacancy rates under 4%. Retail continues to evolve through downsizing and mixed-use redevelopment, yet lifestyle centers such as UTC prove in-person shopping thrives when paired with experiences.

Despite concerns, the panel ended on a cautiously optimistic note. San Diego’s fundamentals — climate, infrastructure, water resources, and top-tier universities — position it for long-term resilience. As London noted, downturns often create opportunity. Strategic investments during slow periods may define the next wave of success.

The Forum ultimately offered business owners a realistic but hopeful outlook: Prepare for economic shifts but remain alert to opportunities that follow.