San Diego ranks as one of the most attractive commercial real estate markets in California, combining a diversified economy with strong population growth and constrained land supply. The metro area's $275 billion GDP is powered by major sectors including biotechnology, defense and military, tourism, and technology - creating reliable demand for office, industrial, retail, and multifamily space across the county. Whether you are financing a mixed-use property in Mission Valley, acquiring an industrial building in Otay Mesa, or investing in multifamily units in North County, understanding the lending landscape is critical to making smart capital decisions.
Clear House Lending provides commercial real estate financing throughout the San Diego metro area, from conventional commercial mortgages and SBA loans to bridge financing and DSCR loans. This guide covers current market conditions, loan programs, interest rates, and submarket-level insights to help you navigate the San Diego commercial lending environment in 2025.
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What Does the San Diego Commercial Real Estate Market Look Like Right Now?
San Diego's commercial real estate market entered 2025-2026 with a mixed but fundamentally healthy profile. The metro's diverse economic base provides resilience that many single-industry cities lack, though different property sectors are telling very different stories.
The multifamily sector remains the clear standout. San Diego's apartment vacancy rate holds steady near 4.5%, well below the national average of 6%, reflecting the chronic housing undersupply that defines coastal California markets. Cap rates for multifamily properties have stabilized around 4.5%, consistent with trailing two-year levels. New deliveries have surged, but strong demand has kept pace - La Jolla and University City posted the best vacancy improvement over the past 12 months, dropping 50 basis points, while Vista improved by 40 basis points.
The industrial market is navigating a correction after years of extremely tight conditions. The overall vacancy rate rose to 7.2% in Q4 2025, up 70 basis points year-over-year, though it ticked down 30 basis points from the prior quarter. Cumulative direct net absorption reached negative 1.7 million square feet by Q3 2025, marking the third consecutive year of negative absorption. Despite these headwinds, average industrial sale prices remain elevated at $312.86 per square foot, and investor confidence persists. Lincoln Property Co. and Brasa Capital Management's $26.25 million acquisition of the Spectrum Tech Center in Kearny Mesa exemplifies the continued appetite for well-located industrial assets.
The office sector faces the steepest challenges. San Diego's overall office vacancy increased by 180 basis points year-over-year to 14.1%, with Downtown availability exceeding 35% due to large new campuses coming online empty. However, suburban submarkets like UTC and Del Mar Heights maintain sub-15% vacancy, and office sales are off to their strongest start since 2022 as lower interest rates and discounted pricing attract opportunistic buyers. Class A space carries a 16.4% vacancy rate, while Class C is much tighter at 6.3%.
Retail continues to outperform expectations, with San Diego's retail vacancy sitting at approximately 4.3% - among the tightest in California. Retail has climbed to the third-most favored commercial property type nationally, behind multifamily and industrial.
The life sciences sector, a signature San Diego industry, is experiencing a significant correction. Lab vacancy in San Diego reached 26.5% in Q3 2025, up sharply from 18.7% one year prior. This represents both a challenge for existing landlords and a potential opportunity for investors willing to acquire discounted life science assets in markets like Sorrento Valley and Torrey Pines.
What Types of Commercial Loans Are Available in San Diego?
San Diego borrowers have access to the full range of commercial real estate financing products. The right loan structure depends on your property type, investment timeline, financial profile, and exit strategy.
Conventional Commercial Mortgages are the standard financing tool for stabilized, income-producing properties. These loans typically offer fixed rates for 5, 7, or 10 years with 25 to 30 year amortization schedules. They are well suited for office buildings, retail centers, and multifamily properties with strong occupancy and predictable cash flow. In San Diego, conventional loans are commonly used for properties in established submarkets like Mission Valley, Kearny Mesa, and Carlsbad.
SBA Loans provide government-backed financing for owner-occupied commercial properties. The SBA 7(a) program allows borrowers to finance up to $5 million with down payments as low as 10%, while SBA 504 loans can reach $20 million for real estate and equipment purchases. These programs are particularly popular among San Diego small business owners purchasing restaurant space in the Gaslamp Quarter, medical offices in Sorrento Valley, or professional service buildings in Carlsbad.
Bridge Loans provide short-term capital for acquisitions, property repositioning, or lease-up scenarios where traditional financing is not yet available. In San Diego's competitive market, bridge financing enables investors to close quickly on time-sensitive deals while stabilizing the asset for permanent refinancing. Bridge loans are especially relevant for investors targeting value-add opportunities in the discounted office and life sciences sectors.
DSCR Loans evaluate the property's rental income rather than the borrower's personal income, making them attractive for investors with multiple properties or complex tax situations. DSCR loan programs in San Diego typically require a minimum debt service coverage ratio of 1.25x and down payments of 20% to 25%. DSCR rates in San Diego currently start at 6.6%. Learn more about DSCR loan requirements to determine if this program fits your investment strategy.
Hard Money Loans serve borrowers who prioritize speed and flexibility. These asset-based loans can close in days rather than weeks, making them useful for auction purchases, distressed acquisitions, or properties that do not qualify for conventional financing. Explore hard money loan options for time-critical San Diego transactions.
Construction Loans fund ground-up development and major renovation projects. With significant development activity in Otay Mesa, Downtown, and North County, construction financing remains a vital component of the San Diego lending landscape.
What Are Current Commercial Loan Rates in San Diego?
As of early 2026, commercial mortgage rates in California start as low as 5.11% for the most qualified borrowers and well-stabilized assets. San Diego rates generally track state and national benchmarks closely, though property-specific factors can create meaningful variation.
Conventional commercial mortgages for stabilized properties range from approximately 5.11% to 7.25%, depending on term length, property type, and loan-to-value ratio. Lenders typically offer up to 80% LTV on multifamily properties and 75% on commercial assets, with the potential for 90% financing through SBA programs.
SBA 7(a) loans carry rates in the 6.50% to 8.00% range, while SBA 504 loans offer fixed rates starting around 5.50% through the CDC debenture portion. Both programs offer terms and amortizations up to 30 years.
Bridge loans in San Diego typically range from 7.50% to 10.50%, reflecting the short-term nature and transitional risk profile. These are commonly structured as interest-only with 12 to 36 month terms.
DSCR loans for investment properties currently start at 6.60% and can reach 8.75%, with rates heavily influenced by the property's net operating income relative to debt obligations, the borrower's credit score, and the loan-to-value ratio.
Hard money loans command the highest rates, generally falling between 9.00% and 12.50%, offset by their speed and flexibility for unconventional situations.
To estimate your monthly payments and debt service coverage ratio, use our commercial mortgage calculator or DSCR calculator.
Which San Diego Submarkets Offer the Best Commercial Investment Opportunities?
San Diego County spans more than 4,200 square miles, and commercial real estate performance varies significantly across its submarkets. Understanding these differences is essential for identifying the best financing opportunities.
Downtown and the Gaslamp Quarter remain the urban core of San Diego's commercial market. While the office sector faces elevated vacancy above 35% due to large-scale deliveries, this creates pricing opportunities for investors willing to acquire Class B office space at significant discounts and reposition it for modern tenants. Multifamily demand remains robust downtown, and the Gaslamp's restaurant and entertainment scene sustains strong retail activity. Ground-floor retail with upper-story residential commands premium rents in this walkable district.
Mission Valley serves as San Diego's central commercial corridor, anchored by major shopping centers, hotels, and a growing stock of mixed-use developments. The submarket benefits from exceptional freeway access via I-8 and I-15, a trolley line, and proximity to both Downtown and the beaches. Mission Valley is a prime target for multifamily and retail investors, with hotel properties also generating strong interest from hospitality-focused lenders.
Kearny Mesa has historically been known for defense-related facilities and low-rise business parks, but it is undergoing a significant transformation. The recent Kearny Mesa Community Plan update is paving the way for residential and office redevelopment in what has been a primarily industrial zone. Investors see strong opportunity to reposition older office and flex properties here, given its strategic location at the crossroads of San Diego's major highways (I-805, I-15, and SR-163). Industrial assets in Kearny Mesa continue to trade at premium prices, as demonstrated by the $26.25 million Spectrum Tech Center acquisition.
Sorrento Valley and Torrey Pines form the heart of San Diego's life sciences and technology corridor. While lab vacancy has spiked to 26.5%, this creates potential acquisition opportunities for investors with longer time horizons. The area's proximity to UC San Diego, Scripps Research, and the Salk Institute ensures sustained long-term demand. Medical office space remains much tighter at 6.4% vacancy. Investors considering this submarket should explore bridge loan options that allow for value-add repositioning during the current correction.
Carlsbad and North County Coastal submarkets serve local tech and R&D tenants with relatively balanced office markets. These areas have experienced fewer dramatic swings than Downtown, maintaining steady occupancy from companies like Viasat, Thermo Fisher, and a growing roster of mid-size technology firms. Retail and multifamily fundamentals are particularly strong in Carlsbad, where lifestyle-oriented centers and walkable village environments attract premium tenants.
Otay Mesa is the epicenter of San Diego's industrial development pipeline. The submarket's connectivity to the U.S.-Mexico border crossing and regional distribution networks makes it critical for last-mile logistics and cross-border commerce. New speculative industrial development continues despite the broader market correction, signaling long-term confidence in the submarket's strategic importance.
Chula Vista and South Bay are positioned for increased multifamily and commercial activity, ranking among the most active submarkets in terms of development pipeline. The ongoing Chula Vista Bayfront project promises to transform the South Bay waterfront with hotels, retail, and residential development.
What Are the Requirements for a Commercial Loan in San Diego?
Commercial loan requirements in San Diego align with California and national standards, though the region's high property values and competitive market create some unique considerations.
Down Payment: Conventional commercial loans typically require 20% to 35% down, with most lenders landing in the 25% range for non-multifamily properties. SBA loans offer a lower barrier at 10% to 20% down. DSCR loans generally require 20% to 25% down, though some programs allow as little as 20% for borrowers with strong credit profiles.
Credit Score: Conventional lenders generally require a minimum credit score of 680. SBA programs may accept scores as low as 650. DSCR loan programs in San Diego typically require a minimum of 640 to 680. Hard money lenders focus primarily on collateral value and may work with lower scores.
Debt Service Coverage Ratio: Most lenders require a DSCR of at least 1.20x to 1.25x, meaning the property's net operating income should exceed annual debt payments by 20% to 25%. Some DSCR loan programs allow ratios as low as 0.75x for investors willing to accept higher rates. Use our DSCR calculator to estimate your property's coverage ratio.
Property Documentation: Borrowers should expect to provide trailing 12-month operating statements, current rent rolls, two to three years of tax returns (for non-DSCR loans), environmental reports, and a commercial appraisal. San Diego-specific considerations may include coastal development permits, earthquake retrofit requirements, and California Environmental Quality Act (CEQA) compliance documentation.
Experience: For bridge and construction loans, most lenders prefer borrowers with a track record of successful commercial real estate projects. First-time investors may face higher rates or lower leverage, though SBA and DSCR programs are generally more accessible to newcomers.
Ready to discuss your specific situation? Contact our team for a personalized loan analysis based on your San Diego property and investment goals.
How Does San Diego Compare to Other Southern California Markets?
San Diego occupies a distinctive position within the Southern California commercial real estate landscape. While it lacks the sheer scale of Los Angeles, it offers several advantages that make it compelling for both local and out-of-state investors.
San Diego's multifamily market is among the tightest in the state, with vacancy near 4.5% compared to roughly 5.0% in Los Angeles and 6.0% nationally. Cap rates for San Diego multifamily hover around 4.5%, comparable to LA and reflecting the strong demand fundamentals of both coastal California markets.
The industrial market, while experiencing a correction, maintains average sale prices of $312.86 per square foot - competitive with the Inland Empire and substantially above national averages. San Diego's constrained land supply and border proximity create long-term value drivers that differentiate it from more sprawling industrial markets.
Office performance varies dramatically by submarket. While Downtown San Diego faces vacancy above 35%, suburban submarkets like UTC, Del Mar Heights, and Carlsbad maintain healthier occupancy profiles. This suburban resilience mirrors patterns seen in Orange County and the Westside of Los Angeles.
Retail vacancy at 4.3% positions San Diego as one of the tightest retail markets in Southern California, reflecting the metro area's strong consumer spending base, tourism economy, and limited new retail development.
The life sciences sector differentiates San Diego from every other SoCal market. While current lab vacancy at 26.5% represents a challenge, San Diego remains the third-largest life sciences cluster in the United States after Boston and the San Francisco Bay Area, with a deep pipeline of biotech companies and research institutions that will eventually absorb available space.
What Should San Diego Investors Know About SBA Loans?
SBA loans represent one of the most powerful financing tools available to San Diego business owners looking to purchase their own commercial space. The combination of low down payments, long terms, and competitive rates makes SBA programs particularly attractive in a high-cost market.
The SBA 7(a) program offers up to $5 million in financing for general business purposes, including commercial real estate acquisition. Borrowers can finance up to 90% of the purchase price, with terms up to 25 years for real estate. This program works well for restaurants, medical practices, professional service firms, and other businesses that occupy their own space.
The SBA 504 program is designed specifically for major fixed-asset purchases and can provide up to $20 million in financing. The structure combines a conventional bank loan (50%) with a CDC debenture (40%) and a 10% borrower contribution. The CDC portion carries a fixed rate, providing payment predictability over the life of the loan. However, SBA 504 loans cannot be used for multifamily properties and require that the business owner occupy at least 51% of the building.
For San Diego business owners, SBA loans are especially valuable given the metro's high property costs. Rather than committing 25% to 35% down for a conventional loan, an SBA borrower can preserve capital for business operations while building equity in commercial real estate. Read our complete guide to SBA loans for commercial real estate for detailed program requirements and application tips.
Frequently Asked Questions
What is the minimum down payment for a commercial loan in San Diego?
The minimum down payment depends on the loan program. SBA 7(a) and SBA 504 loans allow down payments as low as 10% for owner-occupied commercial properties. Conventional commercial mortgages typically require 25% to 35% down, while DSCR loans for investment properties generally require 20% to 25%. Given San Diego's elevated property values, even a 10% down payment can represent a significant capital commitment, so planning your equity position early is essential.
How long does it take to close a commercial loan in San Diego?
Closing timelines vary by loan type. Conventional commercial mortgages typically close in 30 to 60 days. SBA loans may take 60 to 90 days due to additional government underwriting requirements. Bridge loans and hard money loans can close in as little as 7 to 14 days, making them valuable for competitive bidding situations where speed determines whether you win or lose a deal.
What DSCR ratio do San Diego lenders require?
Most San Diego lenders require a minimum debt service coverage ratio of 1.20x to 1.25x for conventional commercial loans. Some DSCR-specific loan programs will consider ratios as low as 0.75x, though borrowers should expect higher interest rates and larger down payment requirements at lower ratios. For multifamily properties, lenders may apply more favorable underwriting given the strong rental demand in San Diego's tight housing market.
Can I get a commercial loan for a property near the U.S.-Mexico border?
Yes, properties in border-adjacent areas like Otay Mesa, San Ysidro, and Chula Vista are regularly financed through commercial loan programs. Industrial properties near the border crossing are particularly attractive to lenders due to strong demand from cross-border logistics and manufacturing tenants. Lenders will evaluate these properties based on standard underwriting criteria including income, occupancy, condition, and location fundamentals.
Are commercial loan rates lower in San Diego than other California markets?
Commercial loan rates are primarily driven by national capital markets rather than local geography, so base rates in San Diego are comparable to those in Los Angeles, San Francisco, or Sacramento. However, property-specific factors like the asset class, occupancy level, property condition, and borrower credit profile create meaningful rate variation. Well-located, stabilized multifamily properties in San Diego may receive among the most competitive rates available anywhere in California.
What property types are easiest to finance in San Diego right now?
Multifamily properties are the easiest to finance in San Diego, thanks to low vacancy rates near 4.5% and strong rent growth fundamentals. Lenders offer the highest LTV ratios (up to 80%) and most competitive rates for well-occupied apartment buildings. Retail properties with strong tenant rosters are also relatively straightforward to finance given the metro's 4.3% retail vacancy. Industrial properties remain financeable despite rising vacancy, particularly in supply-constrained submarkets. Office and life sciences properties face more scrutiny, with lenders requiring stronger sponsorship and lower leverage for these asset types.
Take the next step in your San Diego commercial real estate journey. Contact Clear House Lending today for a free consultation and rate quote tailored to your specific property and investment strategy.