San Diego is one of the fastest-growing construction markets on the West Coast, with building costs averaging $300 to $550 per square foot for commercial projects and high-rise development exceeding $600 per square foot in coastal submarkets. Whether you are financing ground-up multifamily development in East Village, building a mixed-use project in the Midway District, securing entitlements for a master-planned community in Chula Vista, or developing life sciences space in the UTC corridor, construction financing is the critical first step in turning your San Diego project from plans to reality.
Clear House Lending provides construction loan financing across San Diego County, from vertical construction loans for mid-rise and high-rise towers to horizontal construction financing for site grading, infrastructure, and ground-up suburban development. This guide covers San Diego-specific construction costs, CEQA environmental review, coastal development permits, density bonus programs, and the loan structures available to developers and property owners in 2026.
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What Does the San Diego Construction Market Look Like in 2026?
San Diego's construction market is defined by a combination of enormous development ambitions and limited land availability that keeps project pipelines competitive and construction costs elevated. The region added over 8,400 residential units in 2024 and permit applications have continued to climb through early 2026, driven by population growth, a severe housing shortage, and billions of dollars in planned mega-developments.
The most transformative project on the horizon is the NAVWAR Old Town Campus Redevelopment. The Navy selected Manchester/Edgemoor as the master developer for this 70-acre site straddling Pacific Highway, which will include 4,000 to 8,000 apartments, up to 1.3 million square feet of commercial office space, 225,000 square feet of retail, and potentially a hotel. The environmental review process under the California Environmental Quality Act (CEQA) began in early 2025, with a Notice of Preparation published through the city's Development Services Department. This project alone will generate years of construction activity and reshape the Old Town and Midway District submarkets.
Mission Valley is undergoing its own transformation. SDSU Mission Valley broke ground on the Avalon Mission Valley project in August 2025, delivering 621 apartments and 30,000 square feet of retail including a grocery store. The Innovation District adds 315,000 square feet of research and office space across three buildings. Meanwhile, Hines' Riverwalk project launched its first phase with Wakeland Housing breaking ground on a $140 million apartment complex, with residents expected in summer 2027.
The Chula Vista Bayfront represents another massive construction zone. The Gaylord Pacific Resort and Convention Center opened in May 2025, a 1,600-room resort with convention facilities that anchors the bayfront redevelopment. Harbor Park is doubling from 12 to 25 acres with playground and splash pad completion targeted for 2026 and 2027. Thousands of additional residential units, mixed-use buildings, and a new fire station are in the pipeline through 2030.
Downtown San Diego's East Village continues to attract development capital. The $1.5 billion East Village Quarter project will overhaul the area surrounding Petco Park into a residential and hospitality hub. East Village Green, a 3.6-acre urban park with a community center, children's playground, and performance plaza, is nearing completion. As of early 2026, downtown has 502 hotel guest rooms under construction and nearly 59,000 square feet of retail space in active development.
For developers seeking construction financing, San Diego presents a market where demand fundamentals are strong but regulatory complexity, high labor costs, and California-specific environmental requirements demand experienced sponsors and realistic project timelines.
What Are the Current Construction Loan Rates and Terms in San Diego?
Construction loan rates in San Diego currently range from approximately 7.25% to 12.00% depending on the project type, sponsor experience, loan-to-cost ratio, and whether the project involves ground-up development, renovation, or infill construction. Rates have moderated from their 2023-2024 peaks as the Federal Reserve has eased monetary policy, but they remain well above pre-pandemic levels.
Most San Diego construction loans are structured as interest-only facilities with 12 to 36 month terms, typically including one or two six-month extension options. Funds are disbursed through a draw schedule, with the borrower submitting draw requests as construction milestones are completed and verified by a third-party inspector or fund control company.
Loan-to-cost (LTC) ratios typically range from 55% to 85%, with higher leverage available for experienced sponsors who have completed similar projects in the San Diego market. Bank construction loans for well-capitalized developers with strong track records offer rates in the 7.25% to 9.25% range. Private and non-bank lenders fill the gap for projects that need faster execution or borrowers with less conventional profiles, with rates starting at 9.50% and extending to 12.00% or higher for higher-risk projects.
Trinity Mortgage Fund has funded over $30 million in construction hard money loans in San Diego County over the past five years, demonstrating that private capital remains active even for value-add and speculative projects. Coldesina Capital offers construction loans up to $30 million with higher amounts available on a case-by-case basis. CalPrivate Bank structures construction loans as non-revolving lines of credit secured by real estate, with money advanced through fund control.
To estimate your construction loan payments and total project cost, use our commercial mortgage calculator.
What Types of Construction Projects Can Be Financed in San Diego?
San Diego's geographic diversity, from coastal communities to inland valleys, supports a wide range of construction project types, each with distinct financing requirements shaped by the region's regulations, climate, and market dynamics.
Ground-Up Multifamily Development is the most active segment in San Diego construction lending. With a housing deficit that the San Diego Association of Governments (SANDAG) estimates at tens of thousands of units, multifamily projects are being fast-tracked across the county. Total development costs range from $350 to $600 per square foot, with coastal projects running higher. Timelines typically run 18 to 36 months for construction plus 6 to 18 months for entitlements and permitting. Projects in transit priority areas and areas designated for housing density bonuses benefit from streamlined approvals and increased buildable square footage. Explore vertical construction financing for mid-rise and high-rise projects.
Mixed-Use Development combines retail, office, or hospitality with residential units and is particularly popular in San Diego's urban core, Mission Valley, and transit-oriented corridors. These projects are often eligible for California's density bonus law (Government Code Section 65915), which allows developers to build 35% to 50% more units than base zoning permits in exchange for including affordable housing. Construction costs range from $375 to $625 per square foot.
Life Sciences and Biotech Facilities represent a unique San Diego construction niche. The Torrey Pines corridor, Sorrento Valley, and the expanding UTC area house one of the nation's densest life sciences clusters. Lab and research facility construction costs $500 to $800 per square foot due to specialized ventilation, clean room requirements, and reinforced floor loads. Financing these projects requires lenders experienced in special-purpose construction.
Hospitality Construction continues to grow, particularly around the convention center, bayfront areas, and coastal resort communities in Carlsbad, Oceanside, and Encinitas. The Gaylord Pacific Resort's opening has catalyzed additional hospitality development along the Chula Vista Bayfront.
Horizontal and Infrastructure Development covers site grading, utility installation, road construction, and subdivision preparation. This is critical for master-planned communities in the eastern portions of the county and for large-scale projects like the NAVWAR redevelopment that require extensive site preparation before vertical construction begins. Our horizontal construction financing guide covers these specialized loan structures.
How Do CEQA and Coastal Permits Affect Construction Financing in San Diego?
California's regulatory environment adds complexity, cost, and time to construction projects that developers in other states simply do not face. Two requirements in particular have an outsized impact on construction financing in San Diego: the California Environmental Quality Act (CEQA) and coastal development permits.
CEQA Environmental Review applies to virtually all discretionary development projects in California. The process requires an assessment of a project's environmental impacts, including traffic, noise, air quality, biological resources, historical significance, and greenhouse gas emissions. For smaller projects, a Negative Declaration or Mitigated Negative Declaration may suffice, taking 3 to 6 months. Larger projects like the NAVWAR redevelopment require a full Environmental Impact Report (EIR), which can take 12 to 24 months and cost $200,000 to $1 million or more in consultant fees.
CEQA creates a significant financing challenge because lenders cannot underwrite construction loans until environmental clearance is obtained. Developers must fund CEQA compliance through equity, pre-development capital, or a bridge loan during the entitlement phase. Only after CEQA clearance and discretionary approvals are granted can the project move into the construction financing phase.
Coastal Development Permits are required for any development within San Diego's Coastal Zone, which extends inland up to five miles in some areas and covers major development corridors in Oceanside, Carlsbad, Encinitas, Del Mar, La Jolla, Mission Beach, and the Downtown waterfront. The city's Local Coastal Program governs these permits, and projects must demonstrate compliance with coastal access, viewshed protection, habitat preservation, and public resource requirements.
The coastal permit process adds an additional layer of review beyond standard building permits. After the city approves a coastal development permit, there is a 10-day appeal period during which the California Coastal Commission can take jurisdiction. Appealable projects in the Coastal Zone face longer timelines and potential additional conditions. Development near wetlands, bluffs, or sensitive coastal habitats requires specialized biological and geological studies.
For projects in the Coastal Zone, lenders factor in the additional permitting timeline and risk. Expect 6 to 18 months of additional pre-construction time compared to inland projects, and budget $50,000 to $300,000 in additional soft costs for environmental and coastal compliance studies.
San Diego's Housing Density Bonus provides a significant counterweight to these regulatory costs. Under state law and the city's implementation, developers who include affordable housing units can receive density bonuses of 35% to 50% above base zoning, along with concessions on parking, setbacks, and open space requirements. The city's former ADU bonus program, while reformed in June 2025 to cap ADU density at 6 units per single-family lot, still offers meaningful incentives for adding income-restricted units.
Contact Clear House Lending to discuss how to structure construction financing around San Diego's regulatory requirements.
What Are the True Costs of Building in San Diego Per Square Foot?
San Diego consistently ranks among the most expensive construction markets in the United States, trailing only San Francisco and Los Angeles within California. Understanding the full cost picture is essential for structuring a viable financing plan and securing lender approval.
For ground-up multifamily construction, total development costs (including land, hard costs, and soft costs) range from $350 to $600 per square foot across San Diego County, with projects in coastal communities like La Jolla, Del Mar, and Carlsbad regularly exceeding $550 per square foot. Hard construction costs alone average $300 to $500 per square foot for standard mid-rise construction.
Key cost drivers specific to San Diego include:
Labor Market Tightness is the single largest cost pressure. Skilled trade labor rates in San Diego have risen steadily, with average construction wages increasing year over year. Labor comprises approximately 35% to 39% of total construction costs locally, and competition for experienced crews is intense given the volume of active projects across the county. The NAVWAR, SDSU Mission Valley, Chula Vista Bayfront, and East Village projects are all competing for the same labor pool.
Materials and Supply Chain costs have stabilized from their 2022 peaks but remain elevated. Concrete, steel, and lumber prices are 20% to 35% above pre-pandemic levels. Projects starting in early 2026 may see 5% to 8% higher costs than comparable 2025 projects due to continued demand pressure.
Seismic Construction Requirements under the California Building Code add $10 to $25 per square foot to structural costs compared to non-seismic markets. San Diego's proximity to the Rose Canyon and Elsinore fault systems means seismic engineering is a mandatory component of every project.
Soft Costs and Regulatory Compliance including CEQA review, coastal permits, impact fees, school fees, and park dedication fees add $40 to $100 per square foot depending on the project location and type. Permit processing in the City of San Diego has improved, with the Development Services Department digitizing processes and reducing backlogs, but total soft costs remain substantial.
Coastal Zone Premiums apply to projects in Oceanside, Carlsbad, Encinitas, Del Mar, La Jolla, and waterfront areas. Coastal development permit compliance, viewshed restrictions, height limits, and environmental mitigation can add 10% to 20% to total project costs compared to inland locations.
These costs directly impact construction loan sizing. Lenders commission independent cost estimates through third-party quantity surveyors and compare them against your budget. Realistic projections that account for San Diego's unique expense profile are essential for securing favorable terms and avoiding mid-project funding shortfalls.
What San Diego Neighborhoods Offer the Best Development Opportunities?
San Diego's development landscape varies dramatically by submarket, with each area offering different entitlement pathways, cost profiles, and return potential. Understanding these differences is critical for selecting the right project location and structuring appropriate financing.
Downtown East Village is the epicenter of urban infill development. The East Village Quarter and East Village Green projects are driving new investment, and the area benefits from existing infrastructure, transit access, and density allowances that support mid-rise and high-rise construction. Land costs are high ($200 to $400 per square foot) but density bonuses and strong rental demand support viable proformas.
Midway District is positioned for massive transformation as the NAVWAR redevelopment and Midway Rising projects move forward. The Midway Rising developers have until the end of 2026 to negotiate a long-term lease for the sports arena property. Early movers in this submarket can benefit from lower basis before the full development wave lifts surrounding values.
Mission Valley is experiencing a generational redevelopment cycle anchored by SDSU Mission Valley and the Riverwalk project. The valley's central location, trolley access, and freeway connectivity make it attractive for multifamily and mixed-use development. Construction costs benefit from relatively flat topography compared to hillside coastal sites.
Chula Vista Bayfront offers large-scale development parcels rare in the San Diego market. The Gaylord Pacific Resort's completion validates the location, and thousands of planned residential units create a sustained construction pipeline. South Bay construction costs run 10% to 15% below North County coastal markets.
North County Coastal (Oceanside and Carlsbad) markets are seeing increased density along transit corridors, particularly near the Coaster commuter rail stations. Oceanside's downtown revitalization and Carlsbad's village area offer infill opportunities, though coastal development permit requirements add complexity and timeline.
Inland Corridors (Escondido, San Marcos, Poway) offer lower land costs and more straightforward entitlements for suburban multifamily and commercial projects. These areas are benefiting from employers relocating from coastal submarkets and from the region's ongoing population growth.
How Do You Qualify for a Construction Loan in San Diego?
Qualifying for a construction loan in San Diego requires meeting higher standards than permanent financing on completed properties. Lenders evaluate the sponsor, the project, and the local market conditions as an integrated package, with particular attention to California-specific regulatory and cost factors.
Sponsor Experience is the most important qualification factor. San Diego construction lenders prefer developers with a track record of completing similar projects in the Southern California market. The regulatory complexity of CEQA, coastal permits, and local zoning means that out-of-state developers face additional scrutiny. First-time developers can improve their prospects by partnering with an experienced general contractor or local development partner.
Equity Contribution typically ranges from 20% to 45% of total project cost. Residential and smaller multifamily projects generally require 20% to 30% equity, while larger commercial, mixed-use, and speculative projects require 30% to 45%. For projects with pre-sales or pre-leasing commitments, lenders may accept lower equity contributions.
Project Feasibility is evaluated through detailed construction budgets, proformas, and market analysis. San Diego lenders pay close attention to realistic construction timelines that account for CEQA review, coastal permitting, labor availability, and the region's history of cost escalation. A contingency budget of at least 10% to 15% of hard costs is expected given current market conditions.
General Contractor Qualification is scrutinized carefully. Lenders require a California State License Board (CSLB) licensed, bonded, and insured general contractor with a track record on projects of similar scope in the San Diego market. The GC must carry adequate liability insurance and workers' compensation coverage, and lenders may require payment and performance bonds for larger projects.
Environmental and Regulatory Compliance is a threshold requirement. Lenders require Phase I environmental assessments, CEQA clearance (or a clear path to clearance), and verification that the project meets current California Building Code seismic standards. Projects in the Coastal Zone must have coastal development permit approval or be in the advanced stages of obtaining it. Projects near the NAVWAR site, coastal bluffs, or sensitive habitats face additional environmental scrutiny.
Ready to discuss your San Diego construction project? Contact Clear House Lending for a confidential consultation on your development financing options.
Frequently Asked Questions
What is the minimum down payment for a construction loan in San Diego?
Construction loans in San Diego typically require 20% to 45% equity. Residential and ADU projects need 20% to 30%, while commercial and multifamily ground-up projects require 30% to 45%. On a $5 million project, expect to contribute $1 million to $2.25 million in equity. Mezzanine financing or joint venture equity partnerships can supplement your capital, though senior lenders still require 10% to 15% in direct sponsor equity.
How long does CEQA environmental review take for a San Diego construction project?
Timeline depends on the level of review required. A Categorical Exemption takes 1 to 2 months. A Negative Declaration or Mitigated Negative Declaration takes 3 to 6 months. A full Environmental Impact Report (EIR) for larger projects takes 12 to 24 months and can cost $200,000 to $1 million in consultant fees. Most mid-sized San Diego projects fall in the Mitigated Negative Declaration range. Budget this time into your pre-construction schedule before applying for construction financing.
Do I need a coastal development permit for my San Diego project?
Only if your project is within San Diego's designated Coastal Zone, which extends inland up to five miles in some areas and covers communities from Oceanside through La Jolla and the Downtown waterfront. Inland projects in Mission Valley, Kearny Mesa, Escondido, and eastern San Diego County do not require coastal permits. Check the city's Local Coastal Program maps or consult with the Development Services Department to confirm your property's status.
What are the biggest risks to construction loan timelines in San Diego?
The three primary timeline risks are CEQA and permitting delays (which can add 6 to 18 months), labor shortages that slow construction progress (particularly with multiple mega-projects competing for crews), and material cost escalation that can trigger budget overruns requiring additional equity or loan modifications. Building a realistic timeline with contingency buffers and securing your permits before closing on construction financing will mitigate these risks.
Can I get construction financing for a project in the NAVWAR or Midway District redevelopment area?
Yes, but timing matters. Individual parcels within and adjacent to the NAVWAR and Midway Rising redevelopment areas can be financed, though lenders will evaluate how the broader master plan affects your project's access, utilities, and market positioning. Projects that align with the redevelopment vision and have independent entitlements are well-positioned. A bridge loan may be appropriate for acquiring sites ahead of the full development wave.
How do San Diego's density bonus programs affect construction loan underwriting?
Density bonuses allow developers to build 35% to 50% more units than base zoning permits, which directly increases a project's revenue potential and improves debt service coverage ratios. Lenders view density bonus projects favorably because the additional units improve economics without proportional cost increases. However, the affordable housing component required to trigger the bonus must be factored into your proforma at below-market rents, and lenders will underwrite to those restricted rents for the affordable units.
For more information about commercial real estate financing in San Diego, explore our construction and development lending programs. Take the next step by contacting Clear House Lending today for a free consultation tailored to your San Diego construction financing needs.