San Diego Industrial Loans: Warehouse & Manufacturing Financing [2026 Guide]

San Diego County sits at one of the most strategically significant crossroads in the American industrial landscape. Anchored by the busiest commercial land port in California at Otay Mesa, a world-class biotech corridor in Sorrento Valley, the largest concentration of military assets on the planet, and a limited supply of developable industrial land that keeps long-term fundamentals tight, the San Diego industrial market offers investors and owner-occupants a compelling, if nuanced, financing opportunity in 2026. Whether you are acquiring a cross-border logistics warehouse in Otay Mesa, refinancing a defense contractor manufacturing facility in Miramar, or purchasing flex space for a biotech supplier in Carlsbad, understanding your San Diego industrial loan options is the critical first step.

Why Is San Diego a Unique Industrial Market Compared to Other California Metros?

San Diego's industrial sector operates differently from Los Angeles or the Inland Empire. Instead of massive big-box distribution corridors, San Diego's 200+ million square foot industrial base is shaped by three distinctive demand drivers that set it apart from nearly every other market in the country.

First, cross-border trade with Tijuana and the broader Baja California manufacturing region generates billions of dollars in goods movement annually. The Otay Mesa Land Port of Entry processes approximately $13.5 billion in exports and $37.4 billion in imports each year, making it California's busiest commercial border crossing. Tijuana's 960+ manufacturing facilities rely on San Diego-side warehouses for customs brokerage, freight staging, and last-mile distribution into the U.S. market.

Second, San Diego's defense and military sector contributes roughly 20% of the region's gross domestic product. More than 1,700 defense contractors operate in San Diego County, supported by $19 billion in annual defense contracting. Companies like General Atomics, Northrop Grumman, BAE Systems, and a growing roster of defense-tech startups like Firestorm Labs (which secured a $100 million DoD drone contract and leased 60,000 square feet in Miramar) drive steady demand for specialized manufacturing and assembly space.

Third, the life sciences and biotech sector has made San Diego one of the top three biotech clusters in the nation. Over 3.2 million square feet of new life sciences buildings became available across the county by late 2025, with Sorrento Valley, Sorrento Mesa, and the Torrey Pines corridor serving as the epicenter. Much of this demand spills into industrial flex properties as biotech companies need warehouse space for equipment storage, logistics, and light manufacturing.

What Are the Key San Diego Industrial Submarkets Borrowers Should Know?

San Diego County's industrial inventory is distributed across several distinct submarkets, each with its own tenant profile, vacancy dynamics, and lender considerations. Understanding these differences is essential for structuring the right loan.

Otay Mesa / Border Region: This is San Diego's industrial epicenter for logistics and cross-border trade. Home to the largest concentration of warehouse and distribution space in the county, Otay Mesa saw significant leasing activity in 2025, including a 119,044 square foot transaction at 9350 Airway Road and 73% lease-up of the 242,969 square foot Sanyo Logistics Center by JD Group and Blue Streak Electronics. The submarket benefits from direct proximity to the Otay Mesa Land Port of Entry and the planned Otay Mesa East Port of Entry, which is expected to reduce commercial border crossing wait times by up to 50%.

Kearny Mesa / Miramar: This central San Diego corridor serves defense contractors, light manufacturers, and flex-space users. Proximity to MCAS Miramar, major freeway interchanges (I-15 and SR-163), and the Miramar tech corridor makes it a preferred location for defense-related industrial tenants. Firestorm Labs' recent 60,000 square foot headquarters relocation to Miramar underscores the submarket's appeal for defense-tech companies planning rapid expansion.

Sorrento Valley / Sorrento Mesa: While primarily known as a life sciences hub, this area generates significant demand for industrial flex space. Biotech and pharma companies require warehouse, storage, and light manufacturing space adjacent to their R&D campuses. Over 3.2 million square feet of lab and flex space is available in Sorrento, including approximately 30 subleases totaling 650,000 square feet, creating both opportunity and competition for industrial investors.

North County (Carlsbad, Vista, Oceanside): These submarkets offer the most affordable industrial rents in San Diego County, with Vista averaging $1.36 per square foot and Oceanside at $1.27 per square foot monthly. However, North County posted negative net absorption in early 2025, with Carlsbad (-70,849 SF), Oceanside (-108,023 SF), and Escondido (-98,345 SF) all showing occupancy declines. A 500,000 square foot warehouse development near Oceanside's airport recently won planning approval, adding to future inventory. Lenders may apply more conservative underwriting to North County assets given the softening fundamentals.

What Types of Industrial Properties Can You Finance in San Diego?

San Diego's industrial market encompasses a diverse range of property types, and each has distinct lending considerations. Here are the most common assets borrowers finance across the county:

• Cross-border logistics warehouses: Concentrated in Otay Mesa, these facilities serve as staging and distribution points for goods moving between Tijuana's manufacturing sector and the U.S. market. Lenders favor properties with long-term tenants tied to stable trade flows.
• Defense and aerospace manufacturing: Specialized facilities in Miramar, Kearny Mesa, and Poway house everything from drone assembly to electronics manufacturing. Government contract backing can strengthen loan applications.
• Biotech flex and R&D support space: Hybrid industrial properties in Sorrento Valley and Carlsbad combine warehouse, light manufacturing, and office components to serve the life sciences supply chain.
• General warehouse and distribution: Standard industrial space serving regional distribution, e-commerce fulfillment, and third-party logistics providers across all submarkets.
• Small-bay multi-tenant industrial: Properties under 50,000 square feet with multiple bays serve a broad base of small businesses and are among the tightest product types in the county.
• Cold storage and food logistics: San Diego's position as an entry point for Mexican produce and its large hospitality industry support demand for temperature-controlled warehouse space.

What Are the Current Industrial Loan Rates in San Diego?

As of early 2026, San Diego industrial loan rates reflect both the broader interest rate environment and lender caution around the market's rising vacancy. The Federal Reserve's rate cuts in late 2025 brought the fed funds rate to 3.50% to 3.75%, and commercial mortgage rates have adjusted accordingly, though not as aggressively as some borrowers had hoped.

For stabilized, well-leased industrial properties in strong San Diego submarkets like Otay Mesa or Kearny Mesa, conventional commercial mortgage rates generally start in the mid-to-high 5% range. Properties with credit-rated tenants on long-term NNN leases can achieve rates in the low 5% range. SBA 504 loans remain a compelling option for owner-occupied warehouses and manufacturing facilities, offering below-market fixed rates on the CDC second mortgage with as little as 10% down.

Bridge loans for value-add industrial acquisitions, including vacant buildings, below-market-occupancy properties, or facilities requiring significant renovation, typically range from 7.5% to 10.5% depending on leverage, property condition, and exit strategy. The current market environment, with landlords offering up to five months of free rent to attract tenants, creates opportunities for bridge borrowers who can execute a lease-up strategy.

The most important rate determinants for San Diego industrial loans include: property location (Otay Mesa and Kearny Mesa command tighter spreads than softening North County submarkets), occupancy and tenant credit quality, debt service coverage ratio (DSCR), loan-to-value ratio, borrower experience, and environmental condition. San Diego's limited industrial land supply provides a long-term floor for values that lenders factor into their underwriting.

What Loan Programs Are Available for San Diego Industrial Properties?

Borrowers purchasing or refinancing industrial properties in San Diego County have access to multiple loan programs, each designed for different investment scenarios and property profiles.

Conventional Commercial Mortgages: The standard option for stabilized, income-producing industrial assets. Expect terms of 5 to 10 years with 25-year amortization, loan-to-value ratios up to 75%, and rates starting in the mid 5% range for strong San Diego properties. Lenders evaluate the DSCR as a primary underwriting metric to ensure the property's net operating income comfortably covers debt service.

SBA 504 Loans: An excellent fit for owner-occupants purchasing or expanding a warehouse, manufacturing facility, or flex building. The SBA 504 program provides up to 90% financing with a below-market fixed rate on the CDC second mortgage and terms up to 25 years. This program is especially popular with defense subcontractors, biotech suppliers, and cross-border logistics companies acquiring their first San Diego facility.

Bridge Loans: With San Diego's industrial vacancy climbing to 9.7% as of Q3 2025 and landlords offering aggressive concessions, there are value-add opportunities for investors who can acquire below-market-occupancy properties and execute a lease-up plan. A bridge loan provides 12 to 36 months of capital while you stabilize the asset, with the ability to refinance into permanent financing once occupancy and income targets are met.

CMBS / Conduit Loans: For single-asset deals above $5 million or industrial portfolios, CMBS loans offer competitive fixed rates with non-recourse terms up to 10 years. These are attractive for investors who want to limit personal liability while locking in longer-term financing on stabilized San Diego industrial assets.

Construction Loans: Ground-up industrial development in San Diego requires construction financing, typically at 60% to 70% of project cost with rates in the 7.5% to 10.5% range. Given San Diego's constrained land supply, new development projects in approved industrial zones often achieve strong pre-leasing, which improves construction loan terms.

How Does Cross-Border Trade With Tijuana Impact Industrial Lending in San Diego?

The San Diego-Tijuana corridor represents one of the most economically significant border regions in the Western Hemisphere, and its impact on industrial lending extends well beyond Otay Mesa.

Tijuana is home to 960+ manufacturing facilities producing everything from medical devices and electronics to aerospace components and automotive parts. These factories rely on San Diego-side logistics infrastructure for inbound raw materials, outbound finished goods, customs brokerage, and freight forwarding. This creates a deep and resilient tenant base for industrial properties along the border corridor.

The planned Otay Mesa East Port of Entry represents a transformative infrastructure investment. When completed, it will significantly expand commercial crossing capacity and reduce the unpredictable wait times that currently bottleneck freight movement. For industrial investors, this translates to enhanced property values and stronger tenant demand in the Otay Mesa submarket.

From a lending perspective, cross-border trade provides structural demand that supports underwriting. Unlike purely cyclical demand drivers, the San Diego-Tijuana manufacturing relationship is anchored by decades of supply chain integration, the USMCA trade agreement, and geographic proximity that cannot be replicated. Lenders who understand this dynamic are more likely to offer competitive terms on industrial properties tied to cross-border logistics.

However, tariff uncertainty has introduced caution. In early 2025, several tenant requirements were paused (not canceled) when new tariff announcements were made, and many new leases shifted from the historical 10-year norm to shorter 1-to-3-year terms. This shift in lease duration is something lenders evaluate carefully, as shorter lease terms increase rollover risk in the underwriting model.

What Is the DSCR Requirement for San Diego Industrial Loans?

The debt service coverage ratio is the single most important metric lenders evaluate when underwriting a San Diego industrial loan. DSCR measures a property's net operating income relative to its annual debt service (mortgage payments). A DSCR of 1.25x means the property generates 25% more income than what is required to cover the mortgage.

For San Diego industrial properties, most conventional lenders require a minimum DSCR of 1.20x to 1.25x. SBA loans may accept slightly lower coverage ratios given their government guarantee, while CMBS lenders typically target 1.25x to 1.30x. Bridge lenders focus more on the projected stabilized DSCR rather than current income, since many bridge deals involve properties in lease-up.

San Diego's current rent environment is important context for DSCR calculations. Average industrial asking rents reached $1.48 per square foot NNN monthly as of Q3 2025, though this figure masks significant submarket variation. Otay Mesa and Kearny Mesa command higher rents, while North County submarkets like Vista ($1.36/SF) and Oceanside ($1.27/SF) offer more affordable but softening rates.

You can run your own DSCR scenarios using our DSCR calculator or estimate monthly payments with our commercial mortgage calculator.

How Do San Diego's Defense and Biotech Sectors Strengthen Industrial Loan Underwriting?

San Diego's two signature industries, defense and life sciences, provide industrial lenders with a level of tenant stability and demand durability that few markets can match.

On the defense side, $19 billion in annual defense contracting flows through San Diego County, supporting more than 1,700 businesses. The presence of major installations including Naval Base San Diego, Marine Corps Air Station Miramar, Camp Pendleton, and Naval Air Station North Island creates a permanent anchor for defense-related manufacturing and logistics. When a tenant holds a multi-year government contract, lenders view that income stream as highly reliable, often comparable to investment-grade credit.

The biotech and life sciences sector adds another dimension. San Diego is the third-largest biotech cluster in the United States, and the industry's growth has created substantial demand for industrial flex space, warehouse storage, and light manufacturing facilities that support R&D operations. While the wet-lab market experienced oversupply in 2025, the industrial support functions (equipment storage, materials handling, clean manufacturing) remain in steady demand.

For borrowers, this means that industrial properties leased to defense contractors or biotech tenants often qualify for more favorable loan terms, including lower rates, higher LTVs, and longer interest-only periods. Lenders recognize that these tenant sectors are supported by long-term structural spending (federal defense budgets and healthcare R&D investment) rather than short-term economic cycles.

What Should You Know About San Diego Industrial Rents, Vacancy, and Market Trends?

San Diego's industrial market entered a period of adjustment in 2024-2025 after years of historically tight conditions. Understanding the current landscape is essential for both investment decisions and loan qualification.

As of Q3 2025, the countywide direct industrial vacancy rate stood at 9.7%, up 160 basis points year-over-year. This represents a significant shift from the sub-4% vacancy rates seen before 2023, driven by a wave of new construction and a moderation in tenant demand. Net absorption remained negative for nine consecutive quarters through mid-2025, with over 10 million square feet of available space giving tenants increasing leverage.

Average asking rents reached $1.48 per square foot NNN per month in Q3 2025, but rent growth slowed to just 2.1% year-over-year, well below the long-term average of 3.9%. Landlords have responded with aggressive concessions, including up to five months of free rent on new leases, to maintain occupancy.

However, there are bright spots. Gross leasing volume hit 2.3 million square feet in Q1 2025, a 13.1% increase from the prior quarter and the highest level since 2022. Manufacturing tenants accounted for 22% of recently leased space, reflecting growing demand from defense-related and reshoring-driven occupiers. And with more than 1.5 million square feet of new product expected to deliver by year-end 2025, the supply pipeline is beginning to thin, which should help stabilize vacancy as demand catches up.

For lenders, the rising vacancy and slowing rent growth mean more conservative underwriting on San Diego industrial loans compared to two years ago. Borrowers should expect lenders to stress-test rent assumptions and may need to demonstrate a clear lease-up strategy for properties with near-term vacancy exposure.

What Is the Step-by-Step Process for Getting a San Diego Industrial Loan?

Securing financing for a San Diego industrial property follows a structured process that varies by loan type but generally follows these steps:

Timeline expectations: conventional commercial mortgages typically close in 45 to 60 days. SBA 504 loans require 60 to 90 days due to the dual-approval structure involving both the first-mortgage lender and the Certified Development Company. Bridge loans can close in as few as 14 to 21 days when speed is essential for a competitive acquisition. Construction loans may take 60 to 120 days depending on entitlements, permitting, and project complexity.

Working with a lender experienced in San Diego's industrial market, including cross-border trade dynamics, defense tenant underwriting, and California environmental requirements, can streamline the process and improve your terms significantly.

Frequently Asked Questions About San Diego Industrial Loans

What is the minimum down payment for a San Diego industrial loan?

Conventional commercial mortgages require 25% to 30% down, resulting in a 70% to 75% loan-to-value ratio. SBA 504 loans allow as little as 10% down for owner-occupied industrial properties, making them popular with small manufacturers, logistics companies, and defense subcontractors purchasing their first facility. Bridge loans typically require 20% to 35% equity depending on property condition and business plan risk.

Can I finance a vacant industrial building in San Diego?

Yes, but your options differ from a fully leased property. Vacant or below-market-occupancy industrial buildings are best suited for bridge loan programs that underwrite to the property's stabilized value rather than current income. With San Diego's vacancy at 9.7% and landlords offering significant concessions, there are value-add opportunities for borrowers who can execute a lease-up strategy and then refinance into permanent financing.

How do environmental concerns affect industrial lending in San Diego?

Phase I Environmental Site Assessments are required for virtually all commercial loans. San Diego-specific concerns include former military or defense manufacturing contamination (especially near Miramar and older Kearny Mesa industrial sites), underground storage tanks, and proximity to the Tijuana River Valley. Properties in Otay Mesa may require additional assessment if built on previously undeveloped land near the border. If a Phase I identifies potential contamination, a Phase II assessment with soil and groundwater testing will be required before the lender proceeds.

How does California's regulatory environment affect industrial loan terms?

California's stricter building codes, seismic requirements, environmental regulations (including CEQA compliance for new development), and higher property taxes relative to states like Arizona or Texas can increase project costs and affect cash flow projections. Lenders experienced with California industrial properties build these factors into their underwriting. The tradeoff is that San Diego's limited developable industrial land and regulatory barriers to new supply create a natural floor for property values that supports long-term loan performance.

What industrial property sizes are easiest to finance in San Diego?

Small to mid-size industrial properties between 10,000 and 75,000 square feet are generally the most financeable in the current market. These properties appeal to a broad tenant base, maintain lower vacancy than large-format space, and are in high demand from defense subcontractors, biotech suppliers, and small logistics firms. Larger speculative warehouse buildings may face tighter underwriting given the countywide vacancy trends.

Are there special considerations for financing industrial properties near the U.S.-Mexico border?

Properties in Otay Mesa and the border region benefit from strong cross-border logistics demand, but lenders may evaluate additional factors including tariff policy risk, lease term duration (which has shifted shorter recently), tenant concentration in trade-dependent sectors, and the timeline for the Otay Mesa East Port of Entry, which will expand capacity and support long-term value. Demonstrating diversified tenant demand beyond a single trade corridor strengthens your loan application.

Ready to Finance Your San Diego Industrial Property?

San Diego's industrial market offers a distinctive combination of cross-border logistics, defense manufacturing, biotech innovation, and constrained land supply that creates durable demand for industrial space even as the market works through a period of elevated vacancy. Whether you are acquiring a logistics warehouse near the Otay Mesa border crossing, expanding a defense manufacturing operation in Miramar, purchasing flex space in Carlsbad, or refinancing an industrial portfolio across the county, securing the right financing structure is essential to maximizing your returns.

The current market environment, with landlords offering concessions and motivated sellers adjusting pricing, may present a window for well-capitalized investors to acquire quality industrial assets at favorable basis points before the supply pipeline thins and vacancy tightens again. Contact our team to discuss your San Diego industrial loan options and receive a customized rate quote for your specific property and investment goals.