Commercial Real Estate News / General CRE / Los Angeles, CA vs. San Diego, CA: Which Is Better for Businesses?

Los Angeles, CA vs. San Diego, CA: Which Is Better for Businesses?

Published: 05-18-22 Category: General CRE

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

In the world of real estate, the battle between Los Angeles and San Diego almost feels like a rivalry.

Both cities are coastal and have similar climates. These two cities are often pitched as competitors for new businesses and young professional talent.

Which one is better for your business? Let’s explore the unique pros and cons of each city to help you make an informed decision about moving your business there.

Population Comparisons

Los Angeles is larger than San Diego: 3,985,520 people reside in Los Angeles, whereas 1,429,650 people live in San Diego.

Many people view the city of Los Angeles as a more urban, fast-paced place, while San Diego is considered a quieter, more laid-back city.

Businesses that are looking to relocate to Los Angeles may find themselves in an urban environment with a high amount of foot traffic.

Many companies want to be in close proximity to other offices, tech startups, and incubators.

Average Demographics

In Los Angeles, the population demographics in 2022 were:

Median age is 35.2 years old.
50.5% of the population is female.
17.6% of the population is between the ages of 25 to 34.
28.4% of the population identifies as White.
8.6% of the population identifies as Black.
48.7% of the population identifies as Hispanic.

In San Diego, the population demographics in 2022 were:

Median age is 34.3 years old.
49.7% of the population is female.
19% of the population is between the ages of 25 to 34.
43.1% of the population identifies as White.
6.1% of the population identifies as Black.
30% of the population identifies as Hispanic.

The population demographics of both cities are similar, with one major difference: Los Angeles has a larger Hispanic population.

If your business is looking to cater to the Hispanic community, then Los Angeles would be a better choice for relocation.

Average Household Income

The average household income in Los Angeles is $96,416.

The average household income in San Diego is $108,864.

Commercial Real Estate Comparisons

There are many things to consider when setting up a commercial real estate office for your company.

If you’re looking for a new office location, you may want to consider how much your overhead costs will be for each city.

It is considered expensive to operate a business in either.

Average Commercial Rents

The average cost of commercial rent in Los Angeles is:

Class A Office Space: $49.32 per square foot.
Class B Office Space: $36.30 per square foot.
Class C Office Space: $27.64 per square foot.

The average cost of commercial rent in San Diego is:

Class A Office Space: $48.99 per square foot.
Class B Office Space: $32.57 per square foot.
Class C Office Space: $30.62 per square foot.

It is generally more expensive to lease commercial real estate in Los Angeles than it is to lease commercial real estate in San Diego.

However, both cities have the most expensive commercial real estate prices in the country.

Commercial Vacancy Rates

The commercial vacancy rate in Los Angeles is 12.35%.

The commercial vacancy rate in San Diego is 13.02%.

CRE Market Outlook for 2022

The population and demographic trends of each city seem to encourage businesses to relocate there.

If your company is looking for an urban environment with a high level of foot traffic, then Los Angeles would be a good choice for relocation.

While San Diego can be a quieter area, it’s still accessible to other business offices and incubators.

Commercial Activity Comparisons

Many businesses are looking for commercial real estate. In Los Angeles and San Diego, commercial space is a hot commodity.

If you are in the process of relocating your company, then you should be aware of current and expected commercial real estate trends in each city.

Retail: In-Person Shopping Versus Online Shopping

Many people view shopping as an enjoyable way to spend time and money.

If you’re in the business of retail, then you may want to know what percentage of sales comes from online shopping versus in-person shopping.

The in-person retail and tourism sectors are slightly better in Los Angeles.

If your business is looking at relocation to either city, you may want to consider how that impacts your company’s bottom line.

Online shopping rates in these cities mirror other large American cities.

Industrial: Warehouse Storage Activity

If you’re in the industrial sector, which city is better for your business? Do you want to be near other companies that are similar to yours?

Warehouse storage in large urban cities is a commodity. Warehouses in Los Angeles and San Diego are in high demand because of the low supply.

If you’re looking to buy or sell a warehouse, you’re likely to be within close proximity of other warehouses.

Many businesses setting up warehouses in either city may want to be near other similar companies.

Office: Office Space Activity

Office spaces in the San Diego and Los Angeles area are in high demand, although the COVID-19 pandemic has hindered in-person office activity.

While commercial office space is booming in both cities, Los Angeles has a much higher average rent price.

If you’re looking to expand your office space, then you may find that it is hard to find the perfect location in either city.

You may have to be close to your competition or move to a larger facility rather than be able to expand into adjacent vacancies.

Multifamily: Vacancy Rates & Leasing Activity

In each city, there are many different types of rental properties.

If you’re looking for an apartment complex or condo to rent or buy, then you may be able to find a suitable place in either city.

If you’re looking for commercial real estate to invest in, the long-term growth potential for multifamily structures is high.

Deciding Which Location Is Right for Your Business

Before you can decide which city is right for your company, you should consider different business-related factors such as access to employees, quality of life, and other resources.

Some businesses thrive in a more urban environment where they can be near other companies that are similar to them.

If your company is looking for a large pool of employees, then it may want to look at cities like Los Angeles or San Diego.

If your company is in the retail sector and relies on customers to walk past your storefronts, then you may want to look at Los Angeles as a potential location for relocation.

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