GlobeSt.com: Why are industrial lease rates increasing at a faster rate in North County than in the rest of San Diego?

Robinson: If you look at the market, it's really just increasing for the newer buildings or those that have been completely repositioned. With industrial vacancy as low as it is, there's a huge difference between older-inventory owners who are not willing to put money into to rehab and owners of newer space with better clear heights and loading. Those new buildings are getting a big premium, making it look like the entire market is getting bigger lease rates. The rates have to keep up with construction costs.

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GlobeSt.com: How far into the future do you see this velocity continuing, and what might slow it?

Robinson: Overbuilding could slow it down a bit. There's quite a bit of industrial slated to be built in next 24 months, but nowhere near as much as was built in the 2006-2007 timeframe. That could slow down the market, but there's some tenant demand regarding users not renewing in older buildings. This will cause either more rehab or re-leasing space at much lower lease rates.

GlobeSt.com: What types of industrial tenants are favoring this submarket over others in San Diego?

Robinson: It's pretty broad; there's not just one specific tenant. There's not a lot of availability in many of the southern submarkets, and availability for the most part is somewhat older because there's no land on which to build. Some newer development is causing people to come to North County; there's really good executive housing, and it's great for people relocating their industrial space, even if they live down south. North County is also able to attract a good workforce. The fact that they can do everything up here is an advantage.

GlobeSt.com: What else should our readers know about this submarket?

Robinson: Even though we are seeing a lot of leasing velocity, as soon as we put walls on a building, we get a lot of activity. As a developer, I still have to be careful: just because it's a new building, that doesn't mean it's going to lease. I have to pay attention to what tenants are looking for: loading, parking ratio, office percentage—you have to build the right space for the market or could sit vacant for a long period of time. A lot is going on on the office side, and this is driving new homes. We have a good runway for the next 24 to 36 months. We are bullish on the market for the next three years.

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SAN DIEGO—Industrial lease rates are increasing at a faster pace in North County than in the rest of San Diego, according to local developer RAF Pacifica Group. The firm is bullish on the market for the next three years, but there are some things you should consider before building or buying, company founder and principal Adam Robinson tells GlobeSt.com.

Fundamentals are extremely strong in North County, RAF reports. The region's explosive job growth, quality housing, and superior quality of life are attracting residents and businesses from all over Southern California, and it's all coming together in North County.

The firm is capitalizing on this momentum and recently broke ground on $110 million worth of spec-creative industrial in this market, including vec•tor, a 171,098-square-foot, two-story industrial/R&D facility in the Carlsbad Oaks North corporate business park; dis•trib•ute, a mix of modern creative office and highly functional industrial suites comprising two buildings totaling 277,410 square feet in Carlsbad; and pro•duc•tion, a 219,477-square-foot, four-building creative-industrial campus that will be the first ground-up spec development in San Marcos.

We spoke with Robinson about the appeal of industrial space in this market and whether this appeal has legs.

GlobeSt.com: Why are industrial lease rates increasing at a faster rate in North County than in the rest of San Diego?

Robinson: If you look at the market, it's really just increasing for the newer buildings or those that have been completely repositioned. With industrial vacancy as low as it is, there's a huge difference between older-inventory owners who are not willing to put money into to rehab and owners of newer space with better clear heights and loading. Those new buildings are getting a big premium, making it look like the entire market is getting bigger lease rates. The rates have to keep up with construction costs.