Pourcho: Primarily because they have a different perspective. The institutional buyers are looking for ways to provide their investors (pension funds, endowments, funds, etc.) a 13% to 19% internal rate of return within a three-to-five- year window. So, they are forced to look at an asset where the basis is quite low and there is significant upside for them to exit in a few years to provide the return and stay in business. On the other hand, the private investor is look at yield and stable cash flow, period. They just want mail-box money and something that provides a decent long-term return. In other words, private buyers are longer-term holders rather than buyers with a plan to squeeze value or appreciation in a short amount of time. Therefore, we offer this solution on a silver platter.

It's also important to note that private buyers are not just one person. They are family offices and sometimes partnerships of high-net-worth individuals or families who have sold a business or have obtained a large amount of wealth looking to place it into different asset classes. Historically, stabilized real estate assets provide an excellent yield long term and phenomenal cash-on-cash returns given today's low interest rates.

GlobeSt.com: What interests private buyers in the San Diego industrial market?

Pourcho: Stability. Private investors are looking for a safe home to put their capital, and industrial provides that very well given the healthy industrial fundamentals in San Diego. San Diego is currently experiencing industrial fundamentals never seen before. We continue to see record net absorption, record demand and, for the first time in San Diego's history, every region is at or below 5% vacancy. Furthermore, industrial product is much less headache than office since it doesn't' require as much capex, TIs, management, etc. This is why industrial cap rates are lower than office (higher demand plus less supply equals higher price).

GlobeSt.com: How are private buyers' interests in industrial shifting?

Pourcho: Buyers are now looking at secondary San Diego markets similar to core industrial markets, given the healthy fundamentals. We used to only see low cap rates and higher per-square-foot in key core submarkets like Kearny Mesa and Miramar, but we have recently sold some record deals in secondary markets like Sports Arena (4.7% cap rate) and Chula Vista ($142 per square foot).

GlobeSt.com: What else should our readers know about private industrial buyers in the San Diego market?

Pourcho: San Diego cap rates are higher than Orange County and Los Angeles by approximately 50 to 75 basis points and attracting tremendous demand outside San Diego. When looking at San Diego from a macro standpoint, it's easy to see why private investors are paying these prices in San Diego when looking at their alternatives. This has allowed us to push pricing and maximize value for our clients. Again, it's all about perspective.

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SAN DIEGO—Private industrial buyers are longer-term holders than buyers with a plan to squeeze value or appreciation in a short amount of time, CBRE's first VP, investment properties, Matt Pourcho tells GlobeSt.com. This is part of the reason their properties are outperforming those of institutional buyers.

Pourcho, along with the firm's Gary Stache, Anthony DeLorenzo and Doug Mack, recently represented the seller, Focus Real Estate LP, in the sale of Southrail Business Park in Chula Vista, CA, to a 1031-exchange buyer, for $18 million. According to Pourcho, “This was a great opportunity to own a business park that has maintained a better-than-average occupancy rate of 94% over the past five years due to the tight submarket fundamentals, quality, access to the 5 freeway, trolley line and its varying unit sizes. The buyer was a private 1031 buyer from Los Angeles, and we continue to see private buyers substantially outperform institutional buyers.”

We spoke with Pourcho about this phenomenon and how private buyers' interests in the industrial market are shifting.

GlobeSt.com: Why are private buyers outperforming institutional buyers in San Diego's industrial sector?

Pourcho: Primarily because they have a different perspective. The institutional buyers are looking for ways to provide their investors (pension funds, endowments, funds, etc.) a 13% to 19% internal rate of return within a three-to-five- year window. So, they are forced to look at an asset where the basis is quite low and there is significant upside for them to exit in a few years to provide the return and stay in business. On the other hand, the private investor is look at yield and stable cash flow, period. They just want mail-box money and something that provides a decent long-term return. In other words, private buyers are longer-term holders rather than buyers with a plan to squeeze value or appreciation in a short amount of time. Therefore, we offer this solution on a silver platter.

It's also important to note that private buyers are not just one person. They are family offices and sometimes partnerships of high-net-worth individuals or families who have sold a business or have obtained a large amount of wealth looking to place it into different asset classes. Historically, stabilized real estate assets provide an excellent yield long term and phenomenal cash-on-cash returns given today's low interest rates.

GlobeSt.com: What interests private buyers in the San Diego industrial market?

Pourcho: Stability. Private investors are looking for a safe home to put their capital, and industrial provides that very well given the healthy industrial fundamentals in San Diego. San Diego is currently experiencing industrial fundamentals never seen before. We continue to see record net absorption, record demand and, for the first time in San Diego's history, every region is at or below 5% vacancy. Furthermore, industrial product is much less headache than office since it doesn't' require as much capex, TIs, management, etc. This is why industrial cap rates are lower than office (higher demand plus less supply equals higher price).

GlobeSt.com: How are private buyers' interests in industrial shifting?

Pourcho: Buyers are now looking at secondary San Diego markets similar to core industrial markets, given the healthy fundamentals. We used to only see low cap rates and higher per-square-foot in key core submarkets like Kearny Mesa and Miramar, but we have recently sold some record deals in secondary markets like Sports Arena (4.7% cap rate) and Chula Vista ($142 per square foot).

GlobeSt.com: What else should our readers know about private industrial buyers in the San Diego market?

Pourcho: San Diego cap rates are higher than Orange County and Los Angeles by approximately 50 to 75 basis points and attracting tremendous demand outside San Diego. When looking at San Diego from a macro standpoint, it's easy to see why private investors are paying these prices in San Diego when looking at their alternatives. This has allowed us to push pricing and maximize value for our clients. Again, it's all about perspective.