Part 2 of 2
SAN DIEGO—As GlobeSt.com prepared to launch a San Diego city page, we thought it best to chat with local experts on a few challenges and bright spots in the local CRE market. And according to Colliers International SVP Tim Cowden, the local market has a few issues.
The market has significant barriers to entry for new projects with lack of buildable land to develop and high development and construction costs, he says. In addition, the “very difficult regulatory environment in California, everything from environmental rules, to cap and trade to high costs of workers comp insurance to 'Green Mail' by local unions makes it difficult, time-consuming and costly to build or renovate here.”
Another issue Cowden tells GlobeSt.com is the cost of living and cost of housing in Southern California versus alternative sites such as Texas and Nevada, which makes it difficult for many firms to choose to locate here or to stay here.
Still he says, despite those challenges, business is percolating along pretty well. “Office and residential demand is outpacing new supply resulting in declining vacancy rates and increasing rents,” he says.
In addition, he notes, “construction of multifamily residential product will remain strong, construction of office and industrial product will remain moderate for the foreseeable future.”
When asked about where there is money to be made in the CRE market here, Cowden points out that some well-located flex or light industrial buildings are being purchased and renovated into 'creative' office spaces to meet demand for office spaces in popular submarkets such as Mission Valley, Kearny Mesa and Governor Park. “These projects can be delivered to market quicker and more cheaply than building from the ground up,” he says.
He also tells GlobeSt.com that apartments can't be built fast enough to meet demand in the San Diego market. “Residential rental vacancies are now 2%, with rising rental rates.”
In another previous analysis of the CRE market here, a Kidder Mathew' source pointed out that San Diego's future lies in spec development and redevelopment. Check out all the details on that story here.
Stay tuned for more analysis out of San Diego from many other sources we exclusively spoke with about the market and be on the lookout for the new city page on GlobeSt.com, which launches February 2.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
