SAN DIEGO—CBRE remains quite positive in analyzing the local industrial market, saying a low vacancy rate, strong positive net absorption, rental rate growth in the second quarter represented a “wave of positivity.”
A milestone was reached the quarter, the firm notes, as total vacancy dropped to 5.1%, which is below the pre-recession trough of 5.4% in 2006. Every region in San Diego is now at or below 6% total vacancy.
This quarter marked the 12th consecutive quarter of positive net absorption bringing year-to-date absorption to over two million square feet. North County accounted for more than half of that year-to-date absorption with 1,102,298 positive square feet.
“North County is on track to see sub 3% vacancy in most submarkets by the end of 2015 and we are currently tracking enough demand to potentially absorb 320,000 square feet of spec development in Oceanside and Carlsbad,” says Adam Molnar, first vice president of CBRE in San Diego.
According to CBRE Econometric Advisors (CBRE EA), San Diego's construction industry grew by 5.4% in the last 12 months. Construction activity has increased quarter-over-quarter and will continue to gather more strength as new building construction increases throughout the year in San Diego. Construction deliveries will increase and a number of projects are expected to break ground. The newest speculative industrial construction activity in San Diego is First Park @ Ocean Ranch, located in Oceanside, totaling nearly 240,000 square feet consisting of two 65,000-square-foot light industrial buildings and one 108,000-square-foot warehouse.
“In central San Diego, the current demand for 20,000–40,000 square feet of warehouse space far exceeds the available inventory, and vacant spaces are receiving multiples offers from tenants,” says Bill Dolan, vice president in San Diego. “For high quality, well-located spaces lease rates and sale prices are at all-time highs and capitalization rates are at all-time lows.”
The overall industrial asking lease rate has been notable over the past three years, increasing more than 35% since Q3 2011. This can be heavily attributed to new and repositioned lab product, but has also been driven by the recent surge in low-finish rates.
The life science market, in particular, has been robust with an increase in new tenant demand and tenant expansion over the last year. The overall positivity in the market, as well as increased life science demand, has translated into numerous property conversions into higher uses.
CBRE Group, Inc., a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services and investment firm (in terms of 2014 revenue). The company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 offices (excluding affiliates) worldwide.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
David Phillips
David Phillips is a Chicago-based freelance writer and consultant with more than 20 years experience in business and community news. He also has extensive reporting experience in the food manufacturing industry for national trade publications.
