Why Larger Deals Are On the Rise in North County

Williams: “I don’t see this slowing down in the next several quarters; there are more tenants and buyers for industrial than there are spaces, and some tenants can’t find the right building.”

SAN DIEGO—North County is seeing an increase in multi-million-dollar industrial transactions, partly because of the great number of exchange buyers in the market, Lee & Associates broker Rusty Williams tells GlobeSt.com. The firm’s North San Diego office recently closed three $7-million industrial deals, which is unusual for this submarket. We spoke exclusively with Williams about this trend and what it says about the North County industrial market. GlobeSt.com: Why has there been an increase in multi-million-dollar deals in North County recently? Williams: There’s probably a few reasons. The main reason is that there are a lot of 1031-exchange buyers in the market right now looking for opportunities. North County is attractive because it’s less expensive on a per-square-foot basis than other parts of the county. It hasn’t seen rental rates increase as much as other areas, although it will see this over the next several quarters. A lot of people are buying as investors, and the cap rate isn’t really good, but there should be a good upside when rental rates increase. The other thing is that on the owner/user side, it’s a really good time to be financing acquisitions , with the low-interest-rate environment. It’s cheaper to own than to lease in most cases, and we’re getting our share of them because we’re doing transactions off market. We’re in constant contact with owners of buildings in North County, who typically will call us when they’re ready to sell and we will have a buyer lined up to buy. GlobeSt.com: What about this submarket intrigues buyers? Williams: The diversity of tenants that we have is intriguing. We have a lot of different types of businesses in the North County market, and a lot of the buildings can be used as manufacturing, flex/R&D, and in some cases distribution-type buildings, so our buildings provide flexibility for different types of tenants, and we have those tenants in North County. GlobeSt.com: Where do you see this interest in the market heading? Williams: I think we’ll continue to see vacancy rates come down. They are already relatively low, but I think we’ll see them drop further, and in most areas of North County, we will see rental rates increase. I don’t see this slowing down in the next several quarters; there are m ore tenants and buyers for industrial than there are spaces , and some tenants can’t find the right building. There is some new construction coming in Carlsbad, and this could have an effect on the market, but some of the space being built is already being absorbed.