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What Caused SD's Q3 Industrial Absorption Surge?

The third quarter benefitted from larger occupiers finalizing deals on some big blocks of space in Otay Mesa, Rancho Bernardo and Sorrento Mesa as space needs for industrial occupiers become increasingly more specific, CBRE's Sean Williams tells GlobeSt.com.

By Carrie Rossenfeld | Updated on November 08, 2017

Sean Williams Williams: “The future product is state-of-the-art, which will satisfy occupiers’ flight-to-function trend—now occupiers will have brand-new product that will meet all their building requirements.”

SAN DIEGO—San Diego had a strong third quarter in industrial absorption that benefitted from larger occupiers finalizing deals on some big blocks of space in Otay Mesa, Rancho Bernardo and Sorrento Mesa as space needs for industrial occupiers become increasingly more specific, CBRE VP Sean Williams tells GlobeSt.com. According to CBRE research, the San Diego industrial market saw a surge in absorption largely due to pent-up demand; after a relatively slow start to the year, the industrial market surged in Q3.

The report states that this demand has driven market fundamentals to record levels. With the market softening at the end of 2016 and beginning of 2017, net absorption numbers surged as a direct result of such high demand for quality space. Developers have responded by increasing construction activity for four consecutive quarters, culminating in the most construction activity in the post-recession era. Future construction deliveries should help alleviate pent-up demand, but the under-construction volume only represents 1.2% of the current industrial rentable building area. Considering 32% of current construction is pre-leased, the pent-up demand should continue for the near future.

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