The world of commercial real estate is a complex and provocative field that demands expertise in areas from development and capitalization to legal and regulatory issues to long-term investment strategies and short-term speculation. We asked a select group of professionals to give us their perspectives on the local industry’s significant rebirth after the devastation of the economic recession. Their insights into this high stakes realm give a glimpse into where the region has been and the far-reaching plans for its future.
Current Trends Submarkets. Setting Records.
San Diego County’s industrial market continues its hot streak through the second quarter of 2015 remaining on pace to be a record-setting year. Countywide vacancy has plummeted to 5.76 percent due to another quarter of strong leasing and owner/user activity. The majority of San Diego’s industrial absorption has occurred at the fringes of the county. The southernmost submarket being Otay Mesa which has been a historical laggard witnessed a flurry of leasing activity during the first half of 2015. The drivers for Otay Mesa’s demand are high quality large blocks of space, proximity for companies with maquiladora operations in Mexico and companies migrating out of expensive central submarkets in search of value.
For the first time in almost ten years there is some speculative industrial development breaking ground in the county. First Industrial Realty Trust and McDonald Property Group have tilted walls on First Park @ Ocean Ranch in Oceanside. The three building 237,000 square foot project has received strong preleasing activity from users that like the northern San Diego location as a launching point to serve San Diego, Orange County, Riverside County and Los Angeles. Most importantly new projects like First Park offers state of the art features that tenants are looking for. Features such as ESFR sprinkler systems, thirty foot minimum clear height and energy efficiency features which don’t exist in most of the older existing inventory.
Owner/user activity has never been stronger in San Diego with many companies utilizing their strong balance sheets and very attractive financing to purchase buildings. Owner/user pricing has exceeded previous peak pricing. High demand, lack of available land, skyrocketing construction costs, and limited available inventory have constrained any new supply while driven up pricing.
Industrial land pricing has exceeded $20 per square foot in virtually all markets with the exception of Otay Mesa. Some high demand submarkets like Kearny Mesa, Miramar and parts of Carlsbad have seen land pricing reach well over $35 per square foot.
San Diego’s high tech and flex markets are also witnessing a strong rebound with several major life science and pharmaceutical companies expanding their campuses in La Jolla, University Towne Centre, Sorrento Valley, Sorrento Mesa, Oceanside and Poway.
Additionally, several major defense contractors are back in the market and cautiously expanding after years of downsizing and belt tightening through the ugly days of sequestration. San Diego has always been a big defense and military town and that will continue for the foreseeable future.
For the full story, go to San Diego Business Journal.