Part three of three
San Diego County CA— All indicators are pointing to sustainable growth throughout 2015 in the San Diego industrial market due to strong positive net absorption, decreasing vacancy, increasing rates, and the highest level of construction activity since the recession, according to CBRE research. See report here [Link]
Each industrial subtype posted positive net absorption as a result of increased occupancy. This quarter marked the eleventh consecutive quarter of positive net absorption and decreasing vacancy, posting more than one million square feet with a 5.5 percent vacancy rate. Warehouse accounted for 51.1 percent of the positive net absorption with 585,074 square feet. Every region in San Diego is now at or below 7.0 percent total vacancy.
“The warehouse market is exceptionally strong right now, particularly for modern, functional space under 50,000 square feet. For the first time since the Great Recession, it is common to have multiple tenants competing for the same space,” says Bill Dolan, first vice president of CBRE in San Diego. “There is also increasing demand from advanced manufacturing users for larger space, over 100,000 square feet.”
As the market continues to tighten, rates are being forced higher. The overall industrial asking lease rate has been notable over the past three years, increasing more than 25 percent since Q2 2012.
San Diego construction activity doubled quarter-over-quarter. This is due to two projects totaling over 600,000 square feet: FedEx broke ground on a 312,000 square foot warehouse in Oceanside and BioMed broke ground on their 307,660 square foot i3 lab campus in UTC.
“In addition to increased build-to-suit activity from major occupiers like FedEx, we are witnessing the first spec development in North County since 2007. Burke has broken ground on 80,000 square feet of manufacturing space in Carlsbad and more product is slated for later in the year including First Industrial’s 240,000 square foot distribution project in Oceanside,” says Greg Lewis, vice president, CBRE in San Diego. “This construction activity is being fueled by strong market fundamentals including increased demand, nearly one million square feet of positive absorption in 2014, and an overall vacancy rate in North County that now sits at 5.9 percent.”