San Diego County CA— The wave of positivity continued this quarter in the San Diego industrial market due to its low vacancy rate, strong positive net absorption, rental rate growth and a consecutive quarter of increased construction activity.
A milestone was achieved this quarter with total vacancy dropping to 5.1 percent, which is below the pre-recession trough of 5.4 percent in 2006. Every region in San Diego is now at or below 6.0 percent 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 percent 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 percent 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 percent 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.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), 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. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.