San Diego Business Journal

North County Feels Effects of Improving Industrial Market

REAL ESTATE: Vacancy Rate for Sector Is at Lowest Level Since Mid-2011 By Lou Hirsh Monday, April 22, 2013

Improving fundamentals in San Diego County’s industrial property market are piquing the interest of locally based investors like SR Commercial, as vacancy rates in that sector continue to head downward.

The privately held investment and management firm, with headquarters in Solana Beach, recently purchased La Pacifica, a three-building multitenant industrial park in Oceanside, for $19.8 million. The seller was U.S. Rep. Darrell Issa, R-Vista, who represents California’s 49th congressional district.

Local brokers confirm that the Oceanside purchase was the largest North County industrial acquisition so far in 2013, and among the largest countywide. It also followed closely behind SR Commercial’s purchase of two other North County industrial buildings — one in Vista and one in Oceanside — for a total of $12.9 million, from other sellers.

North County industrial markets have historically lagged behind central San Diego markets — such as Kearny Mesa, Miramar and Sorrento Mesa — for overall demand among tenants and investors, and experts say Oceanside in particular is still playing catch-up.

However, prospects for both the North and South County regions have recently been rising, thanks in part to limited land and space remaining in central San Diego and still scarce construction in the local industrial sector.

Brokerage firm Cassidy Turley San Diego recently reported that San Diego County’s overall industrial vacancy fell for the seventh consecutive quarter, standing at 9.3 percent at the end of the first quarter of 2013, its lowest level since mid-2011.

In its own first-quarter report, brokerage firm CBRE deemed the segment’s performance “San Diego’s strongest start to a year for industrial properties since 2006,” with more than 700,000 square feet of net space absorption.

Increasing Rents

Cassidy Turley Senior Vice President Bryce Aberg said industrial rents have increased 10 to 15 percent from a year ago in some of the high-demand locations of central San Diego, which is gradually having a “compression” effect elsewhere in the county as tenants seek out lower-priced space appropriate to their needs.

“The landlords are now in a position where they’re able to push rents up, and that hasn’t been the case for three or four years,” Aberg said.

Bob Willingham, director in the Carlsbad office of Cushman & Wakefield, which represented SR Commercial in the La Pacifica deal, said Oceanside is the one North County market that hasn’t yet absorbed the bulk of its available industrial inventory, and has long lagged behind markets such as Carlsbad and Vista.

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