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Thursday, Sep 28, 2023

Little Stands in the Way of Construction Boom

Real Estate: Demand for New Building Space Leads To Good Business Outlook

San Diego County’s real estate and construction industry leaders see about the same amount of business coming their way this year as in the past year.

Close to half of the 37 industry executives surveyed in the 10th Annual Deloitte and Touche/San Diego Business Journal Economic Outlook Survey said the economic conditions facing their industry in San Diego will be about the same in the coming year as in 1999.

Only six said their business would be worse. Ten respondents said it would be better and three of them said it would be much better.

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The booming real estate economy here will mean more difficulty for tenants seeking new quarters.

Rents for all types of property have risen dramatically in the past two years. However, tenants in some types of commercial property in particular areas should see some easing in rental rates develop in the coming year, another real estate industry member said.

Rick Reeder, an agent in the BRE Commercial Real Estate office in Carlsbad, said a shortage of land for development should curtail new office construction in North County later this year and start driving rates back up again.

“Del Mar Heights has been a pretty incredible market in the past two years, doubling in size and never having a vacancy rate more than 2 percent,” Reeder said. “Land is selling in Del Mar Heights for over $30 a square foot now. A year ago, it was selling between $20 and $24, and a year before that it was $15 to $19 a square foot.”

Working Close To Home

The high demand for property in the Del Mar Heights area, and to a certain extent in Carlsbad, is due to a new trend, he added. Business owners, some of whom live in North County, are tired of fighting the traffic south of the Interstate 805 merge with I-5 and are relocating their businesses farther north to avoid traffic congestion, he said.

“All of the real estate submarkets north of the I-5/805 merge have experienced tremendous activity. Executives want to move their businesses close to home and Del Mar Heights is the first stop,” Reeder said. “Right now, Carlsbad is really inexpensive compared to Del Mar Heights. It’s (leasing at) $2.50 to $2.55 a square foot in Del Mar Heights and in Carlsbad it is $1.90 to $2 a square foot.”

The growing demand for new building space will lead to a good business outlook for the construction and real estate industries for the next three to five years, said 25 of the executives. Only one said the outlook for the next three to five years was poor, while six said it would be fair, and five said it would be excellent. The percentage distribution for the survey was similar to those of the previous year.

“Only (Federal Reserve chairman) Greenspan or some international incident can derail the current express we are on,” said one survey respondent.

County and city officials were not overwhelmingly popular with real estate and construction industry members who were questioned in the survey. While 14 of them, or 38 percent, said they were satisfied with the current political leadership, another 14 of them said they were dissatisfied, while seven said they were very dissatisfied.

Only 5 percent said they were very satisfied.

Finding qualified new employees to help with expanding business is becoming more difficult, said 19 of those polled. Twelve respondents said they are experiencing extreme difficulty. Only 16 percent of the executives surveyed had experienced no difficulty in recruiting last year.

Income Increase

The booming economy here will lead to increased net income for their companies this year, said 28 of the executives, which represents about 76 percent of the respondents.

Fourteen of those polled were expecting a 10 percent or greater increase in net income; eight were expecting a 6 percent to 10 percent increase; and six were predicting a 1 percent to 5 percent increase. Only 11 percent saw no change in income, while 14 percent saw income declining, the survey revealed.

The real estate and construction industry executives, for the most part, saw no major impact on their industry by the change in state government.

Of the executives, 16, or 44 percent, said the change in the governorship won’t affect their industry at all. However, 13 said the change would have a negative impact, while five saw the change as positive for their industry, the survey showed.

One respondent felt the change would be very positive, while another respondent thought the change would be very negative for the industry.


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