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North County Deal Leads to New Record

Black Creek Group has acquired the five-building North County Corporate Center in Vista, billed as the largest pure industrial distribution park in North County.

 

The $147.5 million deal comes amid a period of historically high demand for industrial property in San Diego County.

 

Black Creek Group acquired the 493,898 square-foot corporate center from Barings.

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The North County Corporate Center sale was the largest in the third quarter of 2021, according to the commercial real estate brokerage JLL, with total sales for the year so far on pace to be the strongest year on record.

Brokering the North County Corporate Center deal from the commercial real estate brokerage Newmark were managing directors Bret Hardy, Jim Linn, and Andrew Briner with Briner Brunson, co-head of U.S. Capital Markets for Newmark.

Kevin Shannon of Newmark represented Black Creek Group.

The center has suites ranging from 21,000 square feet to 123,000 square feet in buildings that range from 71,464 square feet to 123,000 square feet.

The property was fully leased at the time of sale.

Rising Rents

The North County Corporate Center sale is unusual because most of the industrial activity has been in Otay Mesa, where Amazon moved into its recently completed 3.5 million square-foot distribution center – Amazon’s largest location in California.

Amazon also is building a more-than 700,000 square-foot project near the distribution center.

“The big news in San Diego for the past couple of years is Amazon,” said Brent Don, senior research analyst with Newmark.

Otay Mesa in general has grown really “by leaps and bounds,” Don said. “It’s still relatively affordable compared to other industrial products in the county.”

Demand for industrial space has pushed the countywide vacancy rate to the lowest it’s been since 2010, Don said.

Rents have been soaring as a result.

According to Newmark, rent growth for industrial property has averaged 5% annually over the past 10 years as vacancy rates had fallen from more than 10% in 2011 to less than 5% in 2021.

Newmark reported that the average asking rent for the third quarter of 2021 reached $1.17 per square foot – a 4.8% increase over the past year.

“There’s a pretty big production pipeline but I don’t think it’s enough to meet demand, so rents will continue to go up,” Don said.

Conversions

Greg Lewis, executive vice president of JLL, said that 2021 is turning into a record year for the absorption of industrial space in San Diego County, driven partly by ecommerce as consumers have come to expect next day product delivery.

“We already saw a huge push for last mile delivery before COVID and that’s just accelerated,” Lewis said. “We see even more room for growth.”

Lewis said about 14% of retail sales are online, and JLL is predicting that will rise in 2021, although at a slower pace than in 2020.

Adding to the demand for industrial space is a drive by real estate investment firms that cater to life science companies buying up industrial property in traditional industrial markets and converting it to lab space, just as they have with office property.

“They’ve seen both the office and industrial markets kind of shrink as they’ve been converted to life science,” Don said. “A lot of the space that gets converted to lab or life science is kind of obsolete for industrial.”

Often, the older warehouse buildings have ceiling heights that are too low for product distribution companies, which need high ceilings to stack products.

Sorrento Valley in particular has been targeted by life science investors.

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