Majestic Realty Co. and Sunroad Enterprises have started construction on the second half of a four-building industrial complex in Otay Mesa with plans to build more in a market so tight that tenants are lining up to lease buildings before they’re finished.
Demand for industrial space has gotten so intense that it almost rivals the demand for housing, with prospective tenants bidding against each other for space, said Tom Simmons, executive vice president of Majestic Realty.
“The momentum in that market has been unlike what we’ve seen in recent memory,” Simmons said.
More to Come
Majestic and Sunroad are building a 240,975-square-foot building at 1610 Landmark Road and a 235,085-square-foot building at 1910 Landmark Road as the second phase of a 50-acre Landmark at Otay industrial park. The buildings are scheduled to be completed in February 2023, with leasing handled by Mark Lewkowitz, Chris Holder and Will Holder of Colliers International.
The two companies late last year completed the first section of the industrial park with construction of a 153,630-square-foot building at 1701 Landmark Road and a 216,140-square-foot building at 1601 Landmark Road.
The smaller building was leased to RL Jones Customhouse Brokers. The bigger building was leased to four tenants – 67,528 square feet to Global Logistics & Fulfillment, 40,435 square feet to Exportalia, 54,168 square feet to Avanza Loop, and 54,009 square feet to Terry Town.
Majestic and Sunroad have acquired 17 acres of adjacent land to expand the industrial park to a total of 67 acres, with two more buildings planned, one of 150,000 square feet and one of 115,000 square feet. Construction of those is slated to start in the summer, and Simmons said he’s already getting offers to lease them.
Simmons said that he’s not accepting any offers yet because the market is so volatile, with rents rising so high so fast that he doesn’t know how much to charge.
“By the time this property is completed, I might be leaving a significant amount of money on the table,” Simmons said. “I’ve actually seen right now for the valuations for our industrial buildings are higher than for downtown office buildings. We’ve never seen industrial being this busy for decades.”
Still to come, Simmons said that development on an additional 60 acres in Otay Mesa is still in the planning stages.
Simmons predicted that demand will remain strong for the rest of 2022, “but chinks are showing in the armor.”
Rising energy and housing costs, a substantial hike in interest rates coupled with inflation could be an issue, Simmons said, because consumers would then have less money to spend.
Even so, Simmons said that the products stored in his warehouses tend to be things like paper towels and other goods that aren’t considered discretionary.
“We don’t house shiny handbags,” Simmons said.
Majestic Realty Co.
President and board chairman: Ed Roski Jr.
Headquarters: City of Industry
Business: Commercial real estate developer
Notable: Majestic Realty Co. is the largest, privately held developer and owner of master-planned business parks in the U.S. with an 87-million-square-foot portfolio that includes industrial, office and retail space, as well as sports, entertainment and hospitality projects.