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Thursday, Feb 29, 2024
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Strong Demand for Industrial Real Estate

The third quarter brought upbeat news for San Diego County’s industrial sector.

According to Grubb & Ellis/BRE Commercial, positive absorption and decreasing vacancy have continued, encouraging developers to construct new buildings in the northern and southern sub-markets of the county.

San Diego’s overall industrial vacancy rate remained at 6 percent from the second quarter, while regional vacancy rates were significant: The amount of space in the central county fell to 4.4 percent, and South County to under 8 percent, while vacancy rates rose in North County, largely due to the completion of new industrial buildings.

Some more tidbits:

– More than 1 million square feet of industrial space was completed countywide during the third quarter, and year-to-date completions rose above 2.2 million square feet.

– As a result of low interest rates, more than half the new buildings were offered for sale.

– The demand for industrial space remained consistent, as net absorption eclipsed 1 million square feet for the fourth consecutive quarter. The strong demand was attributed to positive national economic indicators in business capital spending, manufacturing, productivity and gross domestic product.

As a result, local demand was driven by companies specializing in military, defense, software, communications and sporting goods.

– Asking rents decreased slightly from the previous quarter for all industrial property types combined, but remained higher year-over-year.

Countywide, rates averaged 92 cents per square foot. The average asking rate for research and development space was down, but remains among the highest in the nation at $1.17.

Overall, the third-quarter 2006 trends of strong absorption, high levels of construction and stable vacancies are expected to continue into 2007, according to Grubb & Ellis.

, Pat Broderick

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