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10/27/15
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San Diego’s industrial market closed out the third qurter of 2015 with strong numbers, posting the highest positive net absorption since Q3 2006. The region also saw construction activity increase once again, according to the latest data from CBRE research.
This quarter brought year-to-date net absorption to positive 3.24 msf, while vacancy dropped for the 13th consecutive quarter to a more than 10-year low of 4.4 percent. Southwest Riverside pegged the lowest vacancy of all submarkets, currently at 2 percent total vacancy. It is followed by South San Diego, which is at 5.1 percent.
Overall, San Diego’s industrial rental rates have increased this quarter by $0.02 to $1.10. High-Finish was relatively flat decreasing $0.01 to $1.58, while Low-Finish saw a $0.05 increase to $0.82. All current Low-Finish construction amounts to slightly over 1 msf, primarily in Oceanside, while all High-Finish construction activity is in the UTC submarket.
Net absorption has kept up its pace every quarter in 2015; this quarter posted 1.255 msf of positive net absorption. Every San Diego submarket posted positive net absorption this quarter. Central San Diego led with 581k sf, however, North County is the leader year-to-date with more than 1.2 msf. Every submarket also posted positive net absorption.
Techbilt Companies delivered two speculative warehouses in Poway Corporate Center totaling 70.6k sf. Both of these buildings were delivered 100 percent pre-leased by Best Buy and Grace Digital.
“The majority of current construction activity in North County is driven by build-to-suits, however nearly one third, or 320k sf, represents the first speculative construction we have seen since 2007,” said Adam Molnar, first vice president, of CBRE in the San Diego region. “With speculative construction more than 50 percent pre-leased, this provides added support for further speculative construction.”
These positive indicators have fueled more industrial construction this quarter—Siempre Viva Business Park broke ground on Building 18, a speculative 122k sf warehouse in Otay Mesa. Additionally, ground was broken on two new build-to-suits in Oceanside; Coca-Cola broke ground on a new distribution warehouse totaling 193.8k sf and Magnaflow broke ground on a 92k sf light industrial building. These three new projects total 407.7k sf, bringing the total under construction to 1.64 msf.
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