Industrial Market Snapshot
San Diego County • Second Quarter 2013
Market Tracker
*Arrows = Change from previous qtr.
Vacancy
9.0%
Net Absorption
351,296 SF
Deliveries
0 SF
Asking Rent
$0.80 NNN
8th Consecutive Quarter of Positive Absorption Confirms Stabilizing Market
The San Diego industrial market has been following the principle of “slow and steady wins the race” for the
last two years while recording measured and sustained improvements in market fundamentals, such as
positive net absorption, decreasing countywide vacancy rate and stabilizing asking rents. This trend of slow
and steady improvements is expected to continue in the second half of 2013.
SAN DIEGO COUNTY INDUSTRIAL
Economic Indicators
2Q13
2Q12
1.61M
1.59M
6.7%
8.8%
7.6%
8.2%
74.9
65.3
San Diego Labor Force
– as of May 2013
San Diego Unemployment
– as of May 2013
U.S. Unemployment
– as of May 2013
U.S. CCI – a quarterly avg.
Net Absorption
Distribution
R&D
1,500
Square Feet (000s)
Flight-to-quality, renewals and consolidations continue to be the main drivers of leasing activity. Tenants
recognizing the current window of opportunity are opting to act now to take advantage of market trends by
upgrading their facility to larger, higher quality spaces or prime locations, or both. Demand is expected to
remain largely stable for the remainder of 2013.
Future Development: Construction activity remains at a standstill, with developers reluctant to build without
a committed tenant in place.
Vacancy: Countywide total vacancy for all product types, including sublease space, has been decreasing for
eight consecutive quarters. The current vacancy rate of 9.0% is 370 basis points (bps) lower than the peak
rate of 12.7% recorded four years ago (4Q09) and 160 bps lower than a year ago.
– excl. Sublease
2,000
1,000
500
Evaluating changes in total countywide vacancy from a year ago by product type shows declines in R&D
vacancy by 250 bps, in distribution by 210 bps, IMT by 150 bps, and manufacturing by 70 bps. Current
vacancy rates for all product types are below the five-year average, indicating that demand for industrial
product has recovered nicely. Direct vacancy has decreased in 20 of 25 San Diego’s industrial submarkets
from a year ago, indicating improved tenant confidence in making real estate decisions.
Asking Rents: Over the last 13 quarters, the countywide monthly asking rent for all product types has
remained stable between $0.79 and $0.81 per month per SF triple net (NNN) and was $0.80 this quarter,
unchanged from a year ago. The average asking rent for manufacturing space, however, has increased 7.1%
from a year ago.
0
-500
-1,000
-1,500
2007
2008
Total Vacancy
2009
2010
2011
2012 2013YTD
– All Product Types, incl. Sublease
14%
6-Year Average 10.5%
Comparing counties, over the past 12 months average asking rent has increased for all product types in
Central County and for all product types except distribution in South County. Asking rents in North County
are yet to see the recovery. The average monthly rent for all product types combined in Central County was
$0.97 in 2Q13, 31% higher than North County ($0.74) and 62% higher than South County ($0.60). In
2013, the countywide average rent is expected to increase between 3% and 5% led by improved leasing
activity in Central County where rents are expected to increase between 8% and 10%. Not all landlords
have been in a position to increase rents, however the majority have been tightening concessions since late
2012.
Forecast: Further improvements in the San Diego industrial market depend heavily on improvements in the
national and local economies. The macro outlook is more balanced and the recovery is expected to
continue. The national economic activity in the manufacturing sector expanded in June following one month
of contraction, and the overall economy grew for the 49th consecutive month.1 The national unemployment
rate of 7.6% has decreased 60 bps from a year ago, and the San Diego unemployment rate of 6.7% has
decreased 210 bps from a year ago.2 In 2014, all employment sectors combined are forecasted to grow
1.8% (+ 22,800 jobs) countywide.3 As national and local economies continue to improve, the San Diego
industrial market is bound to follow while building on improvements recorded over the last two years.
12%
10%
8%
6%
4%
2007
Net Absorption: During the 2Q13, the San Diego industrial market recorded 351,296 SF of positive net
absorption countywide for all product types combined, marking the eighths consecutive quarter of positive
countywide net absorption. Over the last eight quarters (3Q11 - 2Q13), tenants have absorbed 4.4 million
SF of industrial space combined countywide. Comparing quarterly leasing activity in 25 industrial
submarkets countywide, tenants absorbed the most space in East County, Poway and Sorrento Mesa
submarkets. The largest move-ins in the second quarter were recorded in East County, Rose Canyon and
Otay Mesa: Vision Systems purchased and moved into 109,367 SF in East County, Harley Davidson moved
into 88,617 SF in Rose Canyon, and Recall Total Information Management moved into 41,047 SF in Otay
Mesa. The largest move-outs were recorded in Otay Mesa (Imperial Toys vacated 155,000 SF); in Escondido
(Snap-on Tools vacated 88,600 SF); and in Carlsbad (Callaway Golf vacated 82,751SF). Second quarter’s
net absorption countywide was nearly double compared to the post-recession (3Q09 - 2Q13) quarterly
average of 194,000 SF, indicating an improving industrial market.
2008
2009
2010
2011
2012 2013YTD
Tenants currently in the market are looking for 4.7 million SF over the next 24 months with 2.5 million SF
in Central and South Counties combined, 1.7 million SF in North County, and 470,000 SF with no
geographic preference. The most active tenants are in the manufacturing (20.6%), life sciences (17.1%),
and transportation, warehousing, & utilities (12.3%) sectors. While not all of the current tenants in the
market will transact in the short-term, leasing activity is set to strengthen.
Sources: 1The ISM Index. 2www.bls.gov as of 5/12 in San Diego and as of 6/13 in the U.S. 3Moody’s Analytics economy.com forecast as of 4/13.
Cassidy Turley San Diego
Cassidy Turley San Diego Industrial Market Snapshot
San Diego County • Second Quarter 2013
CURRENT
ABSORPTION
SF
YTD
ABSORPTION
SF
UNDER
CONSTRUCTION
AVERAGE ASKING
RENT
(All Types)
9.3%
62,801
157,929
0
$0.74
5,468,009
7.7%
463,419
784,777
0
$0.97
218,514
3,369,380
11.9%
(174,924)
(273,818)
0
$0.60
164,517,677
1,423,938
13,380,072
9.0%
351,296
668,888
0
$0.80
865
33,601,007
424,414
3,464,169
11.6%
246,829
417,470
0
$1.12
MFG
2438
66,229,320
346,251
4,263,197
6.9%
(10,309)
153,239
0
$0.75
IMT
610
21,057,621
88,469
1,698,348
8.5%
203,964
224,624
0
$0.86
DIST
973
43,629,729
564,804
3,954,358
10.4%
(89,188)
(126,445)
0
$0.59
TOTAL
4886
164,517,677
1,423,938
13,380,072
9.0%
351,296
668,888
0
$0.80
TOTAL
BLDGS.
INVENTORY
SF
SUBLET VACANT
SF
DIRECT VACANT VACANCY RATE
SF
%
North County
1,967
51,776,480
255,530
4,542,683
Central County
2,294
82,693,107
949,894
South County
625
30,048,090
TOTAL
4,886
R&D
Submarket
*Industrial monthly asking rates converted to triple net (NNN). Vacancy Rate includes direct and sublease. Net absorption excludes sublease.
Key Lease Transactions 2Q13
Industrial Submarkets
San Diego County
PROPERTY
SF
16550 W Bernardo Dr.
TENANT
160,000
Northrop Grumman Systems Corp.
102,320
Acushnet Company
56,140
Owens & Minor
2070 Las Palmas Dr.
32,551
Spy Optics
Montgomery Tech Center
30,592
Maxwell Technologies
Sycamore Vista
Business Park
Oceanview Hills Corporate
Center
TRANSACTION
TYPE
New
Renew
New
Renew
New
SUBMARKET
Rancho
Bernardo
Vista
Otay Mesa
Carlsbad
Kearny Mesa
Key Sale Transactions 2Q13
PROPERTY
3801, 3809, 3817
Ocean Ranch Blvd.
SF
SELLER/BUYER
PRICE
SUBMARKET
La Pacifica LP | SR Commercial
$19,800,000
Oceanside
($87.53/sf)
2350 Siempre Viva Ct. 103,904
GE Capital Corp | Hamann Companies
$5,410,000
($52.07/sf)
Otay Mesa
2293 Cosmos Ct.
47,762
Oceanside Glasstile | Focus Real Estate LP
$4,824,000
($101.00/sf)
Carlsbad
13000 Kirkham Way
34,843
Ravenwood Towers Inc. | Morrow Meadows
Corporation
$3,868,000
($111.01/sf)
Poway
31,302
Jacobs Investment Company LLC | Cire
Partners
$3,250,000
($103.83/sf)
Chula Vista
995 W Bay Blvd.
226,220
Jolanta Campion
Director of Research
Clark Rorbach
Research Analyst
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The information contained within this report is
gathered from multiple sources considered to be
reliable. The information may contain errors or
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