Post on 19-Jan-2015
description
Industrial ReportNorth San Diego County
4th Quarter 2012
PREPARED BY:
Adam Molnar
Greg Lewis
Tucker Hohenstein
Mike Erwin
COLLIERS INTERNATIONAL
5901 Priestly Drive, Suite 100
Carlsbad, CA 92008
Fax 760 438 8925
www.colliers.com/carlsbad
www.colliers.com/carlsbad
OVERVIEWAbsorption for Industrial/R&D product in Carlsbad got off to a strong start in 2012, only to taper off considerably in the second half as a result of back to back sluggish quarters. Nonetheless, absorption numbers managed to remain in the black by posting a slightly positive gain of 23,113 SF. The overall vacancy rate for Industrial/R&D continued to inch downward and fi nished the year at 13.55%, down from 14.14% one year ago. Carlsbad had a fairly robust year of leasing and sales volume in 2012 with 176,437 SF of total absorption compared to 18,615 SF in 2011. R&D product accounted for most of the action in 2012 with a net gain of 160,839 SF against 15,598 SF on the Industrial side. As a result of this lopsided activity, R&D was able to narrow the vacancy gap by more than two percentage points in 2012 and ended the year at 13.81% versus 13.29% for Industrial.
ACTIVITYFor The largest signed lease in 4Q 2012 was a 30,865 SF deal with San Diego-Imperial Counties Developmental Services at 5931 Priestly Drive. This newly renovated R&D building is owned by Greene Properties and the tenant is the largest nonprofi t agency in San Diego County. Other lease transactions included SGN Nutrition at 2777 Loker Avenue (25,680 SF), Signet Armorlite at 5803 Newton Drive (21,762 SF), Intravas at 5840 El Camino Real (21,669 SF), and Aurora Spine at 1920 Palomar Point Way.
An investment sale at 1950 Camino Vida Roble represented the largest transaction in 4Q 2012. The 121,500 SF multi tenant R&D/Offi ce property was purchased by Pacifi c Realty Advisors at $138.27/SF. Another signifi cant transaction was the sale of 1959 Palomar Oaks Way. This 47,437 SF building, while technically considered an Offi ce property, was relevant for two reasons. First, the buyer was an R&D user by the name of DATRON out of Vista that recognized an opportunity to expand operations in a western location and control a Corporate Headquarters building at a low price ($107.36/SF). Second, this represented a successful strategy on the part of the seller. Bixby Land Company acquired the property as part of a larger portfolio with plans to spin off the offi ce building to an owner user. This deal allows them to focus on the 5 remaining R&D buildings in the @Palomar project at a lower basis.
FORECASTThe majority of the new small and mid range for sale product delivered in the previous cycle has been absorbed. Regardless of size range there is a limited amount of for sale inventory in Carlsbad which should push buyers on the sideline into decision making mode. Qualifi ed companies can still take advantage of low interest rates and building prices compared to historical averages. Expect upward pressure on sales prices to continue at a slow but steady pace for owner user product as a result of this dwindling supply. With the exception of the former Upper Deck building on Sea Otter Place (249,000 SF), there are no buildings available for sale or lease above 100,000 SF. This means that larger users will need to consider build to suit options if they wish to expand or consolidate operations in Carlsbad.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2012
Q4 2012 | INDUSTRIAL
10.0%
7.3%
7.9%
14.7%
4.9%
13.8%
0% 5% 10% 15%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
0%
2%
4%
6%
8%
10%
12%
14%
16%
-100
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Vaca
ncy
Rate
SF (0
00s)
Net Absorption New Supply Vacancy
CARLS BAD HIS TORICAL MARKET TRENDS
Ocean
Oceanside
Vista
SanMarcosCarlsbad
Q42012
Q12013 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
CARLSBADAT A GLANCE
Carlsbad
# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
1 1950 Camino Vida Roble Investor 121,500 $16,800,000 $138.27
2 1959 Palomar Oaks Way Owner User 47,437 $5,093,070 $107.36
3 1630 Faraday Avenue Investor 32,717 $5,000,139 $152.83
4 2710 Gateway Road Owner User 10,583 $1,259,377 $119.00
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE/SF
5 5931 Priestly Drive SDRC 30,865 125 months $1.40 NNN
6 2777 Loker Avenue SGN Nutrition 25,680 63 months $0.73 NNN
7 5803 Newton Drive Signet Armorlite 21,762 60 months $0.89 NNN
8 5840 El Camino Real Intravas 21,669 24 months $0.92 MG
9 1920 Palomar Point Way Aurora Spine 17,288 72 months Confidential
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q4 2012
McClellan Palomar Airport
McClellan Palomar Airport
VistaCity Boundary
Park Hyatt Aviara Resort
La Costa Resort & Spa
The Crossings at CarlsbadGolf Course
sings badurse
Legoland
Carlsbad Oaks NorthCarlsbad
Oaks North
Carlsbad RacewayCarlsbad Raceway
Carlsbad ResearchCenter
Carlsbad ResearchCenter
CarlsbadAirportCenter
CarlsbadAirportCenter
Carlsbad Ranch
Palomar Forum
Palomar Forum
BressiRanchBressiRanch
El C
amin
o Re
alEl
Cam
ino
Real
Las PalmasLas Palmas
Camino Vida RobleCamino Vida RobleEl Camino Real
Gateway RdGateway Rd
Whiptail LoopWhiptail Loop
El Camino Real
Cannon Rd
Faraday Ave
Faraday Ave
College Blvd
College Blvd
Palomar
Airpo
rt Rd
Palomar
Airpo
rt Rd
Poinsettia Ave
Poinsettia Ave El Fuerte St
El Fuerte St
Alga Rd
Melrose Dr
Melrose Dr
Poins
ettia
Ave
Armada Dr
Paseo Del Norte
Palomar Airport Rd
Avenida Encinas
Aviara Pkwy
Business Park Dr
Business Park Dr
Sycamore AveSycamo
Palomar Airport RdPalomar Airport Rd
El Fuerte St
El Fuerte St
Faraday AveFaraday Ave
Melro
se D
r
Melro
se D
r
Loker Ave
Loker Ave
Pacif icOcean
Lionshead AveLionshead Ave
7
8
This document has been prepared by Colliers International for advertising and general information only. Colliers
International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding
the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party
should undertake their own inquiries as to the accuracy of the information. Colliers International excludes
unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes
all liability for loss and damages arising there from.
prepared by ADAM MOLNAR, GREG LEWIS
TUCKER HOHENSTEIN & MIKE ERWIN, 760 438 8950
AT A GLANCE | Q4 2012 | INDUSTRIAL | CARLSBAD
www.colliers.com/carlsbad
OVERVIEW
Escondido Industrial Market continues to rebound from the turbulent last few years. This
industrial market continues its streak of three consecutive quarter of positive absorption,
which has resulted in the lowest vacancy rate of all the North County cities of 4.9%. This
vacancy rate is also the lowest in Escondido since 1Q08 and continues its downward trend
since the peak of 8.5% in 2Q09.
Absorption during 4Q12 was
a positive 48,000 square feet,
fi nishing the year with a positive
absorption of 55,000 square feet.
This positive absorption was a
culmination of small lease and
sale transactions combined with a
continued stabilization and growth
of the current tenancy within
the Escondido industrial market.
Escondido also benefi ts from the
continued demand from companies
to be on the I-15 corridor, as
evidenced by Hamann Construction’s nearly complete 100,000 square foot build-to-suit for
Corovan in the Escondido Research and Technology business park.
Market rents remained fl at throughout the year in the Escondido Industrial Market and sales
prices have steady increased from a year ago. The tenant and buyer activity have increased
throughout the year, while the supply continues to dwindle for both lease and for sale
buildings.
ACTIVITY
Leasing activity continued to improve but mainly consisted of small transactions. There were
25 new leases signed in 4Q12, of which 24 of these were below 10,000 square feet. The
largest signed lease in 4Q 2012, was a 14,000 SF transaction with X3 Management Services
San Diego. There were fi ve sales in Escondido, in which 3 sales were in buildings less than
10,000 square feet. The other 2 transactions consisted of SDGE purchasing a 12,500 square
foot building adjacent to its current yard at 650 Alpine Way for $116 psf, and the Union Tribune
purchased the 57,000 square foot Lee Publications building for $7 Million ($121 psf).
FORECAST
The lack of supply of buildings for lease and sale in Escondido, combined with record low
interest rates and the increase in activity, will result in upward pressure on rates and prices.
We should see a spike in lease rates and sale prices in 2013. Those waiting for distressed
opportunities will be disappointed as most of these have already been absorbed. Moreover,
with limited land and no new speculative construction on the horizon, companies will have far
less real estate options then they did during the last four years.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2012
Q4 2012 | INDUSTRIAL
10.0%
7.3%
7.9%
14.7%
4.9%
13.8%
0% 5% 10% 15%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
0%
2%
4%
6%
8%
10%
12%
14%
16%
-100
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Vaca
ncy
Rate
SF (0
00s)
Net Absorption New Supply Vacancy
CARLS BAD HIS TORICAL MARKET TRENDS
Ocean
SanMarcos
Oceanside
Vista
EscondidoCarlsbad
Q42012
Q12013 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
ESCONDIDOAT A GLANCE
Escondido
Nord
ahl R
oad
Nord
ahl R
oa
Mission Road
Mission Road
Montiel Rd
Montiel Rd
Auto Park Way
Auto Park Way
Country Club DrCountry Club Dr
Industrial Ave
Industrial Ave
Simpson Way
Simpson Way
Citracado Pkwy
Citracado Pkwy
N An
drea
sen
Drive
N An
drea
sen
Drive
S An
drea
sen
Drive
S An
drea
sen
Drive
Enterprise St
Enterprise St
Valle
y Pa
rkwa
y
Valle
y Pa
rkwa
y
9th Ave
Washington Avenue
Washington Avenue
Tulip StTulip St
Mission Avenue
Mission Avenue
Escondido Ave
Escondido Ave
Center City Parkway
Center City Parkway
Quince StQuince St
Rock Springs Rd
Rock Springs Rd
PalomarPomeradoHospital
PalomarPomeradoHospital
EscondidoAuto ParkEscondidoAuto Park
Myers Avenue Myers Avenue
Auto Park Way
Auto Park Way
N. H
ale A
venu
e
N. H
ale A
venu
e
78
EscondidoResearch
& Tech Center
EscondidoResearch
& Tech Center
# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
1 650 Alpine Way Owner User 12,519 $1,450,000 $115.82
2 207 E Pennsylvania Ave Owner User 57,140 $6,902,003 $120.79
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE/SF
3 2215 Auto Pky X3 Management Services, Inc. 13,916 36 months $.75 MG
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q4 2012
This document has been prepared by Colliers International for advertising and general information only. Colliers
International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding
the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party
should undertake their own inquiries as to the accuracy of the information. Colliers International excludes
unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes
all liability for loss and damages arising there from.
prepared by ADAM MOLNAR, GREG LEWIS
TUCKER HOHENSTEIN & MIKE ERWIN, 760 438 8950
AT A GLANCE | Q4 2012 | INDUSTRIAL | ESCONDIDO
www.colliers.com/carlsbad
OVERVIEW
Despite a setback in Q4 2012 that posted a negative 100,876 SF of net absorption,
Oceanside still experienced a moderate year with 186,004 SF of positive net absorption.
The temporary setback in November was due in large part to one tenant, Genica –
Computer Geeks, who vacated 147,000 SF and relocated to a building they purchased in
Temecula.
ACTIVITY
Industrial leasing and sale
activity in the quarter was
steady with both investors
and users closing deals in the
Oceanside submarket. Jazzy
Expo renewed their lease in
the Pacifi c Coast Business
Park for two years at a below
market NNN rate. Nature’s
Supplements purchased a
20,000 SF building in the
Pacifi c Coast Business Park to
occupy. Finally two investors
closed purchases in the
Oceanside market buying 33,000 SF and 13,000 SF respectively that is a sign of investor
confi dence in the market fundamentals.
FORECAST
Oceanside is expected to do well in 2013. With the best supply of buildable land at
reasonable prices in North County and large blocks of high quality available industrial
space, Oceanside should see a number of sizeable transactions close this year. In
addition the City of Oceanside is now committed to investing in the industrial market with
assistance to stimulate attracting manufacturing jobs.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2012
Q4 2012 | INDUSTRIAL
10.0%
7.3%
7.9%
14.7%
4.9%
13.8%
0% 5% 10% 15%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
-400
-200
0
200
400
600
800
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Vaca
ncy
Rate
SF (0
00s)
Net Absorption New Supply Vacancy
OCEANS IDE HIS TORICAL MARKET TRENDS Ocean
OceansideVista
SanMarcosCarlsbad
Q42012
Q12013 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
OCEANSIDEAT A GLANCE
Oceanside
# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
1 1935 Avenida Del Oro Investor 33,116 $2,900,000 $87.57
2 1342 Rocky Point Dr Owner-User 19,461 $1,780,000 $91.46
3 2550 Jason Ct Investor 12,945 $895,000 $69.14
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE/SF
4 1332 Rocky Point Dr Jazzy Expo 28,308 26 months $0.30 NNN
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q4 2012
El CorazonEl Corazon
Ocean Ranch
Plaza Retail
Ocean Ranch
Plaza Retail
Paci c CoastBusiness ParkPaci c CoastBusiness Park
OceanRanchOceanRanch
Rancho Del OroRancho Del Oro
OceansideGateway
OceansideGateway
Sprinter Light
Rail Line
Sprinter Light
Rail Line
Rancho Del Oro Dr
Rancho Del Oro Dr
College Blvd
College Blvd
Mesa Dr
Mesa Dr
Avenida De La PlataAvenida De La Plata
Old Grove Road
Old Grove Road
Ocean Ranch Blvd
Ocean Ranch Blvd
North
Ave
North
Ave
Temple Heights Dr
Temple Heights Dr
Avenida Del Oro
Avenida Del Oro
Melrose Dr
Oceanside BlvdOceanside Blvd
Corp
orate C
enter D
r
Corp
orate C
enter D
r
AT A GLANCE | Q4 2012 | INDUSTRIAL | OCEANSIDE
prepared by ADAM MOLNAR, GREG LEWIS
TUCKER HOHENSTEIN & MIKE ERWIN, 760 438 8950
This document has been prepared by Colliers International for advertising and general information only. Colliers
International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding
the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party
should undertake their own inquiries as to the accuracy of the information. Colliers International excludes
unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes
all liability for loss and damages arising there from.
Q42012
Q12013 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
www.colliers.com/carlsbad
OVERVIEW
The San Marcos industrial market gave up some ground during Q4 posting 42,000
square feet of negative absorption and bringing the year-end total to negative 58,186
square feet. Fortunately, against an 8.6 million square foot industrial base this is a minor
move that increased vacancy only 67 basis points to 7.99% at year-end. The majority of
new vacancy during the quarter was in spaces smaller than 10,000 square feet making
this a competitive size range for San Marcos landlords.
ACTIVITY
Leasing activity mainly consisted of small tenants in multi-tenant parks. A couple notable
lease transactions were Goodman Manufacturing leasing 11,700 square feet and Service
Partners Supply leasing 18,081 square feet at 120 Mata Way. An owner-user purchased
12,609 square feet at 2951 Norman Strasse for $62/SF. This building sold at a lower
number because it was lender owned and had some past settling issues. The sale of 929
Rancheros, an 8,960 square foot building, for $95/SF is more indicative of market value
for non-stressed assets.
FORECAST
In the near term lease rates
for smaller (< 10,000 SF)
spaces will be under pressure
as tenants have several
opportunities to choose from.
As landlords look for ways to
diff erentiate their buildings from
the pack we anticipate lease
concessions will continue to be
used to attract tenants. Leasing
of distribution space showed
strength during Q4 and will
likely continue to do so due to
its limited supply and increasing
national demand for warehouse distribution. We expect lease rates for this product type
to lead the market. Sale prices seem to have stabilized during 2012 in the $95-$110/SF
range. These prices will continue to edge up given the limited supply, although we don’t
expect any large moves.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2012
Q4 2012 | INDUSTRIAL
10.0%
7.3%
7.9%
14.7%
4.9%
13.8%
0% 5% 10% 15%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
-300
-200
-100
0
100
200
300
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Va
canc
y Ra
te
SF (0
00s)
Net Absorption New Supply Vacancy
S AN MARCOS HIS TORICAL MARKET TRENDS
Ocean
Oceanside
Vista
SanMarcos
Escondido
Carlsbad
SAN MARCOSAT A GLANCE
San Marcos
# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
1 929 Rancheros Drive Owner-User 8,960 $851,500 $95.03
2 2951 Norman Strasse Owner-User 12,609 $780,000 $61.86
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE/SF
3 120 Mata Way, Ste 104 Goodman Manufacturing 11,700 60 months $0.78 Gross
4 120 Mata Way, Ste 101 Service Partners Supply 18,081 48 months $0.77 Gross
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q4 2012
This document has been prepared by Colliers International for advertising and general information only. Colliers
International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding
the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party
should undertake their own inquiries as to the accuracy of the information. Colliers International excludes
unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes
all liability for loss and damages arising there from.
prepared by ADAM MOLNAR, GREG LEWIS
TUCKER HOHENSTEIN & MIKE ERWIN, 760 438 8950
AT A GLANCE | Q4 2012 | INDUSTRIAL | SAN MARCOS
www.colliers.com/carlsbad
OVERVIEW
Strong leasing activity, driven
in part by attractive rates
during Q4, helped Vista post its
second consecutive year of net
absorption. The Vista industrial
market fi nished the year with
117,999 square feet of net
absorption (down slightly from
141,000 SF during 2011). Lease
rates and sale prices stabilized
during 2012. Vista vacancy sits
at 7.30% near its ten year low of
7.19%, which will inevitably lead
to higher lease and sale values if
demand continues at levels seen during 2011 and 2012.
The Vista industrial market is comprised of 530 buildings totaling 13.3 million square
feet with an average building size of 25,000 square feet. Major industries include: spa
manufacturing, advanced precision manufacturing, biomedical devices, food distribution,
telecommunications, and action sports.
ACTIVITY
The majority of transactions that occurred during Q4 were between 14,000-45,000 square
feet with eff ective lease rates ranging from $0.45/SF Gross to $0.53/SF NNN. Rates
dipped during Q4 mainly due to one project that adopted an aggressive rate strategy and
successfully leased 54,000 square feet to three tenants within two months. At the end
of December Stonebridge Capital, an investor, purchased One Viper Way for $23,125,000
($114.45/SF). This 202,045 square foot corporate headquarters facility is leased to Directed
Electronics and the sale price represented an approximate 10.25 % CAP on existing income
with a relatively short-term remaining on the lease. The investment sale of One Viper Way
represented the largest industrial transaction that occurred in North County during 2012.
FORECAST
Expect good functional distribution space (<15% offi ce/multiple dock positions/good truck
circulation/22’+ clear) to lease quicker than the broader market regardless of size. Supply
of distribution space is constrained and we are seeing good activity in neighboring markets,
as well as, on a national level. There will continue to be almost no lease rate diff erential
between larger buildings (>50,000SF) and smaller buildings under 15,000 square feet due
to limited supply of larger buildings. Low vacancy will continue to drive sale prices closer
to replacement cost. At the end of the year investors were under contract to purchase two
buildings in the Vista industrial park; one is approximately 130,000 square feet and the other
42,000 square feet. These transactions are anticipated to close during Q1 2013 and should
not immediately impact vacancy.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2012
Q4 2012 | INDUSTRIAL
10.0%
7.3%
7.9%
14.7%
4.9%
13.8%
0% 5% 10% 15%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
Q42012
Q12013 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
Ocean
Oceanside
Vista
SanMarcosCarlsbad
VISTAAT A GLANCE
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
-200
-100
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Vaca
ncy
Rate
SF (0
00s)
Net Absorption New Supply Vacancy
VIS TA HIS TORICAL MARKET TRENDS
Vista
# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
1 1 Viper Way Investor 202,045 $23,125,000 $114.45
2 1281 Liberty Way Owner-User 24,526 $2,750,000 $112.13
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE/SF
3 1325 Sycamore Avenue, Suite A Carol Cole 21,789 48 months $0.53 NNN
4 2580 Progress Street Preserved Treescapes 45,465 84 months Undisclosed
5 985 Poinsettia Avenue, Suite A Epic Boats 22,000 18 months $.45 Gross
6 975 Poinsettia Avenue Hesham Kamil 14,176 39 months $.45 Gross
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q4 2012
Sycamore Ave
Sycamore Ave
Syca
more Av
e
Oleander Ave
Oleander Ave
Green Oak Rd
Green Oak Rd
Shadowridge Dr
University Dr
La Mirada Dr
La Mirada Dr
Melros
e Dr
Melros
e Dr
Park
Cente
r Dr
Park
Cente
r Dr
Lionshead AveLionshead Ave
Palomar Airport Rd
Poins
ettia
Ave
Poins
ettia
Ave
Shadowridge
Golf Course
Shadowridge
Residential
Business Park DrBusiness Park Dr
Faraday AveFaraday Ave
AT A GLANCE | Q4 2012 | INDUSTRIAL | VISTA
This document has been prepared by Colliers International for advertising and general information only. Colliers
International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding
the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party
should undertake their own inquiries as to the accuracy of the information. Colliers International excludes
unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes
all liability for loss and damages arising there from.
prepared by ADAM MOLNAR, GREG LEWIS
TUCKER HOHENSTEIN & MIKE ERWIN, 760 438 8950
NORTH COUNTYAT A GLANCE
www.colliers.com/carlsbad
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ3 2012
Q3 2012 | INDUSTRIAL
10.0%
7.9%
7.3%
13.3%
6.1%
13.6%
0% 5% 10% 15%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
Q32012
Q42012 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
Ocean
Escondido
Oceanside
Vista
San
MarcosCarlsbad
Submarket Buildings Total Inventory Vacant SF Vacancy Rate
Carlsbad 482 14,793,976 2,018,039 13.6%
Escondido 636 7,175,725 436,957 6.1%
Oceanside 394 8,014,725 1,065,063 13.3%
San Marcos 490 8,636,002 620,263 7.3%
Vista 530 13,373,177 1,065,867 7.9%
Total 2,532 51,993,604 5,212,129 10.0%
OVERVIEWThe North San Diego County industrial market is largely decentralized and comprised of fi ve cities including Carlsbad, Escondido, Oceanside, San Marcos and Vista. Situated 35 miles north of downtown San Diego and 52 miles south of John Wayne Airport in Orange County, the coastal location is a major factor in the area’s appeal to corporate users and its 826,985 residents.
The industrial market consists of approximately 52.3 million square feet. By comparison, the total San Diego industrial market is 188.3 million square feet. North County represents 27% of the total. The following table summarizes the inventory and vacancy by submarket:
North San Diego County is well known for its highly skilled labor force, excellent transportation network, pro-growth business environment, signifi cant Federal Government presence, desirable vacation destination including world class beaches, resorts, golf venues, and abundant employee housing.
The North San Diego County industrial market is home to a diversifi ed mix of users including defense, telecommunications, software, medical manufacturing, golf and leisure sports, life science and technology fi rms. Corporate neighbors include:
Coca-ColaMedtronicTitleist GolfViaSatCovidienAbbott LabsGenentechCallaway GolfL-3 CommunicationsSAIC
Isis PharmaceuticalsLife TechnologiesCobra / Puma GolfTaylorMade GolfDenso WirelessUS FoodsPhilips RespironicsThomson ReutersRockwell CollinsJohn Deere
DJO, Inc.LinearKillion IndustriesJeld-Wen Windows and DoorsSumitomo ElectricMcCain, Inc.Directed ElectronicsGIAHunter IndustriesWatkins Manufacturing
10.0%
7.9%
7.3%
13.3%
6.1%
13.6%
0% 5% 10% 15%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
MARKET REPORTSAN DIEGO COUNTY
www.colliers.com/sandiego
Industrial demand at highest rate since 2005 Countywide vacancy drops below 10%
MARKET OVERVIEW
San Diego County’s industrial/R&D market continued its sixth straight quarter of positive demand
with over 1.0 million SF of net absorption. The net absorption recorded for 2012 exceeded 3.0
million SF making it the strongest year since the 3.4 million SF recorded in 2005. Strong leasing
activity continued the absorption trend into 2013 with a vacancy rate that has fallen in the single-
digit level – a level not seen since prior to early-2009.
The November 2012 San Diego County unemployment rate measured 8.3%, exhibiting a 0.3%
decrease from October. The California unemployment rate decreased (-0.2%) in November
and stood at 9.6% while the national rate decreased (-0.1%) to 7.4%. As of November 2012,
San Diego County experienced a year-over-year increase in non-farm employment totaling
24,600 jobs. The combined industry sectors of “Trade, Transportation, and Utilities” and
“Manufacturing” – the two predominant industrial-utilizing employment sectors – posted a
net increase of 2,300 jobs over the same period. Increasing employment will continue to fuel
absorption in 2013
In November, the USD Burnham-Moores Center for Real Estate’s Index of Leading Economic
Indicators for San Diego posted a 0.1% increase. This was the third consecutive month of
increases that was driven primarily by a decrease in initial claims for unemployment insurance
within the county along with smaller gains in consumer con dence and help wanted advertising.
The index has posted its 11th increase in the last 13 months.
MARKET TRENDS
Signi cant positive
demand drove
countywide net
absorption to over 1.0 SF
in Q4 and 3.0 million SF
for the year. This level of
demand was the most for
any year since 2005. A
total of nearly 130,000
SF was built for the year,
but an additional 173,000
SF should be completed
by mid-2013. Vacancy
stood at 9.9% and will
continue to decrease
throughout 2013.
MARKET INDICATORS
INDUSTRIAL VACANCY RATESQ4 2012
Q4 2012 Q3 2012 (P)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
Q4 2012 | INDUSTRIAL
6.3%
9.7%
8.6%
8.7%
19.3%
10.9%
11.8%
12.8%
0% 5% 10% 15% 20%
I-15 Corridor
North County
Central County
S.D. County
R&D Industrial
0%
2%
4%
6%
8%
10%
12%
-4.5
-3.0
-1.5
0.0
1.5
3.0
4.5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Vacancy R
ate
SF (
Mill
ions)
Net Absorption New Supply Vacancy
NEW SUPPLY, ABSORPTION AND VACANCY RATES
SAN DIEGO COUNTY
The San Diego County industrial/R&D
market is comprised of 187.0 million SF
of industrial and R&D space. The county
is divided into three major market areas
with 21 submarkets within them. About
62% of countywide industrial/R&D
space is located within the 13
submarkets of the Central County
market. Industrial buildings (including
manufacturing, warehouse, distribution,
and multi-tenant/incubator) make up
72% of total inventory while R&D
buildings (including ex, wet lab and
corporate headquarters) make up the
remaining 28% of the total inventory.
PROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF SALE PRICE PRICE/SF
1950 Camino Vida Roble Carlsbad R&D 121,500 $16,800,000 $138
5959 & 6059 Cornerstone Court W. Sorrento Mesa R&D 97,945 $14,100,000 $144
4106-4122 Sorrento Valley Blvd. (4 buildings) Sorrento Valley R&D 113,571 $13,340,000 $117
900 Hitachi Way Chula Vista R&D 86,920 $11,850,000 $136
13450 Stowe Drive Poway Industrial 73,000 $7,120,000 $98
PROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF
10015 Waples Court Sorrento Mesa Industrial 106,412 Covan World-Wide Moving (renewal)
10277 Scripps Ranch Boulevard Scripps Ranch R&D 69,900 CoreLogic Solutions
4757 Nexus Centre Drive Campus Pt./Eastgate Wet Lab 67,050
5005 Wateridge Vista Drive Sorrento Mesa R&D 61,460 Accelrys, Inc.
10390 Pacific Center Court Sorrento Mesa Wet Lab 68,400 Quantum Design
TRANSACTION ACTIVITY - Q4 2012
SALES ACTIVITY
LEASING ACTIVITY
TENANT NAME
Genomatica, Inc.
NET ABSORPTION
The Q4 combined industrial/R&D net absorption
totaled a positive 1,031,268 SF. Countywide net
absorption for industrial space (manufacturing,
warehouse, distribution, and multi-tenant/
incubator building uses) totaled a positive
548,589 SF and R&D space ( ex, wet lab
and R&D building uses) totaled a positive
482,679 SF. Both segments created overall
net absorption of 3,014,742 SF (1,723,474 SF
industrial; 1,291,268 SF R&D). The renewed
activity in industrial/R&D markets was re ected
in the individual submarkets as well, where 18
of the 21 countywide submarkets posted net
positive demand for 2012.
New leasing activity of 2.5 million SF during
Q4 was just 0.6% higher than the Q3, but was
comprised of a strong posting of new leases in
addition to renewals. Many of these leases will
take occupancy in the rst half of 2013, thereby
bolstering demand and driving down vacancy
even further. Leasing activity still remains
strong primarily amongst smaller tenants
(under 10,000 SF).
The majority of Q4 positive net absorption
was in the submarkets of Sorrento Mesa
(+170,636 SF), Poway (+145,198 SF), Campus
Point/Eastgate (+138,019 SF) and Miramar
(+130,769 SF). The North County submarkets
of Oceanside (-100,876 SF) and San Marcos
(-42,571 SF) saw the most space vacated for
the quarter. Several submarkets did particularly
well for the year, but Otay Mesa (+830,519 SF)
and Sorrento Mesa (+318,129 SF) performed
the best.
The countywide overall industrial/R&D average
asking rental rate reached its market bottom
of $0.80/SF/mo. in Q1 2011. For the last eight
quarters, the rent has settled in the low-$0.80
range and stood at $0.82/SF/month in Q4
2012 – a $0.01 decrease from Q3. Overall,
rates tended to be relatively at but should pick
up increased momentum in 2013 as vacancy
continues to tighten up.
VACANCY
The overall vacancy rate decreased by 34 basis
points in Q4, settling in at 9.9%. This marks
the rst quarter in four years where vacancy
has dropped below 10% (9.7% in Q1 2009).
The industrial and R&D vacancy components
measured 8.7% and 12.8%, respectively. Over
the course of the year, R&D vacancy has
decreased by 267 basis points (15.4% in Q4
2011) and industrial vacancy has decreased by
116 basis points (9.9% in Q4 2011).
The Q4 2012 combined industrial/R&D direct
vacancy rate decreased to 9.3 % compared to
9.7% at the end of Q3. The sublease vacancy
NORTH COUNTY
I-15 CORRIDOR
MCAS MIRAMAR
CENTRAL
COUNTY
Continued on page 4
P. 2 | COLLIERS INTERNATIONAL
MARKET REPORT | Q4 2012 | INDUSTRIAL | SAN DIEGO COUNTY
COLLIERS INTERNATIONAL | P. 3
MARKET REPORT | Q4 2012 | INDUSTRIAL | SAN DIEGO COUNTY
Submarket / Class Bldgs
Total
Inventory
SF
Direct
Vacancy
Rate
Sublease
Vacancy
Rate
Total
Vacancy
Rate
Prior Qtr
Vacancy
Rate *
Net Abs
Current Qtr
SF
Net Abs
YTD
SF
New Supply
Current Qtr
SF
Under
Construction
SF
Proposed
SF
INDUSTRIAL TOTALS BY MARKET Manufacturing, warehouse, distribution, and multi-tenant/incubator
Central County 3,183 83,112,632 8.1% 0.4% 8.6% 8.7% 282,299 1,247,099 0 49,256 2,663,432 $0.64
North County 2,191 40,137,704 9.6% 0.1% 9.7% 9.7% 19,138 268,068 0 0 1,511,019 $0.69
I-15 Corridor 305 10,740,281 6.1% 0.2% 6.3% 7.4% 247,152 208,307 129,845 0 382,900 $0.81
TOTAL 5,679 133,990,617 8.4% 0.3% 8.7% 8.9% 548,589 1,723,474 129,845 49,256 4,557,351 $0.67
R&D TOTALS BY MARKET Flex, wet lab and R&D
Central County 797 32,749,378 10.0% 1.8% 11.8% 12.9% 474,942 1,039,918 0 123,400 1,393,588 $1.17
North County 343 11,919,114 10.7% 0.2% 10.9% 11.2% 48,429 249,241 0 0 1,623,474 $0.94
I-15 Corridor 114 8,320,647 17.7% 1.6% 19.3% 19.8% (40,692) 2,109 0 0 605,000 $1.07
TOTAL 1,254 52,989,139 11.4% 1.4% 12.8% 13.6% 482,679 1,291,268 0 123,400 3,622,062 $1.10
COMBINED INDUSTRIAL / R&D BY MARKET AND SUBMARKET
Central County
Airport / SA 76 1,888,166 6.1% 0.0% 6.1% 6.8% 12,550 (82,759) 0 0 0 $0.86
Campus Pt / Egate 41 3,849,819 11.3% 9.7% 21.0% 24.6% 138,019 160,938 0 123,400 601,967 $2.23
Central San Diego 415 8,415,760 4.1% 0.0% 4.1% 5.3% 99,607 127,009 0 0 0 $0.82
East County 604 14,158,749 5.9% 0.1% 6.0% 6.4% 50,826 248,051 0 0 1,382,158 $0.67
Kearny Mesa 628 16,474,087 4.4% 0.4% 4.8% 4.8% (9,812) 207,867 0 0 65,691 $0.97
Miramar 583 13,750,281 9.8% 1.2% 11.0% 10.9% 130,769 42,859 0 0 0 $0.85
Mission Gorge / Vly 95 2,273,798 7.0% 2.7% 9.8% 12.0% 51,081 76,907 0 0 0 $0.84
Otay Mesa 305 15,146,278 16.1% 0.7% 16.7% 16.6% (15,291) 830,519 0 49,256 1,768,274 $0.47
Rose Cyn / Morena 189 4,140,283 5.9% 0.0% 5.9% 6.2% 11,086 80,355 0 0 0 $0.77
Sorrento Mesa 277 12,951,311 11.3% 0.4% 11.7% 11.8% 170,636 318,129 0 0 0 $1.13
Sorrento Valley 106 3,411,905 8.4% 1.9% 10.2% 10.7% 16,144 53,570 0 0 0 $1.24
South Bay 594 14,349,850 7.0% 0.2% 7.2% 7.6% 53,529 30,597 0 0 0 $0.59
Torrey Pines 67 5,051,723 13.0% 0.0% 13.0% 13.6% 48,097 192,975 0 0 238,930 N/A
TOTAL 3,980 115,862,010 8.7% 0.8% 9.5% 9.9% 757,241 2,287,017 0 172,656 4,057,020 $0.80
North County
Carlsbad 484 14,851,596 13.4% 0.2% 13.5% 13.6% 23,113 176,437 0 0 1,522,132 $0.89
Escondido 636 7,175,725 4.6% 0.1% 4.7% 6.1% 98,536 95,055 0 0 39,500 $0.72
Oceanside 394 8,014,725 14.5% 0.2% 14.7% 13.3% (100,876) 186,004 0 0 1,227,361 $0.61
San Marcos 490 8,640,707 7.9% 0.0% 8.0% 7.3% (42,571) (58,186) 0 0 53,000 $0.80
Vista 530 13,374,065 7.2% 0.1% 7.3% 8.0% 89,365 117,999 0 0 292,500 $0.71
TOTAL 2,534 52,056,818 9.9% 0.1% 10.0% 10.0% 67,567 517,309 0 0 3,134,493 $0.75
I-15 Corridor
Poway 216 8,326,968 4.1% 0.2% 4.2% 4.3% 145,198 116,882 129,845 0 447,900 $0.81
Rancho Bernardo 133 8,807,534 15.9% 0.2% 16.0% 17.1% 1,013 113,090 0 0 0 $1.04
Scripps Ranch 70 1,926,426 20.5% 6.5% 27.0% 30.1% 60,249 (19,556) 0 0 540,000 $0.88
TOTAL 419 19,060,928 11.2% 0.8% 12.0% 12.9% 206,460 210,416 129,845 0 987,900 $0.98
SAN DIEGO COUNTY COMBINED INDUSTRIAL / R&D
TOTAL 6,933 186,979,756 9.3% 0.6% 9.9% 10.2% 1,031,268 3,014,742 129,845 172,656 8,179,413 $0.82
QUARTERLY COMPARISON
Q4 2012 6,933 186,979,756 9.3% 0.6% 9.9% 10.2% 1,031,268 3,014,742 129,845 172,656 8,179,413 $0.82
Q3 2012 6,923 186,473,096 9.7% 0.5% 10.2% 10.4% 313,346 2,177,531 0 253,245 7,901,261 $0.83
Q2 2012 ** 6,923 186,473,096 9.9% 0.5% 10.4% 11.0% 1,128,595 1,864,185 0 253,245 7,881,009 $0.83
Q1 2012 ** 6,923 186,473,096 10.4% 0.6% 11.0% 11.5% 735,590 735,590 0 253,245 7,747,009 $0.82
Q4 2011 6,849 188,338,032 10.8% 0.8% 11.5% 11.6% 180,204 236,197 0 253,245 7,515,118 $0.83
* Revised in Q4 2011. ** Revised in Q3 2012 to reflect changes to industrial inventory.
Average rental rates are defined as the average asking monthly rate per square foot normalized to a "triple net" basis.
San Diego County Industrial Market
VACANCY NET ABSORPTIONAvg
Rental
Rate
(NNN)
CONSTRUCTIONEXISTING PROPERTIES
INDUSTRIAL OVERVIEW
Q4 2012
SAN DIEGO:
JIM SPAIN, SIOR
Regional Managing Director | San Diego Region
License No. 00804745
4660 La Jolla Village Drive, Suite 100
San Diego, CA 92122 | USA
TEL +1 858.677.5311
FAX +1 858.795.4111
RESEARCHER:
CHRISTOPHER REUTZ
Research Director | San Diego Region
4660 La Jolla Village Drive, Suite 100
San Diego, CA 92122 | USA
TEL +1 858.677.5385
FAX +1 858.795.4185
This report has been prepared by Colliers International for
general information only. Information contained herein
has been obtained from sources deemed reliable and no
representation is made as to the accuracy thereof.
Colliers International does not guarantee, warrant or
represent that the information contained in this document
is correct. Any interested party should undertake their
own inquiries as to the accuracy of the information.
Colliers International excludes unequivocally all inferred or
implied terms, conditions and warranties arising out of
this document and excludes all liability for loss and
damages arising there from.
Accelerating success.
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
Q4
07
Q1
08
Q2
08
Q3
08
Q4
08
Q1
09
Q2
09
Q3
09
Q4
09
Q1
10
Q2
10
Q3
10
Q4
10
Q1
11
Q2
11
Q3
11
Q4
11
Q1
12
Q2
12
Q3
12
Q4
12
$ /
SF /
Month
(N
NN
)
Industrial R&D Combined
HISTORICAL RENTAL RATE TRENDS Industrial, R&D and Combined Rates
Quarterly Average Asking Rate Per SF Per Month (NNN)
46.2%
32.4%
9.9% 6.9%
4.5%
<= 2,000 SF [234]
2,001 - 5,000 SF [164]
5,001 - 10,000 SF [50]
10,001 - 20,000 SF [35]
>= 20,001 SF [23]
INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q4 2012
RENTAL RATES
Since a historical high
point in Q3 2008, the
countywide average
asking rental rate for
combined industrial and
R&D space has been
steadily decreasing.
Since Q1 2011, rents have
stabilized in the
low-$0.80/SF/month
range. The Q4 2012
average rate of $0.82/SF/
month is still 17% less
than the historical high; it
decreased by $0.01 for
the quarter.
LEASING ACTIVITY
Just over 500 leases were
completed in Q4 2012,
totaling approximately
2.5 million SF. 89% of all
leases were 10,000 SF or
less, while only 11% of all
leases were over 10,000 SF
in size. Smaller tenants
continue to make up a larger
proportion of all leases
signed in Q4 and will likely
do so in 2013.
www.colliers.com/sandiego
increased just slightly 0.6% which continued
to keep at historically low levels. At year-
end, the vacant sublease inventory accounted
for 1.1 million SF.
Nearly three years of vacancy rates in the
11%-12% range has been broken over the
past three quarters. Vacancy continues to
slide further down and will likely to be in the
low-9% range by the end of 2013.
NEW SUPPLY
In Q4, construction was completed on the
129,845 SF build-to-suit for Hoist Fitness
building in Poway. This marked the only
industrial construction in the county
during 2012. The only space currently under
construction includes the 123,400 SF building
in the Illumina campus in the Campus Point/
Eastgate submarket – which will be completed
in mid-2013 – and a 49,256 SF building on
Camino Maquiladora in Otay Mesa with projected
completion in Q1 2013.
Proposed new development totals about 8.2
million SF with 72% of this space concentrated
in just four submarkets: Otay Mesa, Carlsbad,
East County and Oceanside. The majority of
immediate to mid-term future development
will be concentrated in build-to-suits, but the
current level of elevated demand is likely to
encourage new speculative construction in the
next few years.
512 o ces in
61 countries on
6 continents
United States: 125
Canada: 38
Latin America: 18
Asia Paci c: 214
EMEA: 117
$59.6 billion in annual transactions
1.0 billion square feet under
management
Over 12,500 professionals
MARKET REPORT | Q4 2012 | INDUSTRIAL | SAN DIEGO COUNTY