An industrial report released by Cassidy Turley says that industrial vacancies have dropped to levels not seen since 2001.
According to the report, San Diego County generated 386,000 square feet of positive net absorption across all product types in the third quarter of 2014, bringing year-to-date activity to 1.2 million square feet, more than half of which occurred in North County submarkets. San Diego County generated 386,000 square feet of positive net absorption across all product types in the third quarter of 2014, bringing year-to-date activity to 1.2 million square feet, and Carlsbad is one of the cities that is helping North County lead the market.
This according to an industrial report released by Cassidy Turley late in the fall.
"This is the 13th consecutive quarter of positive activity during which tenants have absorbed 7.2 million square feet," said Bryce Aberg, managing director with Cassidy Turley in San Diego. "The San Diego industrial market has been in growth mode since the beginning of 2013, following a three-year recovery period after 4.2 million square feet was returned to the market in 2009, the worst year of the recession."
North County leads the market with 627,000 square feet absorbed year-to-date.
"North San Diego County, particularly submarkets like Carlsbad and Oceanside, have large blocks of available space in existing buildings that are well positioned to meet growing tenant demand," said Todd Davis, senior vice president with Cassidy Turley. "This has fueled a wave of investment activity, as investors seek to position themselves in areas that have little new inventory on the immediate horizon."
Cassidy Turley reports that total countywide vacancy for all product types, including sublease space, has declined for 13 consecutive quarters to 7.1 percent, finally below the pre-recession level of 7.2 percent recorded more than eight years ago in the second quarter of 2006. Current vacancy is 160 basis points (bps) lower than the vacancy rate of 8.7 percent a year ago, and 560 bps lower than the peak rate of 12.7 percent recorded five years ago in fourth quarter of 2009.
"The last time countywide vacancy below 7.1 percent was 13 years ago, in the fourth quarter of 2001," said Aberg.
Over the past four years, the countywide monthly asking rent for all product types has only increased from $0.78 to $.80 per month, per square foot triple net (NNN). However, the local industrial market is seeing strong increases in the lease rates for modern industrial facilities with low-finish space. These asking rates have jumped by as much as 10 percent in some cases since last year. Still, industrial rental rate growth remains strongly dependent upon the age and quality of product on the market.
"That being said, with the expectation of continued healthy absorption levels and falling vacancy, we anticipate that rental rate growth will expand throughout the region's industrial sector, as will the tightening of concessions, in the months ahead," said Dennis Visser, managing director with Cassidy Turley.
In 2015, all employment sectors combined are forecasted to grow 2.3 percent, or by 31,100 jobs, countywide, with the manufacturing and wholesale sectors forecasted to grow by 0.7 percent or 980 jobs, positively affecting demand for industrial space.
"Tenants currently in the market are looking for 4.4 million square feet over the next 24 months countywide," said Mr. Davis. "Until new speculative construction returns, the steady absorption of existing inventory will continue to drive vacancy rates lower."
According to the report, San Diego County generated 386,000 square feet of positive net absorption across all product types in the third quarter of 2014, bringing year-to-date activity to 1.2 million square feet, more than half of which occurred in North County submarkets. San Diego County generated 386,000 square feet of positive net absorption across all product types in the third quarter of 2014, bringing year-to-date activity to 1.2 million square feet, and Carlsbad is one of the cities that is helping North County lead the market.
This according to an industrial report released by Cassidy Turley late in the fall.
"This is the 13th consecutive quarter of positive activity during which tenants have absorbed 7.2 million square feet," said Bryce Aberg, managing director with Cassidy Turley in San Diego. "The San Diego industrial market has been in growth mode since the beginning of 2013, following a three-year recovery period after 4.2 million square feet was returned to the market in 2009, the worst year of the recession."
North County leads the market with 627,000 square feet absorbed year-to-date.
"North San Diego County, particularly submarkets like Carlsbad and Oceanside, have large blocks of available space in existing buildings that are well positioned to meet growing tenant demand," said Todd Davis, senior vice president with Cassidy Turley. "This has fueled a wave of investment activity, as investors seek to position themselves in areas that have little new inventory on the immediate horizon."
Cassidy Turley reports that total countywide vacancy for all product types, including sublease space, has declined for 13 consecutive quarters to 7.1 percent, finally below the pre-recession level of 7.2 percent recorded more than eight years ago in the second quarter of 2006. Current vacancy is 160 basis points (bps) lower than the vacancy rate of 8.7 percent a year ago, and 560 bps lower than the peak rate of 12.7 percent recorded five years ago in fourth quarter of 2009.
"The last time countywide vacancy below 7.1 percent was 13 years ago, in the fourth quarter of 2001," said Aberg.
Over the past four years, the countywide monthly asking rent for all product types has only increased from $0.78 to $.80 per month, per square foot triple net (NNN). However, the local industrial market is seeing strong increases in the lease rates for modern industrial facilities with low-finish space. These asking rates have jumped by as much as 10 percent in some cases since last year. Still, industrial rental rate growth remains strongly dependent upon the age and quality of product on the market.
"That being said, with the expectation of continued healthy absorption levels and falling vacancy, we anticipate that rental rate growth will expand throughout the region's industrial sector, as will the tightening of concessions, in the months ahead," said Dennis Visser, managing director with Cassidy Turley.
In 2015, all employment sectors combined are forecasted to grow 2.3 percent, or by 31,100 jobs, countywide, with the manufacturing and wholesale sectors forecasted to grow by 0.7 percent or 980 jobs, positively affecting demand for industrial space.
"Tenants currently in the market are looking for 4.4 million square feet over the next 24 months countywide," said Mr. Davis. "Until new speculative construction returns, the steady absorption of existing inventory will continue to drive vacancy rates lower."