Sign of positive economic growth
The industrial real estate market in Carlsbad is on the upswing, finally free from the effects of the Great Recession, which saw rental rates and the price of building and land purchases fall as businesses contracted, laid off employees and freed up office space.
It took time for Carlsbad's industrial real estate market to reflect what was going on financially throughout the country. The market trended down until 2011, when it hit bottom, stabilized and then moved toward pre-recession levels.
Very little new construction took place during the recession, but during the recovery, buildings started to get absorbed briskly, and filled up a lot quicker than they could be delivered, increasing demand for space.
Now, for the first time since 2006, developers are starting to build new space that has not been pre-sold or leased to a specific company, a practice called "speculative or 'spec' building" and a true indicator of recovery, said Tucker Hohenstein, senior vice president and sales manager of Colliers International in Carlsbad.
"We're seeing a return of speculative industrial building development in the Carlsbad market in 2015," Hohenstein said. "That has not happened since 2006-2007 … there has not been someone who said, 'I'm going to build a building with no user identified and think that the market will absorb it.'"
A prime example of this is the Carlsbad Oaks North project, a 141,000 square-foot Class A industrial multi-tenant development near the intersection of Faraday Avenue and Melrose Drive. Hohenstein said a project such as this would most likely attract mid-sized companies that are growing.
"The return of speculative building means that the market is strong, that it's healthy and that there's perceived demand," Hohenstein said.
He noted that it takes a certain level of rental rates to justify building new construction, since most builders will not move forward with construction plans unless they can get 9-10 percent return in investment.
Another positive sign in Carlsbad is that another building practice,, dubbed "built-to-suit", is also thriving, most notably near the intersection of El Camino Real and Palomar Airport Road, where ViaSat Inc. is constructing its campus expansion.
"Usually, build-to-suit construction is the first to take place coming out of a recovery," Hohenstein said.
Currently, Carlsbad has an existing inventory of 14.8 million square feet of space. 52.6 percent is in research and development; 29.4 percent is in manufacturing; 15.5 is in industrial multi-tenant; and 2.5 percent is in distribution. There are 29,800 square feet under construction and 470,392 square feet of proposed construction in Carlsbad. The more than 500,000 square feet of future inventory accounts for almost a third of the future inventory for the North County San Diego region, which includes Carlsbad, Escondido, Oceanside, San Marcos and Vista. Of those cities, the only two that have land available for construction are Carlsbad and Oceanside.
While price is higher in Carlsbad, its coastal location, airport, direct access to the freeway and its strong corporate base companies that cluster around each other and attract each other as well as its reputation for a well-planned and master planned business park community make it an attractive choice for businesses.
"There are just a lot of things about Carlsbad that they've done well," Hohenstein said.
The industrial real estate market in Carlsbad is on the upswing, finally free from the effects of the Great Recession, which saw rental rates and the price of building and land purchases fall as businesses contracted, laid off employees and freed up office space.
It took time for Carlsbad's industrial real estate market to reflect what was going on financially throughout the country. The market trended down until 2011, when it hit bottom, stabilized and then moved toward pre-recession levels.
Very little new construction took place during the recession, but during the recovery, buildings started to get absorbed briskly, and filled up a lot quicker than they could be delivered, increasing demand for space.
Now, for the first time since 2006, developers are starting to build new space that has not been pre-sold or leased to a specific company, a practice called "speculative or 'spec' building" and a true indicator of recovery, said Tucker Hohenstein, senior vice president and sales manager of Colliers International in Carlsbad.
"We're seeing a return of speculative industrial building development in the Carlsbad market in 2015," Hohenstein said. "That has not happened since 2006-2007 … there has not been someone who said, 'I'm going to build a building with no user identified and think that the market will absorb it.'"
A prime example of this is the Carlsbad Oaks North project, a 141,000 square-foot Class A industrial multi-tenant development near the intersection of Faraday Avenue and Melrose Drive. Hohenstein said a project such as this would most likely attract mid-sized companies that are growing.
"The return of speculative building means that the market is strong, that it's healthy and that there's perceived demand," Hohenstein said.
He noted that it takes a certain level of rental rates to justify building new construction, since most builders will not move forward with construction plans unless they can get 9-10 percent return in investment.
Another positive sign in Carlsbad is that another building practice,, dubbed "built-to-suit", is also thriving, most notably near the intersection of El Camino Real and Palomar Airport Road, where ViaSat Inc. is constructing its campus expansion.
"Usually, build-to-suit construction is the first to take place coming out of a recovery," Hohenstein said.
Currently, Carlsbad has an existing inventory of 14.8 million square feet of space. 52.6 percent is in research and development; 29.4 percent is in manufacturing; 15.5 is in industrial multi-tenant; and 2.5 percent is in distribution. There are 29,800 square feet under construction and 470,392 square feet of proposed construction in Carlsbad. The more than 500,000 square feet of future inventory accounts for almost a third of the future inventory for the North County San Diego region, which includes Carlsbad, Escondido, Oceanside, San Marcos and Vista. Of those cities, the only two that have land available for construction are Carlsbad and Oceanside.
While price is higher in Carlsbad, its coastal location, airport, direct access to the freeway and its strong corporate base companies that cluster around each other and attract each other as well as its reputation for a well-planned and master planned business park community make it an attractive choice for businesses.
"There are just a lot of things about Carlsbad that they've done well," Hohenstein said.