Industrial ReportNorth San Diego County1st Quarter 2012PREPARED BY:             COLLIERS INTERNATIONALAdam Molnar         ...
Q1 2012 | INDUSTRIALNORTH COUNTYAT A GLANCE                                                                        OVERVIE...
AT A GLANCE | Q1 2012 | INDUSTRIAL | NORTH COUNTY                  ACTIVITY                  Land appears to have reversed...
Q1 2012 | INDUSTRIALCARLSBADAT A GLANCE                                                                         OVERVIEW  ...
El C                       am                 ino          AT A GLANCE | Q1 2012 | INDUSTRIAL | CARLSBAD                  ...
Q1 2012 | INDUSTRIALESCONDIDOAT A GLANCE                                                                      OVERVIEW    ...
AT A GLANCE | Q1 2012 | INDUSTRIAL | ESCONDIDO                                                        oad                 ...
Q1 2012 | INDUSTRIALOCEANSIDEAT A GLANCE                                                                       INDUSTRIAL/...
AT A GLANCE | Q4 2011 | INDUSTRIAL | OCEANSIDE                                                                            ...
Q1 2012 | INDUSTRIAL      SAN MARCOS      AT A GLANCE                                                                     ...
Q1 2012 Industrial Report
Q1 2012 Industrial Report
Q1 2012 Industrial Report
Q1 2012 Industrial Report
Q1 2012 Industrial Report
Q1 2012 Industrial Report
Q1 2012 Industrial Report
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Q1 2012 Industrial Report

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Q1 2012 Industrial Report

  1. 1. Industrial ReportNorth San Diego County1st Quarter 2012PREPARED BY: COLLIERS INTERNATIONALAdam Molnar 5901 Priestly Drive, Suite 100Greg Lewis Carlsbad, CA 92008Tucker Hohenstein Fax 760 438 8925Mike Erwin www.colliers.com/carlsbad
  2. 2. Q1 2012 | INDUSTRIALNORTH COUNTYAT A GLANCE OVERVIEW The North San Diego County industrial market is largely decentralized and comprised of five 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 Oceanside County, the coastal location is a major factor in the area’s appeal to corporate users and Vista its 826,985 residents. Carlsbad San Escondido The industrial market consists of approximately 52.3 million square feet. By comparison, Marcos Ocean the total San Diego industrial market is 188.3 million square feet. North County represents 27% of the total. For Q1 2012 North County vacancy was 10.6%. The vacancy rate is decreasing as 172,000 SF of positive net absorption occurred. The following tableMARKET INDICATORS summarizes the inventory and vacancy by submarket: Q1 Q2 2012 2012 (forecast) Submarket Buildings Total Inventory Vacant SF Vacancy Rate VACANCY Carlsbad 485 15,025,194 2,165,696 14.4% Escondido 637 7,183,097 445,352 6.5% NET ABSORPTION Oceanside 396 8,038,265 1,246,094 15.5% CONSTRUCTION San Marcos 489 8,710,664 604,631 6.9% RENTAL RATE Vista 530 13,374,822 1,081,203 8.1% Total 2,537 52,333,280 5,566,778 10.6% LEASE CONCESSIONS North San Diego County is well known for its highly skilled labor force, excellent transportation network, pro-growth business environment, significant Federal Government presence, desirable vacation destination including world class beaches, resorts, golf venues, and abundant employee housing.INDUSTRIAL/R&D VACANCY RATESQ1 2012INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKETDiego County The North San TRENDS industrial market is home to a diversified mix of users VISTA HISTORICAL MARKET TRENDSQ1 2012 including defense, telecommunications, software, medical manufacturing, golf and leisure Carlsbad 14.4% Escondido 6.5% Coca-Cola Isis Pharmaceuticals DJO, Inc. Medtronic Life Technologies Linear Oceanside 15.5% Titleist Golf Cobra / Puma Golf Killion Industries San Marcos 6.9% ViaSat TaylorMade Golf Jeld-Wen Windows and Doors Vista 8.1% Covidien Denso Wireless Sumitomo ElectricNorth County 10.6% Abbott Labs US Foods McCain, Inc. Genentech Philips Respironics Directed Electronics 0% 5% 10% 15% 20% Callaway Golf Thomson Reuters GIA L-3 Communications Rockwell Collins Hunter Industries SAIC John Deere Watkins Manufacturing OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDSwww.colliers.com/carlsbad
  3. 3. AT A GLANCE | Q1 2012 | INDUSTRIAL | NORTH COUNTY ACTIVITY Land appears to have reversed its downward NORTH COUNTY HISTORICAL MARKET TRENDS slide with the sale of 28 acres in Ocean Ranch, Oceanside to US Foods for $11.50/ 1,500 14% SF. To help put this price improvement in 12% 1,000 perspective, a year earlier the same property 10% was purchased as a short-sale by a local Vacancy Rate SF (000s) 500 8% investor/developer for $7.23/SF. Supply of industrial land, particularly large contiguous 0 6% sites in North County, is limited. It will not take 4% much in the way of demand to see further -500 2% increases in land prices. -1,000 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 The sale of several distressed properties Q1 during Q1 pulled the median sale price down Net Absorption New Supply Vacancy to $76.50/SF. As distressed real estate is cleared from the market look for sale prices to gradually increase and good quality product to command a sizable premium over the Q1 median price. Many “would be” sellers have chosen to lease rather than compete with distressed opportunities. This has resulted in the supply of properties available for lease out numbering those for sale by a ratio of 6 to 1 in the 25,000-50,000 square foot range. It was a positive sign to see investors, owner-occupiers and tenants active during Q1. Investors purchased two vacant buildings located in Vista. Pacifica Enterprises bought 65,000 square feet 1081 Poinsettia for $58/ SF, while SR Commercial purchased 39,000 square feet at 2390 Oak Ridge for $69.57/SF. Owner occupiers purchased four buildings for a total of 113,449 square feet with prices ranging between $65.78/SF and $127.90/ SF. Significant tenant transactions included; La Cantina Doors leasing 67,000 square feet in Oceanside, PODS renewing their lease of 64,000 square feet in Carlsbad, Astro Converters renewing their lease of 25,000 square feet in San Marcos and Balboa Cal Inc. occupying 23,000 square feet in Vista. FORECAST There are several transactions underway at the end of Q1 that will likely help boost activity when they are completed during Q2. Look for investors and tenants to lead the way, while owner-occupiers find it difficult to locate good quality properties or are reluctant to fill the price gap that has been created by recent distressed sales. Lease rates will move sideways in the near term, but should begin to increase later in the year as vacancy continues its slow decline. The current supply of spaces between 25,000-50,000 square feet for lease will force landlords to complete aggressively for these tenants. New speculative construction while being analyzed is still at least 24 months away. Filling the gap will be an occasional build-to-suit if companies are unable to find a desirable existing alternative. This document has been prepared by Colliers International for advertising and general information only. Colliers prepared by ADAM MOLNAR, GREG LEWIS 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 TUCKER HOHENSTEIN & MIKE ERWIN, 760 438 8950 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.
  4. 4. Q1 2012 | INDUSTRIALCARLSBADAT A GLANCE OVERVIEW This year is off to a slow start in Carlsbad with a meager 14,650 square feet of positive absorption in 1Q 2012. The overall vacancy rate for Industrial/R&D product sits at 14.41% with industrial product continuing to outperform R&D (12.51% and 16.17% respectively). Oceanside There is no new construction underway or in the planned stage. Vista ACTIVITY San The limited activity in the leasing market was mostly concentrated in the 10,000 to Carlsbad Marcos 20,000 square foot segment with companies like Scratch Media and Iris International Ocean committing to space in Carlsbad. Renewals remain prevalent as current Landlords tend to have a leg up on the competition due to prohibitive moving and Tenant Improvements costs associated with a new location. Examples of this during 1Q 2012 are PODS whoMARKET INDICATORS renewed in 64,541 SF and Luxtera who downsized and renewed in 32,510 SF. There Q1 Q2 were no significant sales transactions in 1Q 2012 in Carlsbad. 2012 2012 (forecast) VACANCY FORECAST Investment sales appear to be on the rebound in Carlsbad with multiple large Industrial/ NET ABSORPTION R&D projects expected to trade hands in 2Q 2012. The remaining shortage of large blocks of contiguous, functional space above 75,000 SF suggests that companies with CONSTRUCTION forward thinking and the desire to consolidate operations will continue to explore Build RENTAL RATE to Suit options. Overall activity and demand in the market appear to be up and supply is expected to diminish, meaning that Landlords should benefit from a slight uptick in rentalLEASE CONCESSIONS rates with no new product in the pipeline. INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKE Q1 2012 700 16%INDUSTRIAL/R&D VACANCY RATES 600 14%Q1 2012INDUSTRIAL/R&D VACANCY RATES CARLSBAD 500 HISTORICAL MARKET TRENDS 12% VISTA HISTORICAL MARKET TRENDSQ1 2012 400 10% Vacancy Rate SF (000s) Carlsbad Carlsbad 14.4% 300 8% Escondido 6.5% 200 6% Oceanside 15.5% 100 4% San Marcos 6.9% 0 2% Vista 8.1% -100 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012North County 10.6% Q1 0% 5% 10% 15% 20% Net Absorption New Supply Vacancy OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDSwww.colliers.com/carlsbad
  5. 5. El C am ino AT A GLANCE | Q1 2012 | INDUSTRIAL | CARLSBAD Ave Rea more l Syca Carlsbad Oaks North Busines s P Whiptail Loop us es s a Carlsbad Research Dr se Center r rk lro r D Me Faraday Ave F Fa rad ay Av e El F Carlsbad ue Oaks Carlsbad rte t Raceway S El L t t Ca oke mi er A Lio no nshead he Ave Re R v vesings al abad Palomurse ar A irpo rt Rd Blvd ge Colle McClellan Palomar Palomar Gateway Rd Forum Carlsbad Airport Airport Bressi Center Ranch d tR or rp Ai ar m alo P Me elr o os e Dr r ve aA etti E El F Palomar Airport ns Poi Business Park u uer t te S t t Rd Alga El Ca TRANSACTION ACTIVITY - Q1 2012 mi no Re e Av SALES ACTIVITY laa La Costa Resort & Spa # PROPERTY Av NAME/ADDRESS iar BUYER TYPE SIZE (SF) SALE PRICE PRICE/SF aP kw There were Park Hyatt y no building sales larger than 15,000 SF during Q1 Aviara Resort LEASING ACTIVITY # PROPERTY NAME/ADDRESS TENANT NAME SIZE (SF) TERM EFF RATE/SF 1 3254 GreyHawk Court Scratch Media 12,835 48 months $0.91 MG 2 1891 Rutherford Road Iris International 20,000 84 months $1.53 NNN 3 2320 Camino Vida Roble Luxtera, Inc. (renewal) 32,510 43 months $0.98 NNN 4 2858 Loker Avenue PODS 64,541 84 months $0.70 NNN This document has been prepared by Colliers International for advertising and general information only. Colliers prepared by ADAM MOLNAR, GREG LEWIS 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 TUCKER HOHENSTEIN & MIKE ERWIN, 760 438 8950 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.
  6. 6. Q1 2012 | INDUSTRIALESCONDIDOAT A GLANCE OVERVIEW The Escondido Industrial Market had minimal activity during the 1Q 2012, but continues to have the lowest vacancy rate of any city in North San Diego County at 6.5%. There is no new speculative industrial building or flex construction underway at this time. We most Oceanside Vista likely will see Hamann Construction break ground on Cor-O-Van’s ~100,000 sf build-to- suit in 2Q 2012. The new Palomar Medical Center under construction on a 56 acre site in the Escondido Research and Technology Center continues to take shape with a target San Escondido Carlsbad Marcos opening of 3Q 2012. Ocean ACTIVITY There were no significant sale or lease transactions in Escondido during 1Q 2012, butMARKET INDICATORS there was good lease activity in the multi-tenant parks with 24 lease transactions ranging Q1 Q2 between 1,000 - 5,000 square feet. Lease rates remained steady for 1Q 2012; sales 2012 2012 (forecast) activity was minimal with only three transactions, all below $500,000. VACANCY FORECAST NET ABSORPTION The road ahead is bright for Escondido. With a healthy vacancy rate, there will be upward pressure on rental rates and sale prices in 2012. The economy is showing signs of CONSTRUCTION recovery with an increase in employment which will drive demand for industrial space. One of our clients is tentatively planning on breaking ground on a new speculative, for RENTAL RATE lease industrial project in Escondido which is something we have not seen for severalLEASE CONCESSIONS years. ESCONDIDO HISTORICAL MARKET TRENDS S NORTH COUNTY NET ABSORINDUSTRIAL/R&D VACANCY RATESQ1 2012 300 10%INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET TRENDSQ1 2012 9% 200 Carlsbad 8% 14.4% 5-Yr. Avg. = 91,36 100 7% Escondido Escondido 6.5% Vacancy Rate SF (000s) 6% 0 Oceanside 15.5% 5% -100 4% San Marcos 6.9% -200 3% Vista 8.1% 2% -300 1%North County 10.6% -400 0% 0% 5% 10% 15% 20% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 Net Absorption New Supply Vacancy OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS NORTH COUNTY HISTORICAL MARKET TRENDSwww.colliers.com/carlsbad
  7. 7. AT A GLANCE | Q1 2012 | INDUSTRIAL | ESCONDIDO oad hl R rda NoMyers Avenue 78 Mo ntie l Rd Esc o ondCountry Club Dr Cen ido nter oA Quin ve Cit in yP ce S Mis sion nue ark a St Roa Ave ion way d Miss R Roc y kS Spr sing sR d Au ve to nue Ave Dri Pa ton rk Wa hing Was en y eas ndr NA Sim Palomar pso nW Pomerado ay Hospital Ind ust ria Cit lA i Escondido ve rac St Research Tul ip ado & Tech Center Pk wy ue ven le A Ha Escondido N. Auto Park ve Dri en eas ndr SA ay Auto P kw ark Par W ay ley Val Ent erp rise St A 9th TRANSACTION ACTIVITY - Q1 2012 SALES ACTIVITY # PROPERTY NAME/ADDRESS BUYER TYPE SIZE (SF) SALE PRICE PRICE/SF No building sales above 10,000 square feet LEASING ACTIVITY # PROPERTY NAME/ADDRESS TENANT NAME SIZE (SF) TERM EFF RATE/SF 1 302 Enterprise, Suite A Nexsan 13,772 19 months $0.63 Gross This document has been prepared by Colliers International for advertising and general information only. Colliers prepared by ADAM MOLNAR, GREG LEWIS 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 TUCKER HOHENSTEIN & MIKE ERWIN, 760 438 8950 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.
  8. 8. Q1 2012 | INDUSTRIALOCEANSIDEAT A GLANCE INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS VISTA Q1 2012 OVERVIEW While Oceanside still maintains the highest vacancy rate in North County at 15.46% the 115,069 SF of positive net absorption during Q1 2012 was the best quarterly performance since Q2 2008. This extremely positive indicator signals the long anticipated recovery is Oceanside underway. Vista With just under 1.2m SF of vacant industrial space available there are numerous newer San and older properties of all sizes available to choose from including multi-tenant, free- Carlsbad Marcos standing and larger manufacturing and warehouse distribution facilities. Ocean ACTIVITY Industrial sale transactions OCEANSIDE HISTORICAL MARKET TRENDS S SAN MMARKET INDICATORS were highlighted by the 28 800 20% Q1 2012 Q2 2012 (forecast) acre user purchase by US 18% 600 Foods in the Ocean Ranch 16% VACANCY business park which closed in 400 14% Vacancy Rate SF (000s) 12% March for $11.50 SF. Long term 200 10% NET ABSORPTION plans include the construction 8% 0 of 400,000 – 500,000 SF of 6% CONSTRUCTION 4% food storage and distribution -200 2% RENTAL RATE facilities replacing multiple -400 0% lease properties in Vista as 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1LEASE CONCESSIONS leases term out. Net Absorption New Supply Vacancy Industrial building sales included the Gilead Sciences purchase of 35,856 SF at 4039 Avenida de la Plata. Gilead owns the property next door and this expansion includes plans for a major renovation of the property and a substantial capital improvement investment expanding their lifeINDUSTRIAL/R&D VACANCY RATES sciences business in the Oceanside area.Q1 2012INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET TRENDSQ1 2012 Lease transaction activity was strong this quarter and included a 66,780 SF lease in La Carlsbad 14.4% Pacifica in Ocean Ranch with La Cantina Doors, a tenant that expanded and relocated Escondido 6.5% from the Vista market. Four other leases between 12,000 and 18,000 were completed showing momentum in medium size tenant activity which is a very positive factor. Oceanside Oceanside 15.5% San Marcos 6.9% FORECAST Vista 8.1% Oceanside will continue to see positive net absorption this coming quarter and for the remainder of the year. All economic indicators are trending positive and commercialNorth County 10.6% real estate offices are all reporting the best activity in years. Overall, deals are still taking 0% 5% 10% 15% 20% a long time to process, landlords are making concessions to keep existing tenants and lower building sale prices and attractive interest rates are making user purchases very affordable. OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDSwww.colliers.com/carlsbad
  9. 9. AT A GLANCE | Q4 2011 | INDUSTRIAL | OCEANSIDE Co ll lleg eB Blv d Ol Dr d Gr sa ov Me e Ro a d Te m pl e He iig ht ts e Av Dr rth Paci c Coast No Business Park l vd 7 hB nc Ra ean Oc Oceanside Ocean Gateway Ranch Av Ocean Ranch en Plaza Retail ida i De Ran lO Avenida De La Plata El Corazon r ro c cho Del r Rancho rD Del Oro Oro Dr nte ro Ce te ra po Cor Oceanside Blvd Sprinter Light Rail LineTRANSACTION ACTIVITY - Q1 2012SALES ACTIVITY # PROPERTY NAME/ADDRESS BUYER TYPE SIZE (SF) SALE PRICE PRICE/SF 1 4039 Avenida de la Plata Gilead Services / User 35,856 $4,586,000 $127.90 2 Ocean Ranch Lots 27 & 28 U.S. Foods 27.96 Acres $14,000,000 $11.50LEASING ACTIVITY # PROPERTY NAME/ADDRESS TENANT NAME SIZE (SF) TERM EFF RATE/SF 3 2817 Ocean Ranch Boulevard La Cantina Doors 66,780 60 months $0.55/NNN 4 398 Via El Centro Windigo International 12,000 36 months $0.50/G 5 3801 Ocean Ranch Blvd Star Metal Plating 12,450 60 months $0.49/NNN 6 2612 Temple Heights Dr Apical Industries 18,160 60 months $0.55/G 7 1353 Rocky Point Dr Dixon Scientific 18,911 38 months $0.64/G This document has been prepared by Colliers International for advertising and general information only. Colliers prepared by ADAM MOLNAR, GREG LEWIS 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 TUCKER HOHENSTEIN & MIKE ERWIN, 760 438 8950 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.
  10. 10. Q1 2012 | INDUSTRIAL SAN MARCOS AT A GLANCE OVERVIEW The San Marcos industrial market positive absorption was 36,664 square feet and the quarter ended with a vacancy rate of 6.9%. This is the second best in North County following only Escondido at 6.5%. The positive absorption was on par with some of the best Oceanside quarters in the last three years and now San Marcos has posted three consecutive quarters Vista of net absorption which it hasn’t done since the recession started. San Escondido Carlsbad Marcos ACTIVITY Ocean Industrial building sale activity was light with just one sale closing in the quarter. Metro Western Sign & Awnings purchased a 24,128 square foot distressed property with an outside yard area at 261 South Pacific Street from the Small Business Administration. MARKET INDICATORS Q1AD HISTORICAL MARKET TRENDS Q2 LeasingHISTORICAL MARKET TRENDS between 13,000 and 25,000 square feet the largest VISTA activity consisted of 3 leases 2012 2012 (forecast) of which was a renewal. Leasing velocity is up with several transactions in the market that should close in the next 30-60 days. VACANCY NET ABSORPTION FORECAST CONSTRUCTION We expect to see a continued reduction in supply in the market as space is taken down and no new product is added to the market. Activity in all product types including multi-tenant, RENTAL RATE manufacturing and warehouse distribution is up significantly. As the economy continues LEASE CONCESSIONS to improve the nascent recovery should benefit owners of industrial property in this core market . INDUSTRIAL/R&D VACANCY RATESDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS Q1 2012 INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS 300 VISTA HISTORICAL MARKET TRENDS 9% Q1 2012 8% Carlsbad 14.4% 200 7% Escondido 6.5% 100 6% Vacancy Rate SF (000s) 5% Oceanside 15.5% 0 4% San Marcos San Marcos 6.9% -100 3% Vista 8.1% 2% -200 1% North County 10.6% -300 0% 0% 5% 10% 15% 20% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 Net Absorption New Supply Vacancy OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS www.colliers.com/carlsbad

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