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Q4 2012 Industrial Report
 

Q4 2012 Industrial Report

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    Q4 2012 Industrial Report Q4 2012 Industrial Report Document Transcript

    • Industrial ReportNorth San Diego County4th 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
    • Q4 2012 | INDUSTRIALCARLSBADAT A GLANCE OVERVIEW Absorption 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 Oceanside positive gain of 23,113 SF. The overall vacancy rate for Industrial/R&D continued to inch Vista downward and finished 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 San with a net gain of 160,839 SF against 15,598 SF on the Industrial side. As a result of this Carlsbad Marcos Ocean 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. ACTIVITYMARKET INDICATORS For The largest signed lease in 4Q 2012 was CARLS BAD HIS TORICAL MARKET TRENDS Q4 Q1 a 30,865 SF deal with San Diego-Imperial 700 16% 2012 2013 (forecast) Counties Developmental Services at 5931 600 14% Priestly Drive. This newly renovated R&D 500 12% VACANCY building is owned by Greene Properties and 400 10% Vacancy Rate SF (000s) the tenant is the largest nonprofit agency in 300 8% NET ABSORPTION San Diego County. Other lease transactions 200 6% 100 4% CONSTRUCTION included SGN Nutrition at 2777 Loker Avenue 0 2% (25,680 SF), Signet Armorlite at 5803 -100 0% RENTAL RATE Newton Drive (21,762 SF), Intravas at 5840 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 El Camino Real (21,669 SF), and Aurora Net Absorption New Supply VacancyLEASE CONCESSIONS 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/Office property was purchased by Pacific Realty Advisors at $138.27/SF. Another significant transaction was the sale of 1959 Palomar Oaks Way. This 47,437 SF building, while technically considered an Office property, wasINDUSTRIAL/R&D VACANCY RATES relevant for two reasons. First, the buyer was an R&D user by the name of DATRON out ofQ4 2012 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 Carlsbad Carlsbad 13.8% as part of a larger portfolio with plans to spin off the office building to an owner user. This Escondido 4.9% deal allows them to focus on the 5 remaining R&D buildings in the @Palomar project at a lower basis. Oceanside 14.7% San Marcos 7.9% FORECAST The majority of the new small and mid range for sale product delivered in the previous cycle Vista 7.3% has been absorbed. Regardless of size range there is a limited amount of for sale inventoryNorth County 10.0% in Carlsbad which should push buyers on the sideline into decision making mode. Qualified companies can still take advantage of low interest rates and building prices compared to 0% 5% 10% 15% 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.www.colliers.com/carlsbad
    • El C min a AT A GLANCE | Q4 2012 | INDUSTRIAL | CARLSBAD oR ea Ave l more Carlsbad Syca Oaks North Busines s P Whiptail Loop us es s a r D Carlsbad se lro Research Me Center r rk r D 7 Faraday Ave F Fa rad ay Av e El F 8 ue Carlsbad rte t Raceway S L t t oke er A Lio nshead he Ave v vesingsbad Palomurse ar A irpo lvd rt Rd g eB Colle McClellan Palomar Palomar Gateway Rd Forum Carlsbad Airport Bressi Airport Ranch l d ino Rea Center tR or rp Ai El Cam ar m alo P Me elr Camino Vida Roble os o e Dr r Las Palmas Ave ttia E El F nse Poi u uer te S t t t Rd Alga El Ca mi TRANSACTION ACTIVITY - Q4 2012 no Re e Av ala SALES ACTIVITY La Costa Resort Av & Spa ra ia # PROPERTY NAME/ADDRESS Pk BUYER TYPE SIZE SF SALE PRICE PRICE/SF y w Park Hyatt 1 Aviara Resort 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 LEASING ACTIVITY # 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 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.
    • Q4 2012 | INDUSTRIALESCONDIDOAT A GLANCE 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 Oceanside Vista vacancy rate is also the lowest in Escondido since 1Q08 and continues its downward trend since the peak of 8.5% in 2Q09. San Escondido CARLS BAD HIS TORICAL MARKET TRENDS Carlsbad Marcos Absorption during 4Q12 was Ocean a positive 48,000 square feet, 700 16% 600 14% finishing the year with a positive 500 12% absorption of 55,000 square feet. 400 10%MARKET INDICATORS This positive absorption was a Vacancy Rate SF (000s) 300 8% Q4 Q1 culmination of small lease and 200 6% 2012 2013 (forecast) sale transactions combined with a 100 4% continued stabilization and growth 0 2% VACANCY of the current tenancy within -100 0% NET ABSORPTION the Escondido industrial market. 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Escondido also benefits from the Net Absorption New Supply Vacancy CONSTRUCTION continued demand from companies to be on the I-15 corridor, as RENTAL RATE evidenced by Hamann Construction’s nearly complete 100,000 square foot build-to-suit forLEASE CONCESSIONS Corovan in the Escondido Research and Technology business park. Market rents remained flat 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.INDUSTRIAL/R&D VACANCY RATESQ4 2012 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 Carlsbad 13.8% largest signed lease in 4Q 2012, was a 14,000 SF transaction with X3 Management Services Escondido Escondido 4.9% San Diego. There were five sales in Escondido, in which 3 sales were in buildings less than Oceanside 14.7% 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 San Marcos 7.9% purchased the 57,000 square foot Lee Publications building for $7 Million ($121 psf). Vista 7.3%North County 10.0% FORECAST The lack of supply of buildings for lease and sale in Escondido, combined with record low 0% 5% 10% 15% 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.www.colliers.com/carlsbad
    • AT A GLANCE | Q4 2012 | INDUSTRIAL | ESCONDIDO oad hl R rda No Myers Avenue 78 Mo ntie l Rd Esc con Country Club Dr C Cen dido ter Ave r Cit Quin e yP ce S Mis sion nue ark Roa Ave tt ion way w d Miss Roc kS k prin gs R d 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 Escondido l Av tra e St cad Research Tul ip do & 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 W ay ley y Val Ent erp rise St 9thTRANSACTION ACTIVITY - Q4 2012SALES ACTIVITY # 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 $120.79LEASING ACTIVITY # 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 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.
    • Q4 2012 | INDUSTRIALOCEANSIDEAT A GLANCE 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 – Oceanside Computer Geeks, who vacated 147,000 SF and relocated to a building they purchased in Vista Temecula. San ACTIVITY Carlsbad Marcos Industrial leasing and sale OCEANS IDE HIS TORICAL MARKET TRENDS Ocean activity in the quarter was 800 20% steady with both investors 18% 600 and users closing deals in the 16%MARKET INDICATORS Oceanside submarket. Jazzy 400 14% Vacancy Rate 12% Q4 Q1 Expo renewed their lease in SF (000s) 2012 2013 (forecast) 200 10% the Pacific Coast Business 8% VACANCY Park for two years at a below 0 6% market NNN rate. Nature’s -200 4% 2% NET ABSORPTION Supplements purchased a -400 0% 20,000 SF building in the 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CONSTRUCTION Pacific Coast Business Park to RENTAL RATE occupy. Finally two investors Net Absorption New Supply Vacancy closed purchases in theLEASE CONCESSIONS Oceanside market buying 33,000 SF and 13,000 SF respectively that is a sign of investor confidence 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 industrialINDUSTRIAL/R&D VACANCY RATES space, Oceanside should see a number of sizeable transactions close this year. InQ4 2012 addition the City of Oceanside is now committed to investing in the industrial market with assistance to stimulate attracting manufacturing jobs. Carlsbad 13.8% Escondido 4.9% Oceanside Oceanside 14.7% San Marcos 7.9% Vista 7.3%North County 10.0% 0% 5% 10% 15%www.colliers.com/carlsbad
    • AT A GLANCE | Q4 2012 | 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 d Blv n ch 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 - Q4 2012SALES ACTIVITY # 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 $69.14LEASING ACTIVITY # 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 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.
    • Q4 2012 | INDUSTRIALSAN MARCOSAT A GLANCE 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 Oceanside move that increased vacancy only 67 basis points to 7.99% at year-end. The majority of Vista new vacancy during the quarter was in spaces smaller than 10,000 square feet making this a competitive size range for San Marcos landlords. San Escondido Carlsbad Marcos Ocean 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 ServiceMARKET INDICATORS Partners Supply leasing 18,081 square feet at 120 Mata Way. An owner-user purchased Q4 Q1 12,609 square feet at 2951 Norman Strasse for $62/SF. This building sold at a lower 2012 2013 (forecast) 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 VACANCY for non-stressed assets. NET ABSORPTION FORECAST CONSTRUCTION In the near term lease rates S AN MARCOS HIS TORICAL MARKET TRENDS for smaller (< 10,000 SF) RENTAL RATE 300 9% spaces will be under pressure 8%LEASE CONCESSIONS as tenants have several 200 7% opportunities to choose from. 100 6% Vacancy Rate As landlords look for ways to SF (000s) 5% 0 differentiate their buildings from 4% the pack we anticipate lease -100 3% 2% concessions will continue to be -200 1%INDUSTRIAL/R&D VACANCY RATES used to attract tenants. Leasing -300 0%Q4 2012 of distribution space showed 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 strength during Q4 and will Net Absorption New Supply Vacancy likely continue to do so due to Carlsbad 13.8% its limited supply and increasing Escondido 4.9% national demand for warehouse distribution. We expect lease rates for this product type Oceanside 14.7% 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’tSan Marcos San Marcos 7.9% expect any large moves. Vista 7.3%North County 10.0% 0% 5% 10% 15%www.colliers.com/carlsbad
    • AT A GLANCE | Q4 2012 | INDUSTRIAL | SAN MARCOSTRANSACTION ACTIVITY - Q4 2012SALES ACTIVITY # 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 $61.86LEASING ACTIVITY # 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 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.
    • Q4 2012 | INDUSTRIALVISTAAT A GLANCE OVERVIEW Strong leasing activity, driven VIS TA HIS TORICAL MARKET TRENDS in part by attractive rates 700 10% during Q4, helped Vista post its 9% 600 Oceanside second consecutive year of net 500 8% Vista absorption. The Vista industrial 400 7% market finished the year with Vacancy Rate 6% SF (000s) 300 5% San 117,999 square feet of net 200 4% Carlsbad Marcos absorption (down slightly from 100 3% Ocean 141,000 SF during 2011). Lease 0 2% -100 1% rates and sale prices stabilized -200 0% during 2012. Vista vacancy sits 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012MARKET INDICATORS at 7.30% near its ten year low of Q4 Q1 7.19%, which will inevitably lead Net Absorption New Supply Vacancy 2012 2013 (forecast) to higher lease and sale values if demand continues at levels seen during 2011 and 2012. VACANCY NET ABSORPTION 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 CONSTRUCTION manufacturing, advanced precision manufacturing, biomedical devices, food distribution, telecommunications, and action sports. RENTAL RATE LEASE CONCESSIONS ACTIVITY The majority of transactions that occurred during Q4 were between 14,000-45,000 square feet with effective 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 $23,125,000INDUSTRIAL/R&D VACANCY RATES ($114.45/SF). This 202,045 square foot corporate headquarters facility is leased to DirectedQ4 2012 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 Carlsbad 13.8% represented the largest industrial transaction that occurred in North County during 2012. Escondido 4.9% FORECAST Oceanside 14.7% Expect good functional distribution space (<15% office/multiple dock positions/good truck circulation/22’+ clear) to lease quicker than the broader market regardless of size. Supply San Marcos 7.9% of distribution space is constrained and we are seeing good activity in neighboring markets, Vista Vista 7.3% as well as, on a national level. There will continue to be almost no lease rate differentialNorth County 10.0% 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 0% 5% 10% 15% 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.www.colliers.com/carlsbad
    • AT A GLANCE | Q4 2012 | INDUSTRIAL | VISTA Ol ea nd er Av e k Rd n Oa Gree La M irad aD r ve re A amo Syc Dr se lro Dr Me er nt Ce rk Faraday Ave Pa Ave ttia nse Business Pa r k Dr B Poi D Lionsh ead Av e TRANSACTION ACTIVITY - Q4 2012 Rd ort Airp mar SALES ACTIVITY Palo # 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 LEASING ACTIVITY # 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 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.
    • Q3 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. The industrial market consists of approximately 52.3 million square feet. By comparison, San Escondido Carlsbad Marcos the total San Diego industrial market is 188.3 million square feet. North County Ocean represents 27% of the total. The following table summarizes the inventory and vacancy by submarket:MARKET INDICATORS Submarket Buildings Total Inventory Vacant SF Vacancy Rate Q3 Q4 Carlsbad 482 14,793,976 2,018,039 13.6% 2012 2012 (forecast) Escondido 636 7,175,725 436,957 6.1% VACANCY Oceanside 394 8,014,725 1,065,063 13.3% NET ABSORPTION San Marcos 490 8,636,002 620,263 7.3% Vista 530 13,373,177 1,065,867 7.9% CONSTRUCTION Total 2,532 51,993,604 5,212,129 10.0% RENTAL RATE 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. The North San Diego County industrial market is home to a diversified mix of usersINDUSTRIAL/R&D VACANCY RATES including defense, telecommunications, software, medical manufacturing, golf and leisureQ3 2012 sports, life science and technology firms. Corporate neighbors include: Carlsbad 13.6% Coca-Cola Isis Pharmaceuticals DJO, Inc. Escondido 6.1% Medtronic Life Technologies Linear Oceanside 13.3% Titleist Golf Cobra / Puma Golf Killion Industries San Marcos 7.3% ViaSat TaylorMade Golf Jeld-Wen Windows and Doors Covidien Denso Wireless Sumitomo Electric Vista 7.9% Abbott Labs US Foods McCain, Inc.North County 10.0% Genentech Philips Respironics Directed Electronics 0% 5% 10% 15% Callaway Golf Thomson Reuters GIA L-3 Communications Rockwell Collins Hunter Industries SAIC John Deere Watkins Manufacturingwww.colliers.com/carlsbad
    • Q4 2012 | INDUSTRIALSAN DIEGO COUNTYMARKET REPORT 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.MARKET INDICATORS Q4 2012 Q3 2012 (P) 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 VACANCY 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 NET ABSORPTION 24,600 jobs. The combined industry sectors of “Trade, Transportation, and Utilities” and CONSTRUCTION “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 RENTAL RATE 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.INDUSTRIAL VACANCY RATESQ4 2012 MARKET TRENDS NEW SUPPLY, ABSORPTION AND VACANCY RATES Signi cant positive 4.5 12% demand drove 12.8% S.D. County countywide net 8.7% 3.0 10% absorption to over 1.0 SF 11.8% Central County in Q4 and 3.0 million SF 8.6% 1.5 8% for the year. This level of Vacancy Rate SF (Millions) 10.9% North County demand was the most for 9.7% 0.0 6% any year since 2005. A 19.3% I-15 Corridor total of nearly 130,000 6.3% -1.5 4% SF was built for the year, 0% 5% 10% 15% 20% -3.0 2% but an additional 173,000 R&D Industrial SF should be completed -4.5 0% by mid-2013. Vacancy 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 stood at 9.9% and will continue to decrease throughout 2013. Net Absorption New Supply Vacancywww.colliers.com/sandiego
    • MARKET REPORT | Q4 2012 | INDUSTRIAL | SAN DIEGO COUNTY NET ABSORPTION (-42,571 SF) saw the most space vacated for NORTH COUNTY the quarter. Several submarkets did particularly The Q4 combined industrial/R&D net absorption well for the year, but Otay Mesa (+830,519 SF) totaled a positive 1,031,268 SF. Countywide net and Sorrento Mesa (+318,129 SF) performed absorption for industrial space (manufacturing, the best. I-15 CORRIDOR warehouse, distribution, and multi-tenant/ incubator building uses) totaled a positive The countywide overall industrial/R&D average 548,589 SF and R&D space ( ex, wet lab asking rental rate reached its market bottom and R&D building uses) totaled a positive of $0.80/SF/mo. in Q1 2011. For the last eight MCAS MIRAMAR 482,679 SF. Both segments created overall quarters, the rent has settled in the low-$0.80 net absorption of 3,014,742 SF (1,723,474 SF range and stood at $0.82/SF/month in Q4 industrial; 1,291,268 SF R&D). The renewed 2012 – a $0.01 decrease from Q3. Overall, CENTRAL activity in industrial/R&D markets was re ected rates tended to be relatively at but should pick COUNTY in the individual submarkets as well, where 18 up increased momentum in 2013 as vacancy of the 21 countywide submarkets posted net continues to tighten up. positive demand for 2012. VACANCY New leasing activity of 2.5 million SF duringSAN DIEGO COUNTY Q4 was just 0.6% higher than the Q3, but was The overall vacancy rate decreased by 34 basis comprised of a strong posting of new leases in points in Q4, settling in at 9.9%. This marksThe San Diego County industrial/R&Dmarket is comprised of 187.0 million SF addition to renewals. Many of these leases will the rst quarter in four years where vacancyof industrial and R&D space. The county take occupancy in the rst half of 2013, thereby has dropped below 10% (9.7% in Q1 2009).is divided into three major market areas bolstering demand and driving down vacancy The industrial and R&D vacancy componentswith 21 submarkets within them. About even further. Leasing activity still remains measured 8.7% and 12.8%, respectively. Over62% of countywide industrial/R&D strong primarily amongst smaller tenants the course of the year, R&D vacancy hasspace is located within the 13submarkets of the Central County (under 10,000 SF). decreased by 267 basis points (15.4% in Q4market. Industrial buildings (including 2011) and industrial vacancy has decreased bymanufacturing, warehouse, distribution, The majority of Q4 positive net absorption 116 basis points (9.9% in Q4 2011).and multi-tenant/incubator) make up was in the submarkets of Sorrento Mesa72% of total inventory while R&D (+170,636 SF), Poway (+145,198 SF), Campus The Q4 2012 combined industrial/R&D directbuildings (including ex, wet lab andcorporate headquarters) make up the Point/Eastgate (+138,019 SF) and Miramar vacancy rate decreased to 9.3 % compared toremaining 28% of the total inventory. (+130,769 SF). The North County submarkets 9.7% at the end of Q3. The sublease vacancy of Oceanside (-100,876 SF) and San Marcos Continued on page 4TRANSACTION ACTIVITY - Q4 2012SALES ACTIVITYPROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF SALE PRICE PRICE/SF1950 Camino Vida Roble Carlsbad R&D 121,500 $16,800,000 $1385959 & 6059 Cornerstone Court W. Sorrento Mesa R&D 97,945 $14,100,000 $1444106-4122 Sorrento Valley Blvd. (4 buildings) Sorrento Valley R&D 113,571 $13,340,000 $117900 Hitachi Way Chula Vista R&D 86,920 $11,850,000 $13613450 Stowe Drive Poway Industrial 73,000 $7,120,000 $98LEASING ACTIVITYPROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF TENANT NAME10015 Waples Court Sorrento Mesa Industrial 106,412 Covan World-Wide Moving (renewal)10277 Scripps Ranch Boulevard Scripps Ranch R&D 69,900 CoreLogic Solutions4757 Nexus Centre Drive Campus Pt./Eastgate Wet Lab 67,050 Genomatica, Inc.5005 Wateridge Vista Drive Sorrento Mesa R&D 61,460 Accelrys, Inc.10390 Pacific Center Court Sorrento Mesa Wet Lab 68,400 Quantum DesignP. 2 | COLLIERS INTERNATIONAL
    • MARKET REPORT | Q4 2012 | INDUSTRIAL | SAN DIEGO COUNTY INDUSTRIAL OVERVIEW San Diego County Industrial Market Q4 2012 EXISTING PROPERTIES VACANCY NET ABSORPTION CONSTRUCTION Avg Total Direct Sublease Total Prior Qtr Net Abs Net Abs New Supply Under Rental Inventory Vacancy Vacancy Vacancy Vacancy Current Qtr YTD Current Qtr Construction Proposed Rate Submarket / Class Bldgs SF Rate Rate Rate Rate * SF SF SF SF SF (NNN)INDUSTRIAL TOTALS BY MARKET Manufacturing, warehouse, distribution, and multi-tenant/incubatorCentral 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 $0.64North County 2,191 40,137,704 9.6% 0.1% 9.7% 9.7% 19,138 268,068 0 0 1,511,019 $0.69I-15 Corridor 305 10,740,281 6.1% 0.2% 6.3% 7.4% 247,152 208,307 129,845 0 382,900 $0.81TOTAL 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 $0.67R&D TOTALS BY MARKET Flex, wet lab and R&DCentral County 797 32,749,378 10.0% 1.8% 11.8% 12.9% 474,942 1,039,918 0 123,400 1,393,588 $1.17North County 343 11,919,114 10.7% 0.2% 10.9% 11.2% 48,429 249,241 0 0 1,623,474 $0.94I-15 Corridor 114 8,320,647 17.7% 1.6% 19.3% 19.8% (40,692) 2,109 0 0 605,000 $1.07TOTAL 1,254 52,989,139 11.4% 1.4% 12.8% 13.6% 482,679 1,291,268 0 123,400 3,622,062 $1.10COMBINED INDUSTRIAL / R&D BY MARKET AND SUBMARKETCentral CountyAirport / SA 76 1,888,166 6.1% 0.0% 6.1% 6.8% 12,550 (82,759) 0 0 0 $0.86Campus Pt / Egate 41 3,849,819 11.3% 9.7% 21.0% 24.6% 138,019 160,938 0 123,400 601,967 $2.23Central San Diego 415 8,415,760 4.1% 0.0% 4.1% 5.3% 99,607 127,009 0 0 0 $0.82East County 604 14,158,749 5.9% 0.1% 6.0% 6.4% 50,826 248,051 0 0 1,382,158 $0.67Kearny Mesa 628 16,474,087 4.4% 0.4% 4.8% 4.8% (9,812) 207,867 0 0 65,691 $0.97Miramar 583 13,750,281 9.8% 1.2% 11.0% 10.9% 130,769 42,859 0 0 0 $0.85Mission Gorge / Vly 95 2,273,798 7.0% 2.7% 9.8% 12.0% 51,081 76,907 0 0 0 $0.84Otay Mesa 305 15,146,278 16.1% 0.7% 16.7% 16.6% (15,291) 830,519 0 49,256 1,768,274 $0.47Rose Cyn / Morena 189 4,140,283 5.9% 0.0% 5.9% 6.2% 11,086 80,355 0 0 0 $0.77Sorrento Mesa 277 12,951,311 11.3% 0.4% 11.7% 11.8% 170,636 318,129 0 0 0 $1.13Sorrento Valley 106 3,411,905 8.4% 1.9% 10.2% 10.7% 16,144 53,570 0 0 0 $1.24South Bay 594 14,349,850 7.0% 0.2% 7.2% 7.6% 53,529 30,597 0 0 0 $0.59Torrey Pines 67 5,051,723 13.0% 0.0% 13.0% 13.6% 48,097 192,975 0 0 238,930 N/ATOTAL 3,980 115,862,010 8.7% 0.8% 9.5% 9.9% 757,241 2,287,017 0 172,656 4,057,020 $0.80North CountyCarlsbad 484 14,851,596 13.4% 0.2% 13.5% 13.6% 23,113 176,437 0 0 1,522,132 $0.89Escondido 636 7,175,725 4.6% 0.1% 4.7% 6.1% 98,536 95,055 0 0 39,500 $0.72Oceanside 394 8,014,725 14.5% 0.2% 14.7% 13.3% (100,876) 186,004 0 0 1,227,361 $0.61San Marcos 490 8,640,707 7.9% 0.0% 8.0% 7.3% (42,571) (58,186) 0 0 53,000 $0.80Vista 530 13,374,065 7.2% 0.1% 7.3% 8.0% 89,365 117,999 0 0 292,500 $0.71TOTAL 2,534 52,056,818 9.9% 0.1% 10.0% 10.0% 67,567 517,309 0 0 3,134,493 $0.75I-15 CorridorPoway 216 8,326,968 4.1% 0.2% 4.2% 4.3% 145,198 116,882 129,845 0 447,900 $0.81Rancho Bernardo 133 8,807,534 15.9% 0.2% 16.0% 17.1% 1,013 113,090 0 0 0 $1.04Scripps Ranch 70 1,926,426 20.5% 6.5% 27.0% 30.1% 60,249 (19,556) 0 0 540,000 $0.88TOTAL 419 19,060,928 11.2% 0.8% 12.0% 12.9% 206,460 210,416 129,845 0 987,900 $0.98SAN DIEGO COUNTY COMBINED INDUSTRIAL / R&DTOTAL 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 $0.82QUARTERLY COMPARISONQ4 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 $0.82Q3 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 $0.83Q2 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 $0.83Q1 2012 ** 6,923 186,473,096 10.4% 0.6% 11.0% 11.5% 735,590 735,590 0 253,245 7,747,009 $0.82Q4 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. COLLIERS INTERNATIONAL | P. 3
    • MARKET REPORT | Q4 2012 | INDUSTRIAL | SAN DIEGO COUNTY HISTORICAL RENTAL RATE TRENDS RENTAL RATES 512 o ces in Since a historical high Industrial, R&D and Combined Rates Quarterly Average Asking Rate Per SF Per Month (NNN) point in Q3 2008, the 61 countries on countywide average $1.50 $1.40 asking rental rate for 6 continents combined industrial and $1.30 R&D space has been United States: 125 $ / SF / Month (NNN) $1.20 Canada: 38 steadily decreasing. $1.10 Since Q1 2011, rents have Latin America: 18 $1.00 stabilized in the Asia Paci c: 214 $0.90 low-$0.80/SF/month EMEA: 117 $0.80 range. The Q4 2012 $59.6 billion in annual transactions $0.70 average rate of $0.82/SF/ $0.60 month is still 17% less 1.0 billion square feet under Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 than the historical high; it management 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12 decreased by $0.01 for Over 12,500 professionals the quarter. Industrial R&D Combined SAN DIEGO: JIM SPAIN, SIOR Regional Managing Director | San Diego RegionLEASING ACTIVITY INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE License No. 00804745Just over 500 leases were Percentage of Total Leases Completed in Q4 2012 4660 La Jolla Village Drive, Suite 100completed in Q4 2012, San Diego, CA 92122 | USAtotaling approximately 9.9% TEL +1 858.677.53112.5 million SF. 89% of all 6.9% FAX +1 858.795.4111leases were 10,000 SF or 4.5%less, while only 11% of all <= 2,000 SF [234]leases were over 10,000 SFin size. Smaller tenants 32.4% 2,001 - 5,000 SF [164] RESEARCHER:continue to make up a larger 5,001 - 10,000 SF [50]proportion of all leases CHRISTOPHER REUTZ 10,001 - 20,000 SF [35] Research Director | San Diego Regionsigned in Q4 and will likelydo so in 2013. 4660 La Jolla Village Drive, Suite 100 >= 20,001 SF [23] San Diego, CA 92122 | USA TEL +1 858.677.5385 46.2% FAX +1 858.795.4185increased just slightly 0.6% which continued during 2012. The only space currently under This report has been prepared by Colliers International forto keep at historically low levels. At year- construction includes the 123,400 SF building general information only. Information contained hereinend, the vacant sublease inventory accounted in the Illumina campus in the Campus Point/ has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof.for 1.1 million SF. Eastgate submarket – which will be completed Colliers International does not guarantee, warrant or in mid-2013 – and a 49,256 SF building on represent that the information contained in this document is correct. Any interested party should undertake theirNearly three years of vacancy rates in the Camino Maquiladora in Otay Mesa with projected own inquiries as to the accuracy of the information.11%-12% range has been broken over the completion in Q1 2013. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out ofpast three quarters. Vacancy continues to this document and excludes all liability for loss andslide further down and will likely to be in the Proposed new development totals about 8.2 damages arising there from.low-9% range by the end of 2013. million SF with 72% of this space concentrated in just four submarkets: Otay Mesa, Carlsbad,NEW SUPPLY East County and Oceanside. The majority of immediate to mid-term future developmentIn Q4, construction was completed on the will be concentrated in build-to-suits, but the129,845 SF build-to-suit for Hoist Fitness current level of elevated demand is likely tobuilding in Poway. This marked the only encourage new speculative construction in theindustrial construction in the county Accelerating success. next few years.www.colliers.com/sandiego