Q3 2011 Industrial Report

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Q3 2011 Industrial Report

  1. 1. Industrial ReportNorth San Diego County3rd Quarter 2011PREPARED BY: COLLIERS INTERNATIONALAdam Molnar 5901 Priestly Drive, Suite 100Greg Lewis Carlsbad, CA 92008Tucker Hohenstein Fax 760 438 8925Mike Erwin www.colliers.com/carlsbadMike Bench
  2. 2. Q3 2011 | INDUSTRIALCARLSBADAT A GLANCE Market Conditions After posting four consecutive quarters of positive absorption, Carlsbad’s Industrial/R&D Oceanside vacancy rate was dealt a slight blow in Q3 2011 with nearly 300,000 sf of negative Vista absorption. However, if the layers are peeled back and examined it becomes clear that the vast majority of this negative activity can be attributed to a very small number of large buildings. Upper Deck (249,000 sf) and No Fear (65,000 sf) jettisoned their corporate San Carlsbad Marcos headquarters facilities in favor of much less space. Other users are taking advantage of Ocean a depressed o ce market and upgrading their corporate image by relocating from highly parked R&D properties into more traditional o ce space. Examples of this trend include 3E and NTN Buzztime. The most positive segment of the leasing market by far was theMARKET INDICATORS 15,000 to 25,000 s.f. range with 5 transactions in 3Q 2011. This is encouraging as this Q3 Q4 size range has been fairly stagnant in recent quarters. 2011 2011 (forecast) There was a slight uptick in sales activity in Q3 with contributions from investors and VACANCY owner-users. L.B.A. was able to complete a rare tenant-in-tow transaction by purchasing NET ABSORPTION the last remaining bank owned building at Raceway Point (64,000 sf). Prana Clothing originally had this property tied up as an owner-user but then opted to assign the escrow CONSTRUCTION and sign a long term lease. Other acquisitions included two investment deals on Las Palmas Drive and an owner-user purchase on Rutherford Road. RENTAL RATE Despite a temporary setback in the vacancy rate, expect a more positive conclusion to 2011 with no new construction underway or in the planned stage and signi cant tenant activity in the market.INDUSTRIAL/R&D VACANCY RATES RATES INDUSTRIAL/R&D VACANCY CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKETQ3 2011 Q3 2011INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS 700 VISTA HISTORICAL MARKET TRENDS 16%Q3 2011 15.1% 600 14% Carlsbad Carlsbad 14.5% 500 17.0% 12% Escondido 5.9% 400 10% Vacancy Rate SF (000s) Oceanside 10.9% 16.8% 300 8% San Marcos 7.1% 200 9.2% 6% 100 Vista 5.9% 9.8% 4% 0 North County 12.7% 11.1% -100 2% -200 0% 0% 5% 10% 15% 20% 2003 2004 2005 2006 2007 2008 2009 2010 2011 R&D Industrial YTD Net Absorption New Supply Vacancy OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL Mwww.colliers.com/carlsbad
  3. 3. El C am ino AT A GLANCE | Q3 2011 | 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 8 Raceway S El L t t Ca oke mi er A Lio 9 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 7 rp Ai ar m alo P Me elr os o eD r r Ave ttia E El F Palomar Airport nse Poi Business Park uer u te S t t t Rd Alga El Ca mi TRANSACTION ACTIVITY - Q3 2011 no Re e Av ala SALES ACTIVITY La Costa Resort Av & Spa # PROPERTY NAME/ADDRESS ra ia BUYER TYPE SIZE SF SALE PRICE PRICE/SF P kw Park2261 Rutherford Road y 1 Hyatt Owner User 21,743 $2,032,500 $93.48 Aviara Resort 2 2151 Las Palmas Drive Investor 31,824 $3,250,000 $102.12 3 2070 Las Palmas Drive Investor 32,555 $3,030,000 $93.08 4 3209 Lionshead Avenue Investor 64,327 $5,775,000 $89.78 LEASING ACTIVITY # PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE 5 1815 Aston Avenue JetHead Development, Inc. 17,766 36 months $1.29 MG 6 1905 Aston Avenue Ryderz Compound, LLC 19,794 52 months $0.87 NNN 7 6190 Corte del Cedro Photothera, Inc. 20,423 48 months $0.85 NNN 8 5850 El Camino Real Project Walk 22,043 72 months $1.22 MG 9 3209 Lionshead Avenue prAna Clothing 64,327 108 months $0.88 NNN This document has been prepared by Colliers International for advertising and general information only. Colliers prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN 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 MIKE ERWIN, MIKE BENCH 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. Q3 2011 | INDUSTRIAL VISTA AT A GLANCE Market Conditions Recent leasing by large corporations may be a sign of increasing corporate con dence. Oceanside John Deere, Zodiac and DJO Global all signed leases during Q3 for a combined total of Vista 234,000 sf. This is the rst time during 2011 that we have seen this level of demand from large corporations. While leasing activity improved, there were no building sales larger than 10,000 sf. Two consecutive quarters of reduced sales activity continues to put San Carlsbad Marcos downward pressure on pricing, even though supply is limited. Ocean Lease rates are averaging $0.56 psf per month NNN and have been relatively stable during 2011. These rates could begin to move higher in 2012 due to dwindling supply. MARKET INDICATORS Q3 Q4 Companies looking to lease or purchase space larger than 50,000 sf in Vista may be 2011 2011 (forecast) surprised that there are currently only ve (5) existing opportunities totaling 386,000 sf. When taking into consideration a company’s speci c clear height, loading and/or o ce VACANCY requirements, this list could quickly drop to 1 or 2 viable options. Based on the Q3 gross NET ABSORPTION absorption rate of 234,000 sf there is approximately six (6) months of supply of buildings larger than 50,000 sf. CONSTRUCTION One quarter of positive net absorption is not enough to establish a trend, but is certainly RENTAL RATE a welcome move in the right direction. Vacancy decreased from 11% at the end of Q2 to 9.33% at the end of Q3 due to larger user demand. This downward trend in vacancy is expected to continue through Q4 although at a slower pace.STORICAL MARKET TRENDS INDUSTRIAL/R&D VACANCY RATES VISTA HISTORICAL MARKET TRENDS Q3 2011 INDUSTRIAL/R&D VACANCY RATES 700 CARLSBAD HISTORICAL MARKET TRENDS 10% VISTA HISTORICAL MARKET TRENDS Q3 2011 9% 600 Carlsbad 15.1% 8% 14.5% 500 17.0% 7% Escondido 400 5.9% Vacancy Rate SF (000s) 6% 10.9% 300 Oceanside 5% 16.8% 200 San Marcos 7.1% 4% 9.2% 100 3% 5.9% Vista Vista 9.8% 0 2% North County 12.7% -100 1% 11.1% -200 0% 0% 5% 10% 15% 20% 2003 2004 2005 2006 2007 2008 2009 2010 2011 R&D Industrial YTD Net Absorption New Supply Vacancy OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDSISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS www.colliers.com/carlsbad
  5. 5. AT A GLANCE | Q3 2011 | INDUSTRIAL | VISTA Ol ea nd er Av e d ak R en O Gre La M irad aD r ve re A amo Syc Dr se lro Dr Me er nt Ce B rk Faraday Ave us Pa iine s ss Pa rk D r r Ave ttia nse Poi Lionsh ead Ave TRANSACTION ACTIVITY - Q3 2011 SALES ACTIVITY TRANSACTION ACTIVITY - Q3 2011 ort Rd Airp mar Palo # PROPERTY NAME/ADDRESS SALES ACTIVITY BUYER TYPE SIZE SF SALE PRICE PRICE/SF # PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF There were no buildings sales larger than 15,000SF during Q3 LEASING ACTIVITY # PROPERTY NAME/ADDRESS LEASING ACTIVITY TENANT NAME SIZE SF TERM EFF RATE 1 2611 Commerce Way Ste B-E Zodiac Pool Systems 104,832 84 months $0.59 NNN # PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE 2 990 Joshua Way John Deere 76,000 62 months $0.53 NNN 3 3151 Scott Street DJO Global 53,256 88 months Undisclosed This document has been prepared by Colliers International for advertising and general information only. Colliers prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN 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 MIKE ERWIN, MIKE BENCH 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. Q3 2011 | INDUSTRIALOCEANSIDEAT A GLANCE Market Conditions Although the Oceanside industrial submarket continues to have the highest vacancy rate in North County at 16.05%, the good news is that the rate decreased in the third quarter Oceanside Vista from 16.83%. This 0.78% reduction is signi cant and a trend that is expected to continue into 2012. San Marcos Users are taking longer to make decisions, and relocating is a time consuming process. Carlsbad Ocean However, tenants and buyers are using the down market to move from leased properties to owned properties, and are opting for better properties at attractive terms.MARKET INDICATORS Two industrial sales occurred in the quarter. The rst sale was a 19,628 sf user INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET purchase of a new building at 1338 Rocky Point Drive in the Paci c Coast Business Park. Q3 2011 Q3 Q4 2011 2011 (forecast) The buyer will be using the property to warehouse vintage VW auto parts. The second sale was a user purchase of a 43,500 sf life science lab building located at 4049 Avenida VACANCY de la Plata. The seller was Genetech and the buyer was Gilead Sciences from the Bay Area. NET ABSORPTION CONSTRUCTION Lease activity was good; 62,720 sf of positive net absorption occurred. Panoramic Doors leased 12,000 sf for 3½ years at 3265 Production Avenue in the Oceanside Airport Area. RENTAL RATE This is a positive sign as the residential service/supply market and subcontractors have been one of the hardest hit industry sectors in the area. A signi cant land transaction in Ocean Ranch is in escrow. U.S. Food Service has 28 acres of industrial land under contract with Hamann Construction. This is the largest piece of contiguous industrial land in the market.INDUSTRIAL/R&D VACANCY RATES OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MQ3 2011INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS 800 VISTA HISTORICAL MARKET TRENDS 20%Q3 2011 18% Carlsbad 15.1% 14.5% 600 16% Escondido 17.0% 5.9% 14% 400 Vacancy Rate SF (000s) 10.9% 12% Oceanside Oceanside 16.8% 200 10% San Marcos 7.1% 9.2% 8% 5.9% 0 Vista 6% 9.8% 4% North County 12.7% -200 11.1% 2% -400 0% 0% 5% 10% 15% 20% 2003 2004 2005 2006 2007 2008 2009 2010 2011 R&D Industrial YTD Net Absorption New Supply Vacancy OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDSwww.colliers.com/carlsbad
  7. 7. AT A GLANCE | Q3 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 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 Line TRANSACTION ACTIVITY - Q3 2011 SALES ACTIVITY # PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF 1 1338 Rocky Point Drive Owner/User 19,628 SF $1,865,000 $95.02/SF 2 4049 Avenida de la Plata Owner/User 43,500 SF $11,000,000 $252.97/SF LEASING ACTIVITY # PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE EFF RATE 3 3265 Production Avenue Panoramic Doors 12,000 SF 42 months $0.50/g 4 4055 Oceanside Blvd Grace Anglican Church 10,964 SF 36 months $0.55/g This document has been prepared by Colliers International for advertising and general information only. Colliers prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN 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 MIKE ERWIN, MIKE BENCH 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. Q3 2011 | INDUSTRIAL SAN MARCOS AT A GLANCE Market Conditions The San Marcos Industrial Market had a positive Q3 absorption of approximately 36,000 sf, slightly decreasing vacancy to 8.92%. The positive absorption is mainly attributed to Oceanside one large lease and a few small building buyers bene ting from the record low interest Vista rates and the stabilizing of real estate prices. Although the Year-to-Date absorption is still a negative 45,000 sf, we should continue to see a positive trend in vacancy as the local San Escondido market continues to recover from the signi cant negative impact the economy has had on Carlsbad Marcos Ocean local industrial companies since 2008. There were four industrial building sales during this quarter, and the average price of these MARKET INDICATORS building sales was approximately $100 psf. The largest sale was the 17,600 sf building on 130 Bosstick, which sold for $98 psf. Q3 Q4 2011 2011 (forecast) Lease activity during the 3rd quarter mainly consisted of small multi-tenant transactions VACANCY and one large 41,000 sf lease by Teamwork Athletic Apparel at 740 Los Vallecitos. Currently, there is only one building available larger than 30,000 sf in San Marcos, as NET ABSORPTION the vacancy is mainly concentrated in the 15,000 sf – 30,000 sf range and multi-tenantRLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET TRENDS CONSTRUCTION incubator space. The multi-tenant market lease rates continue to have downward pressure as Landlords provide concessions to ll vacancy as the market recovers. RENTAL RATE The limited supply of available large buildings in San Marcos will put upward pressure on lease rates throughout the North County industrial market. The multi-tenant market will improve as the overall economy continues to recover, which will encourage local entrepreneurs to start-up new ventures. Overall, we should see continued improvement in the vacancy and absorption as no new speculative industrial inventory is planned or under construction in San Marcos. Moreover, INDUSTRIAL/R&D VACANCY RATES Q3 2011 supply of industrial buildings and land parcels has been reduced by the City’s rezoning of INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL properties to o ce, housing and retailVISTA HISTORICAL MARKET TRENDS multiple MARKET TRENDS zones. Q3 2011EANSIDE HISTORICAL MARKET 15.1% Carlsbad TRENDS 14.5% SAN MARCOS HISTORICAL MARKET TRENDS Escondido 17.0% 300 10% 5.9% 9% Oceanside 10.9% 200 16.8% 8% San Marcos San Marcos 7.1% 7% 100 9.2% Vacancy Rate SF (000s) 6% Vista 5.9% 0 5% 9.8% 12.7% 4% North County -100 11.1% 3% 2% -200 0% 5% 10% 15% 20% 1% R&D Industrial -300 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD OCEANSIDE HISTORICAL MARKET TRENDS Net Absorption New Supply SAN Vacancy MARCOS HISTORICAL MARKET TRENDS www.colliers.com/carlsbad
  9. 9. AT A GLANCE | Q3 2011 | INDUSTRIAL | SAN MARCOS TRANSACTION ACTIVITY - Q3 2011 SALES ACTIVITY TRANSACTION ACTIVITY - Q3 2011 SALES ACTIVITY # PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF # PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF 1 130 Bosstick Blvd Owner User 17,637 $1,730,000 $98.09 2 1011 Rancheros Dr Owner User 10,250 $875,000 $85.37 LEASING ACTIVITY LEASING ACTIVITY # PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE 3 220 Bingham Dr #103/104 R&M Industries 11,550 36 months $0.63 G # PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE 4 180 Bosstick Blvd Piercan USA 16,509 84 months $0.76 G 5 740 Los Vallecitos Blvd Teamwork Athletic Apparel 40,962 60 months $0.51 N This document has been prepared by Colliers International for advertising and general information only. Colliers prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN 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 MIKE ERWIN, MIKE BENCH 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. Q3 2011 | INDUSTRIALESCONDIDOAT A GLANCE Market Conditions Escondido continues to maintain the lowest vacancy rate in the North San Diego County industrial market at 5.7%. This is up slightly from 5.5% at Q2 2011. The increase in Oceanside Vista vacancy is directly attributable to the challenging economy. Escondido’s service and contracting rms struggle to procure new business. Owners and tenants have adopted a San Escondido “wait and see” attitude and are not relocating to larger properties. Carlsbad Marcos Ocean Two industrial sales occurred in the quarter which include a 20,000 sf user purchase of a distressed property for $73.75 psf at 622 South Vinewood; and the City of Escondido bought a 40,680 sf building at 455 North Quince Street. The seller, Wickline Bedding,MARKET INDICATORS has been a long time manufacturer in Escondido. The City acquired the property as part Q3 Q4 of the assemblage of surrounding properties including those on Spruce Street for the 2011 2011 (forecast) proposed minor league baseball park. VACANCY Lease activity was limited but did include the renewal and expansion of Nexsan in the NET ABSORPTION Enterprise Heights Industrial Park. Nexsan, a hardware and software storage products rm, grew from 14,000 to 22,000 sf and extended their lease term. COR-O-VAN is CONSTRUCTION expanding into a new 90,000 sf BTS by Hamann Construction in the Escondido Research RENTAL RATE & Technology Center. Lease rates and sale prices have stabilized and are forecast to increase slightly by the end of Q1 2012. No new speculative inventory is planned or under construction in Escondido. The limited supply is positive for the owners of existing buildings. ESCONDIDO HISTORICAL MARKET TRENDSINDUSTRIAL/R&D VACANCY RATESQ3 2011 700 16%INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET TRENDSQ3 2011 600 14% Carlsbad 15.1% 500 14.5% 12% 17.0% 400 Escondido Escondido 10% Vacancy Rate 5.9% SF (000s) 300 Oceanside 10.9% 8% 16.8% 200 San Marcos 7.1% 6% 9.2% 100 5.9% 4% Vista 0 9.8% -100 2% North County 12.7% 11.1% -200 0% 0% 5% 10% 15% 20% 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD R&D Industrial Net Absorption New Supply Vacancy OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDSwww.colliers.com/carlsbad
  11. 11. AT A GLANCE | Q3 2011 | INDUSTRIAL | ESCONDIDO oad hl R rda NoMyers Avenue 78 Mo ntie l Rd Esc ond oCountry Club Dr Cen ido nter oA Quin ve City ince Mis Par sion nue ak St S Roa Ave ion way d Miss R Roc y kS Spr ings 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 ri a Cit l i Escondido Av rac e St Research Tul ip ado & Tech Center Pk wy ue ven le A Ha Escondido N. Auto Park e riv D en eas ndr SA ay Auto P kw ark Par W ay ley Val Ent erp rise St A 9th TRANSACTION ACTIVITY - Q3 2011 TRANSACTION ACTIVITY - Q3 2011 SALES ACTIVITY SALES ACTIVITY # PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF # PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF 1 622 S. Vinewood Street Owner-user (distressed) 20,000 $1,475,000 $73.75 2 455 N. Quince Street Agency (City of Escondido) 40,680 $4,925,000 $121.07 LEASING ACTIVITY LEASING ACTIVITY # PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE # PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE 3 302 Enterprise Street Nexsan 22,000 12 $0.84 MG This document has been prepared by Colliers International for advertising and general information only. Colliers prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN 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 MIKE ERWIN, MIKE BENCH 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.

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