Q1 2012 Industrial Report
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Q1 2012 Industrial Report Q1 2012 Industrial Report Document Transcript

  • 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
  • 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
  • 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.
  • 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
  • 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.
  • 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
  • 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.
  • 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
  • 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.
  • 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
  • AT A GLANCE | Q1 2012 | INDUSTRIAL | SAN MARCOS s Valley Rd Vista N Twin Oak W Missi on Rd Arm orli Rd te D sion r E Mis La Mir ada 78 Dr San Marcos Civic Center d sR Lin a Pos da Vista Dr Las Restaurant d 78 Row s Blv arco an M WS r am D Barh rport Rd Pa lomar Ai Kaiser Permanente Rd St Med Center Fe overy Cal State Disc a University nt Rd Sa San Marcos ho ks Valley Craven Rd nc Ra Discovery Hills Residential S Twin Oa Lake San MarcosMelr elros Dr r e La Costa Meadows Rd Ra n Ra n ch Business Park i jo El n Sa oS an ta Fe Rd San Elijo Hills d Residential San Elijo Rd TRANSACTION ACTIVITY - Q1 2012 SALES ACTIVITY # PROPERTY NAME/ADDRESS BUYER TYPE SIZE (SF) SALE PRICE PRICE/SF 1 261 South Pacific Street Metro Western Sign 24,128 $1,550,000 $64.24 LEASING ACTIVITY # PROPERTY NAME/ADDRESS TENANT NAME SIZE (SF) TERM EFF RATE/SF 2 170 Bosstick Blvd Proformance Apparel 12,816 36 months $0.62 GRS 3 970 Los Vallecitos Mountain Shadows 19,544 63 months $0.77 GRS 4 155 Mata Way Astro Converters 24,814 60 months $0.64 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.
  • Q1 2012 | INDUSTRIAL VISTA AT A GLANCE OVERVIEW Investors and owner-occupiers took advantage of the few remaining distressed/ challenged real estate opportunities by purchasing four properties with an average sale price of $69/SF. Demand from occupiers helped Vista post its third consecutive quarter Oceanside of positive net absorption resulting in a current vacancy rate of 8.1%. Vista continues to Vista plod a slow and steady course to recovery. San ACTIVITY Marcos Ocean Carlsbad Investors showed confidence in the market by purchasing two vacant buildings, which included 65,000 square feet at 1081 Poinsettia Avenue and 39,672 square feet at 2390 Oak Ridge Way. Prices well below replacement cost and continued positive net absorption MARKET INDICATORS are helping boost investor confidence. Investors were not alone as owner-occupiers purchased two more buildings totaling 61,000 square feet at an average price of $75/SF. Q1 Q2 2012 2012 (forecast) Leasing activity consisted of three transactions all occurring in the 20-25,000 square VACANCY foot range. Two of the tenants, PCA and Stroke Rehab, relocated from within the park and Balboa Cal was a new tenant representing positive net absorption. NET ABSORPTION FORECAST CONSTRUCTION There are several transactions underway at the end of Q1 that will likely help boost RENTAL RATE 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 LEASE CONCESSIONS 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 25-50,000 SF for lease will force landlords to complete aggressively for these tenants.BAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET TRENDS INDUSTRIAL/R&D VACANCY RATES Q1 2012 700 10% INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET TRENDS Q1 2012 600 9% 500 8% Carlsbad 14.4% 7% 400 Escondido 6.5% Vacancy Rate SF (000s) 6% 300 5% Oceanside 15.5% 200 4% 100 San Marcos 6.9% 3% 0 2% Vista Vista 8.1% -100 1% North County 10.6% -200 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0% 5% 10% 15% 20% Q1 Net Absorption New Supply VacancySIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS www.colliers.com/carlsbad
  • AT A GLANCE | Q1 2012 | INDUSTRIAL | VISTA Ol ea nd er Av e d ak R en O Gre La M irad a Dr 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 7 D Lionsh ead Ave TRANSACTION ACTIVITY - Q1 2012 SALES ACTIVITY Airp ort Rd mar Palo # PROPERTY NAME/ADDRESS BUYER TYPE SIZE (SF) SALE PRICE PRICE/SF 1 1211 Liberty Way Owner User 25,189 $2,100,000 $83.37 2 991 Park Center Owner User 36,404 $2,395,000 $65.78 3 2390 Oak Ridge Way Investor 39,672 $2,760,000 $69.57 4 1081 Poinsettia Avenue Investor 65,000 $3,770,000 $58.00 LEASING ACTIVITY # PROPERTY NAME/ADDRESS TENANT NAME SIZE (SF) TERM EFF RATE/SF 5 1389 Park Center Drive Ste B Balboa Cal, Inc. 23,493 84 months $0.51 NNN 6 1335 Sycamore Avenue Ste F PCA 25,394 60 months Undisclosed 7 1255 Keystone Avenue Stroke Rehab 21,065 60 months Undisclosed 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.
  • Q1 2012 | INDUSTRIAL MARKET REPORT | Q1 2012 | INDUSTRIAL | SAN DIEGO COUNTY SAN DIEGO COUNTY HISTORICAL RENTAL RATE TRENDSCY RATESIndustrial, R&D and Combined Rates HISTORICAL RENTAL RATE TRENDS Quarterly Average Asking Rate Per SF Industrial, R&D and Combined Rates Per Month (NNN) Quarterly Average Asking Rate Per SF Per Month (NNN) RENTAL RATES Since a historical high point in Q3 2008, the countywide 512 offices in 61 countries on MARKET Report 12% $1.50 $1.40 10% $1.50 average asking rental rate for combined industrial and R&D 6 continents $1.40 space has been steadily $1.30 $1.30 decreasing. Since Q1 2011, United States: 125 $ / SF / Month (NNN) $1.20 8% Canada: 38 $ / SF / Month (NNN) $1.20 rents have stabilized in the Vacancy Rate $1.10 low-$0.80/SF/mo. range. The Latin America: 18 6% $1.10 $1.00 Q1 2012 average rate of Asia Pacific: 214 $1.00 $0.90 4% $0.82/SF/mo. is still 17% less EMEA: 117 $0.90 $0.80 than the historical high.. $0.80 • $59.6 billion in annual transactions $0.70 2% Industrial Demand Starts Strong During Q1 $0.70 billion square feet under • 1.0 $0.60 0% $0.60 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 management009 2010 2011 2012 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 • Over 12,500 professionals Net absorption soars to over half-a-million square feet Industrial R&D Combined Vacancy Industrial R&D Combined SAN DIEGO: MARKET OVERVIEW Jim Spain, SIOR INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE LEASING ACTIVITY San Diego County’s industrial/R&D market experienced a large surge in demand in Q1 as nearly INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q1 2012 Regional Managing Director | San Diego Region Over 470 leases were Percentage of Total Leases Completed in Q1 2012 License No. 00804745 560,000 SF of net absorption was recorded. This was the strongest quarter of net absorption completed in Q1 2012, 4660 La Jolla Village Drive, Suite 100 since Q4 2010 and may be the strongest quarter this year. Robust leasing activity in Q3 and Q4 13.1% totaling nearly 2.2 million 13.1% San Diego, CA 92122 | USA last year led to increased occupancies in Q1 this year. The leasing activity in late 2011 will carry square feet. 91% of all 5.1% NEW SUPPLY, ABSORPTION AND VACANCY RATESmid-2012 absorption activity which will likely translate into positive net absorption, but not HISTORICAL RENTAL RATE TRENDS 5.1% tel +1 858.677.5311 into leases were 10,000 SF or 3.8% Industrial, R&D and Combined Rates 3.8% FAX +1 858.795.4111 at this recent12% surge level. While not as remarkable as Q3 andMonth leasing, Q1 leasing activity was Quarterly Average Asking Rate Per SF Per Q4 (NNN) less, while only 9% of all <= 2,000 SF [232] 4.0 <= 2,000 SF [232] market indicators robust nevertheless and the next few quarters should post steady activity. This is an indicator 29.0% leases were over 10,000 SF 3.0 $1.50 29.0% 2,001 - 5,000 SF [137] in size. Smaller tenants made 2,001 - 5,000 SF [137] Q1 2012 Q2 2012 (P) of reasonably strong absorption for remainder of the year. Net absorption for 2012 will likely be 10% $1.40 2.0 up a larger proportion of all 5,001 - 10,000 SF [62] 5,001 - 10,000 SF [62] researcher: between 1.0 and 1.5 million SF with vacancy standing at 10.8% to 11.0%. $1.30 8% leases signed in Q1. $ / SF / Month (NNN) 10,001 - 20,000 SF [24] 1.0 CHRISTOPHER REUTZ VACANCY $1.20 Vacancy Rate SF (Millions) 10,001 - 20,000 SF [24] >= 20,001 SF [18] Research Director | San Diego Region 0.0 The February 2012 San Diego County unemployment rate measured 9.3%, exhibiting no change 6% $1.10 >= 20,001 SF [18] NET ABSORPTION 4660 La Jolla Village Drive, Suite 100 -1.0 from January. The California unemployment rate increased (+0.1%) in February and stood $1.00 San Diego, CA 92122 | USA 4% CONSTRUCTION -2.0 at 11.4% while the national rate decreased (-0.1%) to 8.7%. As of February 2012, San Diego $0.90 49.0% tel +1 858.677.5385 49.0% County experienced a year-over-year increase in non-farm employment totaling 9,000 jobs. 2% $0.80 FAX +1 858.795.4185 -3.0 $0.70 RENTAL RATE The combined industry sectors of “Trade, Transportation, and Utilities” and “Manufacturing” – -4.0 0% $0.60 the two predominant industrial-utilizing employment sectors – posted a net increase of 2,900 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 jobs over the same period. Q1 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 9 basis points to 0.7% in Q1. Vacant sublease NEW SUPPLY Net Absorption New Supply Vacancy Industrial R&D Combined space comprises 1.3 million SF countywide. In January, the USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Nearly 43% of all this space is concentrated in No new construction was completed in Q1; there Indicators for San Diego posted a 0.9% increase. This was the third consecutive month of wet lab and R&D space in the Golden Triangle is 253,245 square feet under construction. This This report has been prepared by Colliers International increases that was driven primarily by significant gains in local consumer confidence, decreased submarkets of Campus Point/Eastgate and includes a 129,845-square-foot build-to-suit for general information only. Information contained INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE herein has been obtained from sources deemed reliable INDUSTRIAL VACANCY RATES Percentage of Total Leases Completed in Q1 2012 Torrey Pines. Otay Mesa – with over 182,000 for HOIST Fitness in Poway to be completed in and no representation is made as to the accuracy thereof. Q1 2012 MARKET TRENDS square feet – has the most vacant warehouse Q4 2012 and a 123,400-square-foot additional Colliers International does not guarantee, warrant or INDUSTRIAL VACANCY RATES NEW SUPPLY, ABSORPTION AND VACANCY RATES HISTORICAL RENTAL represent that the information contained in this document Q1 2012 13.1% Strong positive demandCombined Rat Industrial, R&D and sublease space in the county. building in the Illumina campus in the Campus is correct. Any interested party should undertake their 4.0 5.1% 12% drove countywide net Asking Rate Pe Quarterly Average 14.9% Point/Eastgate submarket which will be own inquiries as to the accuracy of the information. S.D. County 9.7% absorption$1.50 to over Colliers International excludes unequivocally all inferred 3.0 3.8% Vacancy has tended to remain stable in the completed in mid-2013. 10% 559,000 square feet in $1.40 or implied terms, conditions and warranties arising out of 14.8% <= 2,000 SF [232] Central County 2.0 Q1. In 2012, net this document and excludes all liability for loss and 11%-12% range for the last two years, in part 9.9% 29.0% 8% $1.30 damages arising there from. absorption -will stand at 2,001 5,000 SF [137] $ / SF / Month (NNN) 1.0 due to comparable levels of new construction Proposed new development totals about 12.6% $1.20 Vacancy Rate SF (Millions) North County 10.1% around 1.0 to 1.5 million 5,001 - 10,000 SF [62] (supply) and net absorption (demand). 7.75 million SF with over 70% of this space 0.0 6% SF, making$1.10 it potentially 18.5% $1.00 Minimal demand in 2011 coupled with a virtually concentrated in just four submarkets: Otay I-15 Corridor 7.4% -1.0 4% the best year 20,000 SF [24] 10,001 - for demand equal level of new construction has done very Mesa, Carlsbad, East County and Oceanside. since 2006. No new $0.90 -2.0 >= 20,001 SF [18] 0% 5% 10% 15% 20% construction was $0.80 little to affect vacancy to a significant degree. Most proposed future development 2% R&D Industrial -3.0 completed$0.70 but in Q1 Demand is forecasted to pick up in 2012 is concentrated in build-to-suits with nearly 130,000 SF will -4.0 0% $0.60 causing absorption to drive vacancy down to speculative development trailing for several 49.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 be completed for Q1 Q2 Q3 Q4 Q1 Q the or near 11%. years to come. Accelerating success. Q1 year. Vacancy stood07 07 07 08 0 07 at 11.3% and will settle at or Net Absorption New Supply Vacancy near 11.0% by year-end. www.colliers.com/sandiego www.colliers.com/sandiego INDUSTRIAL LEASING Percentage of Total Leases Compl
  • MARKET REPORT | Q1 2012 | INDUSTRIAL | SAN DIEGO COUNTY MARKET REPORT | Q1 2012 | INDUSTRIAL | SAN DIEGO COUNTY can expect this trend to endure over the next INDUSTRIAL OVERVIEW initial claims for unemployment insurance couple of years, providing a stable level of San Diego County Industrial Market north county and increased local stock prices. January Q1 2012 initial claims for unemployment insurance hit demand that is less prone to extreme levels of EXISTING PROPERTIES VACANCY NET ABSORPTION CONSTRUCTION their lowest level – on a seasonally-adjusted negative absorption. Avg basis – since August 2008, while help Total Direct Sublease Total Prior Qtr Net Abs Net Abs New Supply Under Rental i-15 corridor wanted advertising increased for the 13th The countywide overall industrial/R&D Inventory Vacancy Vacancy Vacancy Vacancy Current Qtr YTD Current Qtr Construction Proposed Rate straight month. average asking rental rate reached its market Submarket / Class Bldgs SF Rate Rate Rate Rate * SF SF SF SF SF (NNN) bottom of $0.80/SF/mo. in Q1 2011. For the INDUSTRIAL TOTALS BY MARKET Manufacturing, warehouse, distribution, and multi-tenant/incubator NET ABSORPTION last five quarters, the rent has settled in the Central County 3,054 81,812,573 9.5% 0.4% 9.9% 10.0% 194,335 194,335 0 0 2,361,960 $0.62 mcas miramar low-$0.80 range and stood at $0.82/SF/ North County 2,190 40,302,817 10.0% 0.0% 10.1% 10.4% 108,584 108,584 0 0 1,315,951 $0.70 I-15 Corridor 302 10,569,503 7.0% 0.4% 7.4% 7.3% 17,322 17,322 0 129,845 382,900 $0.87 Q1 combined industrial/R&D net absorption mo. in Q1 2012. In Q1, rental rates began TOTAL 5,546 132,684,893 9.4% 0.3% 9.7% 9.9% 320,241 320,241 0 129,845 4,060,811 $0.68 totaled a positive 559,233 SF. If this rate to appreciate in all submarkets of the I-15 R&D TOTALS BY MARKET Flex, wet lab and corporate headquarters central of absorption continues throughout the Corridor and most submarkets of the Central Central County 823 34,399,640 12.6% 2.2% 14.8% 15.1% 97,162 97,162 0 123,400 1,622,724 $1.13 county rest of the year, demand in 2012 will be County with an overall increase in the total North County 347 12,030,463 12.0% 0.5% 12.6% 12.6% 63,762 63,762 0 0 1,458,474 $1.05 I-15 Corridor 134 9,331,288 17.5% 1.0% 18.5% 20.5% 78,068 78,068 0 0 605,000 $1.01 close to pre-recession levels. Countywide Central County. However, the North County TOTAL 1,304 55,761,391 13.3% 1.6% 14.9% 15.4% 238,992 238,992 0 123,400 3,686,198 $1.08 net absorption for industrial space submarkets yielded either no change or minor COMBINED INDUSTRIAL / R&D BY MARKET AND SUBMARKET (manufacturing, warehouse, distribution, and decreases in their rental rates. Central County multi-tenant/incubator building uses) totaled Airport / SA 76 1,878,846 3.8% 0.0% 3.8% 1.3% (39,970) (39,970) 0 0 0 $0.89 a positive 320,241 SF and R&D space (flex, VACANCY Campus Pt / Egate 42 4,065,514 16.0% 11.4% 27.4% 26.1% (46,693) (46,693) 0 123,400 601,967 $2.25SAN DIEGO COUNTY Central San Diego 397 8,377,286 4.9% 0.6% 5.5% 5.6% 12,569 12,569 0 0 0 $0.65 wet lab and corporate headquarters building East County 604 14,148,926 8.1% 0.0% 8.1% 7.8% (13,792) (13,792) 0 0 1,229,000 $0.67The San Diego County industrial/R&D uses) totaled a positive 238,992 SF. The Q1 overall vacancy rate decreased by 26 Kearny Mesa 650 17,391,882 5.7% 0.3% 6.0% 6.5% 75,697 75,697 0 0 65,691 $0.97 basis points to stand at 11.3%. The industrial Miramar 586 13,792,527 10.5% 0.4% 10.8% 11.4% 76,662 76,662 0 0 0 $0.88market is comprised of 188.4 million Mission Gorge / Vly 95 2,273,798 10.2% 2.9% 13.1% 13.2% 1,319 1,319 0 0 0 $0.82square feet of industrial and R&D space. Absorption over the last two years has been and R&D vacancy components measured 9.7% Otay Mesa 294 14,645,809 21.2% 1.3% 22.5% 23.0% 104,622 104,622 0 0 1,619,960 $0.47The county is divided into three major and 14.9%, respectively. Compared to one Rose Cyn / Morena 189 4,140,283 5.8% 0.0% 5.8% 3.9% (3,427) (3,427) 0 0 0 $0.75 primarily bolstered by large tenants and usersmarket areas with 21 submarkets within year ago, R&D vacancy has increased by 71 Sorrento Mesa 273 13,495,753 13.3% 0.2% 13.5% 14.2% 93,159 93,159 0 0 229,136 $1.08them. Nearly 62% of countywide who have expanded or leased additional Sorrento Valley 106 3,411,905 9.4% 2.0% 11.4% 11.6% 7,526 7,526 0 0 0 $1.38industrial/R&D space is located within space throughout the county. However, basis points (14.2% in Q1 2011) while industrial South Bay 498 13,556,827 7.4% 0.0% 7.4% 7.5% (4,834) (4,834) 0 0 0 $0.58the 13 submarkets of the Central County the majority of Q1 absorption activity was vacancy has decreased by 9 basis points (9.8% Torrey Pines 67 5,032,857 13.8% 1.9% 15.7% 16.3% 28,659 28,659 0 0 238,930 N/Amarket. Industrial buildings (including in Q1 2011). TOTAL 3,877 116,212,213 10.4% 0.9% 11.3% 11.5% 291,497 291,497 0 123,400 3,984,684 $0.79 attributed to smaller tenants below 10,000manufacturing, warehouse, distribution, North County SF. This was especially true in the North Carlsbad 485 15,025,194 14.0% 0.4% 14.4% 14.1% 14,650 14,650 0 0 1,357,132 $0.97and multi-tenant/incubator) make up County and South County areas. This included The Q1 combined industrial/R&D direct vacancy Escondido 637 7,184,335 6.4% 0.1% 6.5% 6.2% (26,464) (26,464) 0 0 39,500 $0.7270% of total inventory while R&Dbuildings (including flex, wet lab and not only expansions and relocations, but new rate was 10.6% compared to 10.8% at the end Oceanside 396 8,038,265 15.5% 0.0% 15.5% 17.1% 115,069 115,069 0 0 1,227,361 $0.63 San Marcos 489 8,710,664 6.9% 0.0% 6.9% 7.1% 36,664 36,664 0 0 53,000 $0.82corporate headquarters) make up the tenants and users as well. As the local and of 2011. Sublease vacancy inched down by Vista 530 13,374,822 8.0% 0.1% 8.1% 8.6% 32,427 32,427 0 0 97,432 $0.68remaining 30% of the total inventory. national economy continues to improve, we Continued on page 4 TOTAL 2,537 52,333,280 10.5% 0.2% 10.6% 10.9% 172,346 172,346 0 0 2,774,425 $0.79 I-15 Corridor Poway 215 8,196,473 4.5% 0.5% 5.1% 4.3% (31,857) (31,857) 0 129,845 447,900 $0.78TRANSACTION ACTIVITY - Q1 2012 Rancho Bernardo 146 9,559,699 16.3% 0.1% 16.4% 18.1% 147,296 147,296 0 0 0 $1.01 Scripps Ranch 75 2,144,619 20.6% 3.8% 24.4% 27.7% (20,049) (20,049) 0 0 540,000 $0.96SALES ACTIVITY TOTAL 436 19,900,791 11.9% 0.7% 12.6% 13.5% 95,390 95,390 0 129,845 987,900 $0.95 SAN DIEGO COUNTY COMBINED INDUSTRIAL / R&D SIZE SF SALE PRICE PRICE/SF TOTAL 6,850 188,446,284 10.6% 0.7% 11.3% 11.5% 559,233 559,233 0 253,245 7,747,009 $0.82PROPERTY NAME/ADDRESS SUBMARKET TYPE QUARTERLY COMPARISON13550 Stowe Drive Poway Industrial 112,000 $11,800,000 $105 Q1 2012 6,850 188,446,284 10.6% 0.7% 11.3% 11.5% 559,233 559,233 0 253,245 7,747,009 $0.824039 Avenida De La Plata Oceanside R&D 35,856 $4,586,000 $128 Q4 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 Q3 2011 * 6,849 188,338,032 10.9% 0.7% 11.6% 11.7% 280,420 55,993 202,340 253,245 7,515,118 $0.821081 Poinsettia Avenue Vista Industrial 65,000 $3,770,000 $58 Q2 2011 * 6,846 188,135,692 10.9% 0.8% 11.7% 11.5% (297,544) (224,427) 0 202,340 7,160,249 $0.81 Q1 2011 * 6,846 188,135,692 10.7% 0.9% 11.5% 11.3% 73,117 73,117 0 202,340 6,264,113 $0.802390 Oak Ridge Way Vista Industrial 39,672 $2,760,000 $70 * Revised in Q4 2011.9355 Chesapeake Drive Kearny Mesa R&D 14,586 $2,375,000 $163 Average rental rates are defined as the average asking monthly rate per square foot normalized to a "triple net" basis.LEASING ACTIVITYPROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF TENANT NAME2858 Loker Avenue E. Carlsbad Industrial 64,541 PODS Enterprises (renewal)7130 Miramar Road Miramar Industrial 58,368 Ashley Furniture7590 Carroll Road Miramar Industrial 52,103 R.R. Donnelley & Sons (renewal)10445 Pacific Center Court Sorrento Mesa R&D 48,709 Qualcomm5950 Nancy Ridge Drive Miramar Industrial 46,800 InCharacter Costumes LLCp. 2 | Colliers International Colliers International | p. 3
  • MARKET REPORT | Q1 2012 | INDUSTRIAL | SAN DIEGO COUNTY MARKET REPORT | Q1 2012 | INDUSTRIAL | SAN DIEGO COUNTY can expect this trend to endure over the next INDUSTRIAL OVERVIEW initial claims for unemployment insurance couple of years, providing a stable level of San Diego County Industrial Market north county and increased local stock prices. January Q1 2012 initial claims for unemployment insurance hit demand that is less prone to extreme levels of EXISTING PROPERTIES VACANCY NET ABSORPTION CONSTRUCTION their lowest level – on a seasonally-adjusted negative absorption. Avg basis – since August 2008, while help Total Direct Sublease Total Prior Qtr Net Abs Net Abs New Supply Under Rental i-15 corridor wanted advertising increased for the 13th The countywide overall industrial/R&D Inventory Vacancy Vacancy Vacancy Vacancy Current Qtr YTD Current Qtr Construction Proposed Rate straight month. average asking rental rate reached its market Submarket / Class Bldgs SF Rate Rate Rate Rate * SF SF SF SF SF (NNN) bottom of $0.80/SF/mo. in Q1 2011. For the INDUSTRIAL TOTALS BY MARKET Manufacturing, warehouse, distribution, and multi-tenant/incubator NET ABSORPTION last five quarters, the rent has settled in the Central County 3,054 81,812,573 9.5% 0.4% 9.9% 10.0% 194,335 194,335 0 0 2,361,960 $0.62 mcas miramar low-$0.80 range and stood at $0.82/SF/ North County 2,190 40,302,817 10.0% 0.0% 10.1% 10.4% 108,584 108,584 0 0 1,315,951 $0.70 I-15 Corridor 302 10,569,503 7.0% 0.4% 7.4% 7.3% 17,322 17,322 0 129,845 382,900 $0.87 Q1 combined industrial/R&D net absorption mo. in Q1 2012. In Q1, rental rates began TOTAL 5,546 132,684,893 9.4% 0.3% 9.7% 9.9% 320,241 320,241 0 129,845 4,060,811 $0.68 totaled a positive 559,233 SF. If this rate to appreciate in all submarkets of the I-15 R&D TOTALS BY MARKET Flex, wet lab and corporate headquarters central of absorption continues throughout the Corridor and most submarkets of the Central Central County 823 34,399,640 12.6% 2.2% 14.8% 15.1% 97,162 97,162 0 123,400 1,622,724 $1.13 county rest of the year, demand in 2012 will be County with an overall increase in the total North County 347 12,030,463 12.0% 0.5% 12.6% 12.6% 63,762 63,762 0 0 1,458,474 $1.05 I-15 Corridor 134 9,331,288 17.5% 1.0% 18.5% 20.5% 78,068 78,068 0 0 605,000 $1.01 close to pre-recession levels. Countywide Central County. However, the North County TOTAL 1,304 55,761,391 13.3% 1.6% 14.9% 15.4% 238,992 238,992 0 123,400 3,686,198 $1.08 net absorption for industrial space submarkets yielded either no change or minor COMBINED INDUSTRIAL / R&D BY MARKET AND SUBMARKET (manufacturing, warehouse, distribution, and decreases in their rental rates. Central County multi-tenant/incubator building uses) totaled Airport / SA 76 1,878,846 3.8% 0.0% 3.8% 1.3% (39,970) (39,970) 0 0 0 $0.89 a positive 320,241 SF and R&D space (flex, VACANCY Campus Pt / Egate 42 4,065,514 16.0% 11.4% 27.4% 26.1% (46,693) (46,693) 0 123,400 601,967 $2.25SAN DIEGO COUNTY Central San Diego 397 8,377,286 4.9% 0.6% 5.5% 5.6% 12,569 12,569 0 0 0 $0.65 wet lab and corporate headquarters building East County 604 14,148,926 8.1% 0.0% 8.1% 7.8% (13,792) (13,792) 0 0 1,229,000 $0.67The San Diego County industrial/R&D uses) totaled a positive 238,992 SF. The Q1 overall vacancy rate decreased by 26 Kearny Mesa 650 17,391,882 5.7% 0.3% 6.0% 6.5% 75,697 75,697 0 0 65,691 $0.97 basis points to stand at 11.3%. The industrial Miramar 586 13,792,527 10.5% 0.4% 10.8% 11.4% 76,662 76,662 0 0 0 $0.88market is comprised of 188.4 million Mission Gorge / Vly 95 2,273,798 10.2% 2.9% 13.1% 13.2% 1,319 1,319 0 0 0 $0.82square feet of industrial and R&D space. Absorption over the last two years has been and R&D vacancy components measured 9.7% Otay Mesa 294 14,645,809 21.2% 1.3% 22.5% 23.0% 104,622 104,622 0 0 1,619,960 $0.47The county is divided into three major and 14.9%, respectively. Compared to one Rose Cyn / Morena 189 4,140,283 5.8% 0.0% 5.8% 3.9% (3,427) (3,427) 0 0 0 $0.75 primarily bolstered by large tenants and usersmarket areas with 21 submarkets within year ago, R&D vacancy has increased by 71 Sorrento Mesa 273 13,495,753 13.3% 0.2% 13.5% 14.2% 93,159 93,159 0 0 229,136 $1.08them. Nearly 62% of countywide who have expanded or leased additional Sorrento Valley 106 3,411,905 9.4% 2.0% 11.4% 11.6% 7,526 7,526 0 0 0 $1.38industrial/R&D space is located within space throughout the county. However, basis points (14.2% in Q1 2011) while industrial South Bay 498 13,556,827 7.4% 0.0% 7.4% 7.5% (4,834) (4,834) 0 0 0 $0.58the 13 submarkets of the Central County the majority of Q1 absorption activity was vacancy has decreased by 9 basis points (9.8% Torrey Pines 67 5,032,857 13.8% 1.9% 15.7% 16.3% 28,659 28,659 0 0 238,930 N/Amarket. Industrial buildings (including in Q1 2011). TOTAL 3,877 116,212,213 10.4% 0.9% 11.3% 11.5% 291,497 291,497 0 123,400 3,984,684 $0.79 attributed to smaller tenants below 10,000manufacturing, warehouse, distribution, North County SF. This was especially true in the North Carlsbad 485 15,025,194 14.0% 0.4% 14.4% 14.1% 14,650 14,650 0 0 1,357,132 $0.97and multi-tenant/incubator) make up County and South County areas. This included The Q1 combined industrial/R&D direct vacancy Escondido 637 7,184,335 6.4% 0.1% 6.5% 6.2% (26,464) (26,464) 0 0 39,500 $0.7270% of total inventory while R&Dbuildings (including flex, wet lab and not only expansions and relocations, but new rate was 10.6% compared to 10.8% at the end Oceanside 396 8,038,265 15.5% 0.0% 15.5% 17.1% 115,069 115,069 0 0 1,227,361 $0.63 San Marcos 489 8,710,664 6.9% 0.0% 6.9% 7.1% 36,664 36,664 0 0 53,000 $0.82corporate headquarters) make up the tenants and users as well. As the local and of 2011. Sublease vacancy inched down by Vista 530 13,374,822 8.0% 0.1% 8.1% 8.6% 32,427 32,427 0 0 97,432 $0.68remaining 30% of the total inventory. national economy continues to improve, we Continued on page 4 TOTAL 2,537 52,333,280 10.5% 0.2% 10.6% 10.9% 172,346 172,346 0 0 2,774,425 $0.79 I-15 Corridor Poway 215 8,196,473 4.5% 0.5% 5.1% 4.3% (31,857) (31,857) 0 129,845 447,900 $0.78TRANSACTION ACTIVITY - Q1 2012 Rancho Bernardo 146 9,559,699 16.3% 0.1% 16.4% 18.1% 147,296 147,296 0 0 0 $1.01 Scripps Ranch 75 2,144,619 20.6% 3.8% 24.4% 27.7% (20,049) (20,049) 0 0 540,000 $0.96SALES ACTIVITY TOTAL 436 19,900,791 11.9% 0.7% 12.6% 13.5% 95,390 95,390 0 129,845 987,900 $0.95 SAN DIEGO COUNTY COMBINED INDUSTRIAL / R&D SIZE SF SALE PRICE PRICE/SF TOTAL 6,850 188,446,284 10.6% 0.7% 11.3% 11.5% 559,233 559,233 0 253,245 7,747,009 $0.82PROPERTY NAME/ADDRESS SUBMARKET TYPE QUARTERLY COMPARISON13550 Stowe Drive Poway Industrial 112,000 $11,800,000 $105 Q1 2012 6,850 188,446,284 10.6% 0.7% 11.3% 11.5% 559,233 559,233 0 253,245 7,747,009 $0.824039 Avenida De La Plata Oceanside R&D 35,856 $4,586,000 $128 Q4 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 Q3 2011 * 6,849 188,338,032 10.9% 0.7% 11.6% 11.7% 280,420 55,993 202,340 253,245 7,515,118 $0.821081 Poinsettia Avenue Vista Industrial 65,000 $3,770,000 $58 Q2 2011 * 6,846 188,135,692 10.9% 0.8% 11.7% 11.5% (297,544) (224,427) 0 202,340 7,160,249 $0.81 Q1 2011 * 6,846 188,135,692 10.7% 0.9% 11.5% 11.3% 73,117 73,117 0 202,340 6,264,113 $0.802390 Oak Ridge Way Vista Industrial 39,672 $2,760,000 $70 * Revised in Q4 2011.9355 Chesapeake Drive Kearny Mesa R&D 14,586 $2,375,000 $163 Average rental rates are defined as the average asking monthly rate per square foot normalized to a "triple net" basis.LEASING ACTIVITYPROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF TENANT NAME2858 Loker Avenue E. Carlsbad Industrial 64,541 PODS Enterprises (renewal)7130 Miramar Road Miramar Industrial 58,368 Ashley Furniture7590 Carroll Road Miramar Industrial 52,103 R.R. Donnelley & Sons (renewal)10445 Pacific Center Court Sorrento Mesa R&D 48,709 Qualcomm5950 Nancy Ridge Drive Miramar Industrial 46,800 InCharacter Costumes LLCp. 2 | Colliers International Colliers International | p. 3
  • Q1 2012 | INDUSTRIAL MARKET REPORT | Q1 2012 | INDUSTRIAL | SAN DIEGO COUNTY SAN DIEGO COUNTY HISTORICAL RENTAL RATE TRENDSCY RATESIndustrial, R&D and Combined Rates HISTORICAL RENTAL RATE TRENDS Quarterly Average Asking Rate Per SF Industrial, R&D and Combined Rates Per Month (NNN) Quarterly Average Asking Rate Per SF Per Month (NNN) RENTAL RATES Since a historical high point in Q3 2008, the countywide 512 offices in 61 countries on MARKET Report 12% $1.50 $1.40 10% $1.50 average asking rental rate for combined industrial and R&D 6 continents $1.40 space has been steadily $1.30 $1.30 decreasing. Since Q1 2011, United States: 125 $ / SF / Month (NNN) $1.20 8% Canada: 38 $ / SF / Month (NNN) $1.20 rents have stabilized in the Vacancy Rate $1.10 low-$0.80/SF/mo. range. The Latin America: 18 6% $1.10 $1.00 Q1 2012 average rate of Asia Pacific: 214 $1.00 $0.90 4% $0.82/SF/mo. is still 17% less EMEA: 117 $0.90 $0.80 than the historical high.. $0.80 • $59.6 billion in annual transactions $0.70 2% Industrial Demand Starts Strong During Q1 $0.70 billion square feet under • 1.0 $0.60 0% $0.60 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 management009 2010 2011 2012 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 • Over 12,500 professionals Net absorption soars to over half-a-million square feet Industrial R&D Combined Vacancy Industrial R&D Combined SAN DIEGO: MARKET OVERVIEW Jim Spain, SIOR INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE LEASING ACTIVITY San Diego County’s industrial/R&D market experienced a large surge in demand in Q1 as nearly INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q1 2012 Regional Managing Director | San Diego Region Over 470 leases were Percentage of Total Leases Completed in Q1 2012 License No. 00804745 560,000 SF of net absorption was recorded. This was the strongest quarter of net absorption completed in Q1 2012, 4660 La Jolla Village Drive, Suite 100 since Q4 2010 and may be the strongest quarter this year. Robust leasing activity in Q3 and Q4 13.1% totaling nearly 2.2 million 13.1% San Diego, CA 92122 | USA last year led to increased occupancies in Q1 this year. The leasing activity in late 2011 will carry square feet. 91% of all 5.1% NEW SUPPLY, ABSORPTION AND VACANCY RATESmid-2012 absorption activity which will likely translate into positive net absorption, but not HISTORICAL RENTAL RATE TRENDS 5.1% tel +1 858.677.5311 into leases were 10,000 SF or 3.8% Industrial, R&D and Combined Rates 3.8% FAX +1 858.795.4111 at this recent12% surge level. While not as remarkable as Q3 andMonth leasing, Q1 leasing activity was Quarterly Average Asking Rate Per SF Per Q4 (NNN) less, while only 9% of all <= 2,000 SF [232] 4.0 <= 2,000 SF [232] market indicators robust nevertheless and the next few quarters should post steady activity. This is an indicator 29.0% leases were over 10,000 SF 3.0 $1.50 29.0% 2,001 - 5,000 SF [137] in size. Smaller tenants made 2,001 - 5,000 SF [137] Q1 2012 Q2 2012 (P) of reasonably strong absorption for remainder of the year. Net absorption for 2012 will likely be 10% $1.40 2.0 up a larger proportion of all 5,001 - 10,000 SF [62] 5,001 - 10,000 SF [62] researcher: between 1.0 and 1.5 million SF with vacancy standing at 10.8% to 11.0%. $1.30 8% leases signed in Q1. $ / SF / Month (NNN) 10,001 - 20,000 SF [24] 1.0 CHRISTOPHER REUTZ VACANCY $1.20 Vacancy Rate SF (Millions) 10,001 - 20,000 SF [24] >= 20,001 SF [18] Research Director | San Diego Region 0.0 The February 2012 San Diego County unemployment rate measured 9.3%, exhibiting no change 6% $1.10 >= 20,001 SF [18] NET ABSORPTION 4660 La Jolla Village Drive, Suite 100 -1.0 from January. The California unemployment rate increased (+0.1%) in February and stood $1.00 San Diego, CA 92122 | USA 4% CONSTRUCTION -2.0 at 11.4% while the national rate decreased (-0.1%) to 8.7%. As of February 2012, San Diego $0.90 49.0% tel +1 858.677.5385 49.0% County experienced a year-over-year increase in non-farm employment totaling 9,000 jobs. 2% $0.80 FAX +1 858.795.4185 -3.0 $0.70 RENTAL RATE The combined industry sectors of “Trade, Transportation, and Utilities” and “Manufacturing” – -4.0 0% $0.60 the two predominant industrial-utilizing employment sectors – posted a net increase of 2,900 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 jobs over the same period. Q1 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 9 basis points to 0.7% in Q1. Vacant sublease NEW SUPPLY Net Absorption New Supply Vacancy Industrial R&D Combined space comprises 1.3 million SF countywide. In January, the USD Burnham-Moores Center for Real Estate’s Index of Leading Economic Nearly 43% of all this space is concentrated in No new construction was completed in Q1; there Indicators for San Diego posted a 0.9% increase. This was the third consecutive month of wet lab and R&D space in the Golden Triangle is 253,245 square feet under construction. This This report has been prepared by Colliers International increases that was driven primarily by significant gains in local consumer confidence, decreased submarkets of Campus Point/Eastgate and includes a 129,845-square-foot build-to-suit for general information only. Information contained INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE herein has been obtained from sources deemed reliable INDUSTRIAL VACANCY RATES Percentage of Total Leases Completed in Q1 2012 Torrey Pines. Otay Mesa – with over 182,000 for HOIST Fitness in Poway to be completed in and no representation is made as to the accuracy thereof. Q1 2012 MARKET TRENDS square feet – has the most vacant warehouse Q4 2012 and a 123,400-square-foot additional Colliers International does not guarantee, warrant or INDUSTRIAL VACANCY RATES NEW SUPPLY, ABSORPTION AND VACANCY RATES HISTORICAL RENTAL represent that the information contained in this document Q1 2012 13.1% Strong positive demandCombined Rat Industrial, R&D and sublease space in the county. building in the Illumina campus in the Campus is correct. Any interested party should undertake their 4.0 5.1% 12% drove countywide net Asking Rate Pe Quarterly Average 14.9% Point/Eastgate submarket which will be own inquiries as to the accuracy of the information. S.D. County 9.7% absorption$1.50 to over Colliers International excludes unequivocally all inferred 3.0 3.8% Vacancy has tended to remain stable in the completed in mid-2013. 10% 559,000 square feet in $1.40 or implied terms, conditions and warranties arising out of 14.8% <= 2,000 SF [232] Central County 2.0 Q1. In 2012, net this document and excludes all liability for loss and 11%-12% range for the last two years, in part 9.9% 29.0% 8% $1.30 damages arising there from. absorption -will stand at 2,001 5,000 SF [137] $ / SF / Month (NNN) 1.0 due to comparable levels of new construction Proposed new development totals about 12.6% $1.20 Vacancy Rate SF (Millions) North County 10.1% around 1.0 to 1.5 million 5,001 - 10,000 SF [62] (supply) and net absorption (demand). 7.75 million SF with over 70% of this space 0.0 6% SF, making$1.10 it potentially 18.5% $1.00 Minimal demand in 2011 coupled with a virtually concentrated in just four submarkets: Otay I-15 Corridor 7.4% -1.0 4% the best year 20,000 SF [24] 10,001 - for demand equal level of new construction has done very Mesa, Carlsbad, East County and Oceanside. since 2006. No new $0.90 -2.0 >= 20,001 SF [18] 0% 5% 10% 15% 20% construction was $0.80 little to affect vacancy to a significant degree. Most proposed future development 2% R&D Industrial -3.0 completed$0.70 but in Q1 Demand is forecasted to pick up in 2012 is concentrated in build-to-suits with nearly 130,000 SF will -4.0 0% $0.60 causing absorption to drive vacancy down to speculative development trailing for several 49.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 be completed for Q1 Q2 Q3 Q4 Q1 Q the or near 11%. years to come. Accelerating success. Q1 year. Vacancy stood07 07 07 08 0 07 at 11.3% and will settle at or Net Absorption New Supply Vacancy near 11.0% by year-end. www.colliers.com/sandiego www.colliers.com/sandiego INDUSTRIAL LEASING Percentage of Total Leases Compl