q4 2011 industrial report
DESCRIPTION
TRANSCRIPT
Industrial ReportNorth San Diego County
4th Quarter 2011PREPARED BY:
Adam Molnar
Greg Lewis
Tucker Hohenstein
Mike Erwin
Mike Bench
COLLIERS INTERNATIONAL
5901 Priestly Drive, Suite 100
Carlsbad, CA 92008
Fax 760 438 8925
www.colliers.com/carlsbad
NORTH COUNTYAT A GLANCE
www.colliers.com/carlsbad
OVERVIEW
The North San Diego County industrial market is largely decentralized and comprised of
ve 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
County, the coastal location is a major factor in the area’s appeal to corporate users and
its 826,985 residents.
The industrial market consists of approximately 52.3 million square feet. By comparison,
the total San Diego industrial market is 188.3 million square feet. North County represents
27% of the total. Year-end 2011 North County vacancy was 10.9%. The vacancy rate
is improving as 566,762 SF of positive net absorption occurred. The following table
summarizes the inventory and vacancy in the market:
North San Diego County is well known for its highly skilled labor force, excellent
transportation network, pro-growth business environment, signi cant Federal
Government presence, desirable vacation destination and abundant employee housing.
The North San Diego County industrial market is home to a diversi ed mix of users
including defense, telecommunications, software, medical manufacturing, golf and leisure
sports, life science and technology rms. Corporate neighbors include:
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2011
Q4 2011 | INDUSTRIAL
CARLSBAD HISTORICAL MARKET TRENDS
10.9%
8.6%
7.1%
17.1%
6.2%
14.1%
0% 5% 10% 15% 20%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
INDUSTRIAL/R&D VACANCY RATES Q4 2011
VISTA HISTORICAL MARKET TRENDS
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS
Q42011
Q12012 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
Ocean
Escondid
Oceanside
Vista
San
MarcosCarlsbad
Coca-Cola
Medtronic
Titleist Golf
ViaSat
Covidien
Abbott Labs
Genentech
Callaway Golf
L-3 Communications
SAIC
Isis Pharmaceuticals
Life Technologies
Puma Golf
TaylorMade Golf
Denso Wireless
U.S. Foodservice
Philips Respironics
Thomson Reuters
Rockwell Collins
John Deere
DJO Inc.
Linear
Killion Industries
Jeld-Wen Windows and Doors
Sumitomo Electric
McCain Inc.
Directed Electronics
GIA
Hunter Industries
Watkins Manufacturing
Submarket Buildings Total Inventory Vacant SF Vacancy Rate
Carlsbad 485 15,011,955 2,116,686 14.10%
Escondido 637 7,183,097 445,352 6.20%
Oceanside 396 8,038,044 1,374,506 17.10%
San Marcos 489 8,703,364 617,939 7.10%
Vista 530 13,373,882 1,150,154 8.60%
Total 2,537 52,310,342 5,701,827 10.90%
ESCONDIDO HISTORICAL MARKET TRENDS NORTH COUNTY NET ABSORPTION TRENDS
5-Yr. Avg. = 104,234 SF
0%
2%
4%
6%
8%
10%
12%
14%
-1,000
-500
0
500
1,000
1,500
2003 2004 2005 2006 2007 2008 2009 2010 2011
Vacancy R
ate
SF (
00
0s)
Net Absorption New Supply Vacancy
NORTH COUNTY HISTORICAL MARKET TRENDS
ACTIVITY
Big tenants made a positive impact in 2011.
The bulk of the year’s absorption can be
traced to tenants such as: BREG (88K), Zodiac
(104K), John Deere (76K) SKLZ (150K),
DJO (53K), PrAna (64K), Allied Swiss (63K)
and Teamwork (40K). This demand from
corporate tenants helped 2011 post 566,000
square feet of net absorption, which is well
above the 5-year moving average of 104,000
square feet. Vacancy declined slightly to
10.9% at the end of 2011 versus 11.22% at the
end of 2010.
Owner-users and investors cautiously
entered the market during 2011, which led
to inconsistent sales activity. First quarter
showed promising signs in terms of activity, however the balance of the year was sparse and Q4 nished with
only one sale above 15,000 square feet. The most active size segment for owner-users was 15,000-35,000
square feet. These owner-users were able to take advantage of low interest rates (4.0-5.0% during 2011) and
sale prices between $75-100/SF. Investors were also buying in the same price range with following notable
transactions: LBA purchased 237,000 square feet in the Carlsbad Research Center as part of a sale leaseback
to Callaway Golf, Peregrine bought 127,000 square feet of multi-tenant space in Carlsbad, Alliance Partners
purchased 200,000 square feet in Oceanside and Bixby Land Company bought the 170,000 square foot Palomar
Oaks Technology Park.
FORECAST
We anticipate the North County industrial market to perform similarly to how it did in 2011. This means lease
rates will remain stable across product types and sizes, while North County vacancy could shed another 100-
125 basis points. Consequently, we should continue to see a reduction in supply throughout 2012, as there is
no additional industrial product under construction. As demand improves, the result will be an increase in lease
rates and fewer tenant concessions.
The improving economy and limited product in North County should result in a slight increase in real estate
prices in 2012, and a modest increase in property sales. Further supporting this trend is the Lenders willingness
to modify and extend problem loans, which has signi cantly limited the amount of distressed properties in the
market. We will continue to see investment dollars waiting for lender controlled properties, as well as Sellers
that are in a relatively healthy position, continuing to wait for the eventual Buyer.
AT A GLANCE | Q4 2011 | INDUSTRIAL | NORTH COUNTY
prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN
MIKE ERWIN, MIKE BENCH 760 438 8950
This document has been prepared by Colliers International for advertising and general information only. Colliers
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
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.
www.colliers.com/carlsbad
OVERVIEW
Carlsbad rebounded from a negative 3Q 2011 and nished the year on a positive note
by posting 93,000 square feet of absorption in 4Q 2011. However, the overall statistics
for 2011 reveal a fairly at year with a modest 18,615 square feet of positive absorption.
Compared to one year ago the overall vacancy rate for Industrial/R&D increased by one
percentage point to 14.14%. Despite having a higher overall vacancy rate (15.37% versus
12.81%), R&D product vastly outperformed Industrial in 2011 by posting a positive gain
of 214,000 square feet versus 195,717 square feet of negative absorption. The only
new construction delivered in 2011 was the 176,000 SF BTS for Isis Pharmaceuticals at
Carlsbad Oaks North.
ACTIVITY
For the second straight quarter the 15,000 to 25,000 square foot segment of the R&D
market led the charge in terms of leasing activity with ve transactions during 4Q 2011.
The largest lease deal of the quarter, and the year for that matter, was the 150,000 SF
sublease to SKLZ at 2081 Faraday Avenue. The sublessor was Callaway Golf and the
sublease expires in November 2017. SKLZ will be relocating and expanding from their
current facility in Carlsbad and will use the building primarily for distribution. The only
sale transaction in 4Q was an investment sale between Bixby Land Company and Arden
Realty. Bixby purchased the 170,915 square foot Palomar Oaks Technology Park for a
blended rate of $92.44/SF. The project was approximately 50% leased at the time of the
sale and consists of ve R&D properties valued at $75.00/SF and one o ce property at
$133.00/SF.
FORECAST
With no new product proposed
or planned during 2012 the
market should begin to correct
itself and vacancy rates are
expected to decrease. Rental
rates for the most part have
leveled o after a prolonged
decline. Sale prices for the
limited amount of investment
product are still well below
replacement cost and the
occasional bank owned
properties have provided
opportunistic owner users a rare chance to buy at a signi cant discount. These low
prices for lender controlled properties have created a large disparity between distressed
and traditional pricing expectations. Sellers that are in a relatively healthy position have
been somewhat frustrated by this disconnect which has engendered stagnation in the
market.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2011
Q4 2011 | INDUSTRIAL
CARLSBAD HISTORICAL MARKET TRENDS
10.9%
8.6%
7.1%
17.1%
6.2%
14.1%
0% 5% 10% 15% 20%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
INDUSTRIAL/R&D VACANCY RATES Q4 2011
VISTA HISTORICAL MARKET TRENDS
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS
0%
2%
4%
6%
8%
10%
12%
14%
16%
-100
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007 2008 2009 2010 2011
Vacancy R
ate
SF (
00
0s)
Net Absorption New Supply Vacancy
CARLSBAD HISTORICAL MARKET TRENDS INDUSTRIAL/R&D VACANCY RATES Q4 2011
VISTA HISTORICAL MARKET TRENDS
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS
Ocean
Oceanside
Vista
SanMarcosCarlsbad
Q42011
Q12012 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
CARLSBADAT A GLANCE
Carlsbad
# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
1 Palomar Oaks Technology Park Investor 170,915 $15,800,000 $92.44
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE/SF
2 2081 Faraday Avenue SKLZ 150,159 69 months $0.60 NNN
3 2721 Loker Avenue Blue Earth, Inc. 20,329 72 months $1.03 NNN
4 1890 Rutherford Road Genoptix, Inc. 20,108 38 months $1.81 NNN
5 1905 Aston Avenue Ryderz Compound, LLC 19,794 52 months $0.87 NNN
6 1815 Aston Avenue JetHead Development, Inc. 17,776 36 months $1.29 MG
7 6197 El Camino Real ViaSat, Inc. 15,303 62 months $0.97 NNN
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q4 2011
El C
amino R
eal
El C
amino R
eal
El C
amino R
eal
Gateway RdGateway Rd
Whiptail LoopWhiptail Loop
El Camino Real
Cannon Rd
Faraday Ave
Faraday Ave
College B
lvd
College B
lvd
Palom
ar A
irpo
rt R
d
Palom
ar A
irpo
rt R
d
Poinsettia Ave
Poinsettia Ave E
l Fuerte S
t
El F
uerte S
t
Alga Rd
Melrose D
r
Melrose D
r
Poinse
ttia Ave
Arm
ada D
r
Paseo
Del N
orte
Palomar Airport Rd
Aven
ida E
ncin
as
Aviara Pkwy
Busin
ess P
ark Dr
Busin
ess P
ark Dr
Sycamore Ave
Palomar Airport Rd
Palomar Airport Rd
El Fuerte St
El Fuerte St
Faraday AveFaraday Ave
Mel
rose
Dr
Mel
rose
Dr
Loker A
ve
Loker A
ve
Pacif icOcean
Lionshead Ave
Lionshead Ave
McClellan Palomar Airport
McClellan Palomar Airport
VistaC
ity B
oundary
Park Hyatt Aviara Resort
La Costa Resort & Spa
The Crossings at CarlsbadGolf Course
sings badurse
Legoland
Palomar AirportBusiness Park
Palomar AirportBusiness Park
Carlsbad Airport Center
Carlsbad Airport Center
CarlsbadResearchCenter
CarlsbadResearchCenter
Carlsbad Oaks
Carlsbad Oaks
Carlsbad
Oaks North
Carlsbad
Oaks North
Carlsbad RacewayCarlsbad Raceway
Palomar Forum
Palomar Forum
Bressi RanchBressi Ranch
CarlsbadRanch
7
prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN
MIKE ERWIN, MIKE BENCH 760 438 8950
This document has been prepared by Colliers International for advertising and general information only. Colliers
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
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.
AT A GLANCE | Q4 2011 | INDUSTRIAL | CARLSBAD
www.colliers.com/carlsbad
OVERVIEW
Escondido closed 2011 with the lowest vacancy rate of any city in North San Diego
County. Year end direct vacancy was 6.0%. The good news continued with positive net
absorption for both the fourth quarter and the year. The fourth quarter ended with 25,184
SF of positive net absorption which delivered a year -end total of 128,536 SF. There is
no new industrial building or ex construction underway at this time. 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 opening of summer 2102.
ACTIVITY
Transaction activity in Escondido the past quarter was limited to one mid-size lease for
the market, two sales and several smaller lease deals. VIT Products leased 26,664 SF at
2344 Auto Park Way taking down a building that had been empty for over 2 years. There
was an REO sale of an 11,264SF building at 1250 Industrial Avenue for $84 SF. The other
sale was for a 10,120 SF building at 1200 Simpson Way for $130 SF. A handful of smaller
multi-tenant leases from 1,000 to 3,000 SF were completed to end 2011 on a good note.
FORECAST
The road ahead is bright for Escondido. With a healthy vacancy rate of just 6% there will
be upward pressure on rental rates and sale prices in 2012. The economy is showing
signs of recovery and increases in employment will drive demand for industrial space.
One of our clients is tentatively planning on breaking ground on a new speculative, for
lease industrial project in Escondido which is something we have not seen for several
years.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2011
Q4 2011 | INDUSTRIAL
CARLSBAD HISTORICAL MARKET TRENDS
10.9%
8.6%
7.1%
17.1%
6.2%
14.1%
0% 5% 10% 15% 20%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
INDUSTRIAL/R&D VACANCY RATES Q4 2011
VISTA HISTORICAL MARKET TRENDS
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
-400
-300
-200
-100
0
100
200
300
2003 2004 2005 2006 2007 2008 2009 2010 2011
Vacancy R
ate
SF (
00
0s)
Net Absorption New Supply Vacancy
ESCONDIDO HISTORICAL MARKET TRENDS NORTH COUNTY NET ABSORPTION TRENDS
5-Yr. Avg. = 104,234 SF
NORTH COUNTY HISTORICAL MARKET TRENDS
Ocean
SanMarcos
Oceanside
Vista
Escondido
Carlsbad
Q42011
Q12012 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
ESCONDIDOAT A GLANCE
Escondido
Nor
dahl Roa
d
Nor
dahl Roa
Mission Road
Mission Road
Montiel Rd
Montiel Rd
Auto Park Way
Auto Park Way
Country Club DrCountry Club Dr
Industrial Ave
Industrial Ave
Simpson Way
Simpson Way
Citracado P
kwy
Citracado P
kwy
N A
ndr
ease
n D
rive
N A
ndr
ease
n D
rive
S A
ndr
ease
n D
rive
S A
ndr
ease
n D
rive
Enterprise St
Enterprise St
Val
ley
Par
kway
Val
ley
Par
kway
9th AveAv
Washington Avenue
Washington Avenue
Tulip
St
Tulip
St
Mission Avenue
Mission Avenue
Esco
ndid
o A
ve
Esco
ndid
o A
ve
Cen
ter City P
arkway
Cen
ter City P
arkway
Quin
ce St
Quin
ce St
Rock S
prin
gs R
d
Rock S
prin
gs R
d
PalomarPomeradoHospital
PalomarPomeradoHospital
EscondidoAuto ParkEscondidoAuto Park
Myers Avenue Myers Avenue
Auto Park Way
Auto Park Way
N. H
ale
Ave
nue
N. H
ale
Ave
nue
78
EscondidoResearch
& Tech Center
EscondidoResearch
& Tech Center
## PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
1 1250 Industrial Avenue User 11,264 $950,000 $84.34
2 1200 Simpson Way User 10,120 $1,316,500 $130.09
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE/SF
3 2344 Auto Park Way VIT Products 26,664 48 months $0.47 Gross
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q4 2011
prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN
MIKE ERWIN, MIKE BENCH 760 438 8950
This document has been prepared by Colliers International for advertising and general information only. Colliers
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
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.
AT A GLANCE | Q4 2011 | INDUSTRIAL | ESCONDIDO
www.colliers.com/carlsbad
OVERVIEW
While Oceanside still maintains the highest vacancy rate in North County at 17.1%,
175,000 square feet of positive net absorption during 2011 demonstrates that large
corporations continue to relocate to Oceanside. They are taking advantage of attractive
rental rates and the high corporate image that Oceanside o ers.
With 25 buildings in excess of 15,000 SF currently available, landlords are aggressively
pursuing users in the market and looking for ways to di erentiate their real estate from
the competition.
ACTIVITY
There were no building sales
larger than 15,000 SF during
the fourth quarter. There
were 5 buildings sold in the
quarter less than 15,000 SF.
Land activity is bolstered by
U.S. Food Service, which is
planning to close escrow on
29 acres in Ocean Ranch in
February 2012. They plan on
holding the land for the next
3-5 years before constructing
a 400,000 – 500,000 SF
build-to-suit.
Lease transaction activity was relatively slow. A signi cant surge came late in the
quarter from Solar Gard, proving to be Oceanside’s most signi cant new lease
transaction completed. Solar Gard which is a subsidiary of Saint Gobain leased 35,463
SF for ve years at 1865 Ord Way in the Prescott Industrial Park. They plan to utilize
the manufacturing facility as an expansion for their automotive window lm business.
Occupancy is contingent upon a conditional use permit through the city that is expected to
occur early rst quarter of 2012.
FORECAST
Oceanside has started the year strongly with two notable rst quarter 2012 transactions.
La Cantina Doors recently leased 66,780 SF for 5 years at 2817 Ocean Ranch Blvd in the
La Paci ca Business Park. Brixton, Ltd has leased 22,666 SF for 3 years at 1340 Rocky
Point Drive in the Paci c Coast Business Park. This has created a positive buzz within
the business community. We expect leasing to double in the rst quarter of 2012 with 3
signi cant companies exploring Oceanside’s opportunities at this time.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2011
Q4 2011 | INDUSTRIAL
CARLSBAD HISTORICAL MARKET TRENDS
10.9%
8.6%
7.1%
17.1%
6.2%
14.1%
0% 5% 10% 15% 20%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
INDUSTRIAL/R&D VACANCY RATES Q4 2011
VISTA HISTORICAL MARKET TRENDS
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS
CARLSBAD HISTORICAL MARKET TRENDS INDUSTRIAL/R&D VACANCY RATES Q4 2011
VISTA HISTORICAL MARKET TRENDS
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
-400
-200
0
200
400
600
800
2003 2004 2005 2006 2007 2008 2009 2010 2011
Vacancy R
ate
SF (
00
0s)
Net Absorption New Supply Vacancy
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS
Ocean
Oceanside
Vista
SanMarcosCarlsbad
Q42011
Q12012 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
OCEANSIDEAT A GLANCE
Oceanside
# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
There were no buildings sales larger than 15,000SF during Q4
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE
1 2817 Ocean Ranch Boulevard La Cantina Doors 66,780 60 months $0.55/NNN
2 1865 Ord Way Solar Gard - Saint Gobain 35,463 60 months $0.54/NNN
3 1340 Rocky Point Drive Brixton 22,666 36 months $0.59/G
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q3 2011
El CorazonEl Corazon
Ocean Ranch
Plaza Retail
Ocean Ranch
Plaza Retail
Paci c CoastBusiness ParkPaci c CoastBusiness Park
OceanRanchOceanRanch
Rancho Del OroRancho Del Oro
OceansideGateway
OceansideGateway
Sprinter Light
Rail Line
Sprinter Light
Rail Line
Ran
cho D
el O
ro D
r
Ran
cho D
el O
ro D
r
College B
lvd
College B
lvd
Mes
a Dr
Mes
a Dr
Avenida De La PlataAvenida De La Plata
Old Grove Road
Old Grove Road
Ocean
Ranch
Blvd
Ocean
Ranch
Blvd
Nor
th
Ave
Nor
th
Ave
Temple H
eights Dr
Temple H
eights Dr
Avenida D
el Oro
Avenida D
el Oro
Melro
se Dr
Oceanside BlvdOceanside Blvd
Cor
po
rate
Cen
ter D
r
Cor
po
rate
Cen
ter D
r
AT A GLANCE | Q4 2011 | INDUSTRIAL | OCEANSIDE
prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN
MIKE ERWIN, MIKE BENCH 760 438 8950
This document has been prepared by Colliers International for advertising and general information only. Colliers
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
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.
www.colliers.com/carlsbad
OVERVIEW
The San Marcos industrial market continues to improve as Q4 followed the positive trends
of Q3, which included more companies leasing space, resulting in additional positive
absorption and an overall reduction in vacancy. Vacancy decreased from 8.9% to 7.10%
between Q3 and Q4, and year-end absorption was a positive 103,417 square feet.
ACTIVITY
Leasing activity mainly consisted of small tenants in multi-tenant parks and a few notable
transactions such as Crescent Electric’s 30,000 square foot lease at 295 Distribution
Street. Crescent Electric Supply Company is one of the largest independent distributors
of electrical hardware and supplies in the U.S. Based in East Dubuque, Illinois, Crescent
Electric has 120 distribution facilities in 27 states. Another notable lease transaction was
the approximately 16,000 square foot lease by Piercan USA, Inc., which is a latex glove
company with headquarters in Paris, France and San Marcos, California.
There were limited sales during the Q4, mainly smaller buildings under 10,000 square feet.
Prices maintained its recent levels at approximately $90 - $120/SF.
FORECAST
We should continue to see a reduction in supply throughout 2012 as there is no additional
industrial product under construction, combined with the City’s elimination of some
industrial zoned real estate. We also expect an uptick in demand as overall improvement in
local consumer con dence continues to absorb available product.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2011
Q4 2011 | INDUSTRIAL
CARLSBAD HISTORICAL MARKET TRENDS
10.9%
8.6%
7.1%
17.1%
6.2%
14.1%
0% 5% 10% 15% 20%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
INDUSTRIAL/R&D VACANCY RATES Q4 2011
VISTA HISTORICAL MARKET TRENDS
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS
CARLSBAD HISTORICAL MARKET TRENDS INDUSTRIAL/R&D VACANCY RATES Q4 2011
VISTA HISTORICAL MARKET TRENDS
OCEANSIDE HISTORICAL MARKET TRENDS
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
-300
-200
-100
0
100
200
300
2003 2004 2005 2006 2007 2008 2009 2010 2011
Vacancy R
ate
SF (
00
0s)
Net Absorption New Supply Vacancy
SAN MARCOS HISTORICAL MARKET TRENDS
Ocean
Oceanside
Vista
SanMarcos
Escondido
Carlsbad
Q42011
Q12012 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
SAN MARCOSAT A GLANCE
San Marcos
# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
There were no buildings sales larger than 15,000 SF during Q4
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE/SF
1 1740 La Costa Meadows San Diego Rock Church 15,400 36 months $0.80 GRS
2 295 Distribution Street Crescent Electric 30,140 60 months $0.58 GRS
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q4 2011
Palomar Airport Rd
Palomar Airport Rd
W San Marcos Blvd
W San Marcos Blvd
Linda Vista Dr
Linda Vista Dr
Las
Posa
s Rd
Las
Posa
s Rd
La Mirada Dr
La Mirada Dr
W Mission RdW Mission Rd
E Mission Rd
E Mission Rd
Barham DrBarham Dr
N T
win
Oaks V
alley R
dN
Tw
in O
aks V
alley R
d
S T
win
Oaks
Valley R
d
S T
win
Oaks V
alley R
d
San E
lijo
Rd
San E
lijo
Rd
San Elijo RdSan Elijo Rd
Armorlite Dr
Armorlite Dr
Ranc
ho S
anta
Fe Rd
Ranc
ho S
anta
Fe Rd
Melro
se D
r
Melro
se D
r
Discovery St
Discovery St
Craven RdCraven Rd
78
78
Rancho S
anta Fe Rd
Rancho S
anta Fe Rd
Lake San Marcos
Lake San Marcos
San Elijo HillsResidential
San Elijo HillsResidential
Cal StateUniversity
San Marcos
Cal StateUniversity
San Marcos
Kaiser PermanenteMed Center
Kaiser PermanenteMed Center
San MarcosCivic CenterSan MarcosCivic Center
RestaurantRow
RestaurantRow
Discovery HillsResidential
Discovery HillsResidential
VistaVista
La Costa Meadows
Business Park
La Costa Meadows
Business Park
prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN
MIKE ERWIN, MIKE BENCH 760 438 8950
This document has been prepared by Colliers International for advertising and general information only. Colliers
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
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.
AT A GLANCE | Q4 2011 | INDUSTRIAL | SAN MARCOS
www.colliers.com/carlsbad
OVERVIEW
Vista’s 23,000 square feet of net absorption during Q4 helped continue the positive
trend that began in Q3. The Vista industrial market nished 2011 with a total of 141,000
square feet of positive net absorption as compared with 68,000 square feet during
2010. Vacancy decreased by 1.2% to end the year at 8.64%, which equates to 1.15 million
square feet vacant space with a total market size of 13.37 million square feet.
ACTIVITY
During Q4 there were two leases and zero sales that occurred in buildings/spaces larger
than 15,000 square feet. This limited activity made up the majority of this quarter’s
absorption. Progressive Molding leased 36,000 square feet at 991 Park Center and
Electro-graph leased 26,000 square feet at 1491 Poinsettia.
2011 saw a slight uptick in transaction volume* with 12 leases and 5 sales completed
compared to the 5-year moving average of 11 lease transactions and 4 sale transactions.
This increase – in conjunction with positive net absorption – tells us the market is
improving, albeit slowly.
FORECAST
Unless meaningful job growth
occurs during 2012, we anticipate
the market to perform similar
to how it did in 2011. This
means lease rates will remain
stable across product types and
sizes, while vacancy could shed
another 100-125 basis points (the
equivalent of 130-160k of positive
net absorption). Building sale
values could get interesting as we
enter 2012 with many of the same
buildings that were on the market
in 2011. Some of the sellers have
become impatient and dropped prices in hopes of generating demand. Examples of this
include: 2390 Oak Ridge (39,000 square feet), which Bank of America is selling to an
investor in the low $70’s/SF and 1081 Poinsettia (65,000 square feet), which the seller
has now dropped the asking price to $79/SF. These prices are reminiscent of values 9+
years ago (2000-2003). It’s a good time to be a buyer, but presently there are only a few
willing sellers at these numbers. There is a market price gap with the majority of good
quality product still being o ered in the $90-$100/SF range.
* measured using only buildings and spaces larger than 15,000 square feet.
MARKET INDICATORS
INDUSTRIAL/R&D VACANCY RATESQ4 2011
Q4 2011 | INDUSTRIAL
CARLSBAD HISTORICAL MARKET TRENDS
10.9%
8.6%
7.1%
17.1%
6.2%
14.1%
0% 5% 10% 15% 20%
North County
Vista
San Marcos
Oceanside
Escondido
Carlsbad
INDUSTRIAL/R&D VACANCY RATES Q4 2011
VISTA HISTORICAL MARKET TRENDS
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS
CARLSBAD HISTORICAL MARKET TRENDS INDUSTRIAL/R&D VACANCY RATES Q4 2011
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
-200
-100
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007 2008 2009 2010 2011V
acancy R
ate
SF (
00
0s)
Net Absorption New Supply Vacancy
VISTA HISTORICAL MARKET TRENDS
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS
Q42011
Q12012 (forecast)
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
LEASE CONCESSIONS
Ocean
Oceanside
Vista
SanMarcosCarlsbad
VISTAAT A GLANCE
Vista
# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
There were no buildings sales larger than 15,000SF during Q4
# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE/SF
1 991 Park Center Drive Progressive Moldings 36,000 60 months $0.53 GRS
2 1491 Poinsettia Avenue Electro-graph 26,978 96 months $0.68 NNN
SALES ACTIVITY
LEASING ACTIVITY
TRANSACTION ACTIVITY - Q4 2011
Sycamore Ave
Sycamore Ave
Syc
amor
e Ave
Oleander Ave
eander Ave
Green Oak Rd
Green Oak Rd
Shadowridge Dr
University Dr
La Mirada Dr
La Mirada Dr
Mel
rose
Dr
Mel
rose
Dr
Par
k Cen
ter Dr
Par
k Cen
ter Dr
Lionshead AveLionshead Ave
Palomar Airport R
d
Poin
settia
Ave
Poin
settia
Ave
Shadowridge
Golf Course
Shadowridge
Residential
Business Park D
r
Business Park D
r
Faraday AveFaraday Ave
AT A GLANCE | Q4 2011 | INDUSTRIAL | VISTA
prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN
MIKE ERWIN, MIKE BENCH 760 438 8950
This document has been prepared by Colliers International for advertising and general information only. Colliers
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
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.
SAN DIEGO:
Jim Spain, SiORRegional managing Director | San Diego Region
License no. 00804745
4660 La Jolla Village Drive, Suite 100 San Diego, Ca 92122 | USatEl +1 858.677.5311FAX +1 858.795.4111
rESEArchEr:
CHRiSTOpHER REUTZResearch Director | San Diego Region
4660 La Jolla Village Drive, Suite 100 San Diego, Ca 92122 | USatEl +1 858.677.5385FAX +1 858.795.4185
This report has been prepared by Colliers international for general information only. information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers international does not guarantee, warrant or represent that the information contained in this document is correct. any interested party 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.
accelerating success.
0%
2%
4%
6%
8%
10%
12%
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vaca
ncy
Rate
SF (M
illio
ns)
Net Absorption New Supply Vacancy
NEW SUPPLY, ABSORPTION AND VACANCY RATES
7.3%
10.4%
10.0%
9.9%
20.5%
12.6%
15.1%
15.4%
0% 5% 10% 15% 20% 25%
I-15 Corridor
North County
Central County
S.D. County
R&D Industrial
INDUSTRIAL VACANCY RATES Q4 2011
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
$ /
SF /
Mon
th (N
NN
)
Industrial R&D Combined
HISTORICAL RENTAL RATE TRENDS Industrial, R&D and Combined Rates Quarterly Average Asking Rate Per SF Per Month (NNN)
41.8%
35.6%
11.7% 6.7%
4.2% <= 2,000 SF [168]
2,001 - 5,000 SF [143]
5,001 - 10,000 SF [47]
10,001 - 20,000 SF [27]
>= 20,001 SF [17]
INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q4 2011
0%
2%
4%
6%
8%
10%
12%
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vaca
ncy
Rate
SF (M
illio
ns)
Net Absorption New Supply Vacancy
NEW SUPPLY, ABSORPTION AND VACANCY RATES
7.3%
10.4%
10.0%
9.9%
20.5%
12.6%
15.1%
15.4%
0% 5% 10% 15% 20% 25%
I-15 Corridor
North County
Central County
S.D. County
R&D Industrial
INDUSTRIAL VACANCY RATES Q4 2011
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
$ /
SF /
Mon
th (N
NN
)
Industrial R&D Combined
HISTORICAL RENTAL RATE TRENDS Industrial, R&D and Combined Rates Quarterly Average Asking Rate Per SF Per Month (NNN)
41.8%
35.6%
11.7% 6.7%
4.2% <= 2,000 SF [168]
2,001 - 5,000 SF [143]
5,001 - 10,000 SF [47]
10,001 - 20,000 SF [27]
>= 20,001 SF [17]
INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q4 2011
rENtAl rAtES
Since a historical high point in Q3 2008, the countywide average asking rental rate for combined industrial and R&D space had been steadily decreasing for one-and-a-half years. a reversal in this trend commenced in Q2 2011 with the average rate gaining nearly 4% over three quarters. The Q4 average rate of $0.83 is still 16% less than the historical high.
lEASING ActIVItY
Over 400 leases were completed in Q4 totaling nearly 2.3 million square feet. Over three-quarters all leases were 5,000 SF or less. While only 11% of all leases were over 10,000 SF in size, this category has the largest influence on overall net absorption.
www.colliers.com/sandiego
maRKET REpORTSAN DIEGO cOUNtY
www.colliers.com/sandiego
Q4 absorption drives most of 2011’s meager demandMArKEt OVErVIEW
Demand continued to improve in Q4 as positive net absorption was recorded totaling over 180,000 square feet in San Diego County. This continued the trend of countywide industrial improvement that was disrupted in Q2 when approximately 298,000 square feet of negative net absorption was recorded. prior to Q2, the four previous quarters each posted positive demand. The relatively low magnitude of net absorption over the last couple of quarters indicates the industrial market will continue to progress in the direction of slow and steady recovery for the foreseeable future. The overall countywide average asking rent increased slightly the last three quarters suggesting that for the most part, rents have bottomed out and are generally trending upward. not all submarkets and/or industrial and R&D building uses are following this trend though.
The november 2011 San Diego County unemployment rate measured 9.2% – a 0.5% decrease from the previous month. The California unemployment rate decreased in november and stood at 10.9% while the national rate decreased to 8.2%. as of november 2011, San Diego County experienced a year-over-year increase in non-farm employment totaling 26,600 jobs. The combined industry sectors of “Trade, Transportation, and Utilities” and “manufacturing” – the two predominant industrial-utilizing employment sectors – posted a net increase of 5,000 jobs over the same period.
in October, the USD index of Leading Economic indicators for San Diego posted a 0.2% decrease. For the first ten months of 2011, the index increased by 4.7% with the February 2011 increase of 2.0% being the largest one-month increase on record according to the index’s publisher, Dr. alan Gin. October’s decrease was driven by significant decreases in local consumer confidence and authorized residential building permits.
MArKEt trENDS
positive demand drove countywide net absorption to over 180,000 square feet in Q4 for a total of 236,000 square feet in 2011. Only 202,000 square feet of new construction was finished in 2011 with nothing completed in Q4.
MArKEt INDIcAtOrS
INDUStrIAl VAcANcY rAtESQ4 2011
Q4 2011 Q1 2012 (P)
VAcANcY
NEt ABSOrPtION
cONStrUctION
rENtAl rAtE
Q4 2011 | INDUSTRIAL
0%
2%
4%
6%
8%
10%
12%
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vaca
ncy
Rate
SF (M
illio
ns)
Net Absorption New Supply Vacancy
NEW SUPPLY, ABSORPTION AND VACANCY RATES
7.3%
10.4%
10.0%
9.9%
20.5%
12.6%
15.1%
15.4%
0% 5% 10% 15% 20% 25%
I-15 Corridor
North County
Central County
S.D. County
R&D Industrial
INDUSTRIAL VACANCY RATES Q4 2011
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
$ /
SF /
Mon
th (N
NN
)
Industrial R&D Combined
HISTORICAL RENTAL RATE TRENDS Industrial, R&D and Combined Rates Quarterly Average Asking Rate Per SF Per Month (NNN)
41.8%
35.6%
11.7% 6.7%
4.2% <= 2,000 SF [168]
2,001 - 5,000 SF [143]
5,001 - 10,000 SF [47]
10,001 - 20,000 SF [27]
>= 20,001 SF [17]
INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q4 2011
0%
2%
4%
6%
8%
10%
12%
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vaca
ncy
Rate
SF (M
illio
ns)
Net Absorption New Supply Vacancy
NEW SUPPLY, ABSORPTION AND VACANCY RATES
7.3%
10.4%
10.0%
9.9%
20.5%
12.6%
15.1%
15.4%
0% 5% 10% 15% 20% 25%
I-15 Corridor
North County
Central County
S.D. County
R&D Industrial
INDUSTRIAL VACANCY RATES Q4 2011
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
$ /
SF /
Mon
th (N
NN
)
Industrial R&D Combined
HISTORICAL RENTAL RATE TRENDS Industrial, R&D and Combined Rates Quarterly Average Asking Rate Per SF Per Month (NNN)
41.8%
35.6%
11.7% 6.7%
4.2% <= 2,000 SF [168]
2,001 - 5,000 SF [143]
5,001 - 10,000 SF [47]
10,001 - 20,000 SF [27]
>= 20,001 SF [17]
INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q4 2011
of Campus point/Eastgate and Torrey pines. Otay mesa – with over 197,000 square feet – has the most vacant warehouse sublease space in the county.
Vacancy has tended to remain stable in the 11%-12% range for the last two years due in part to comparable levels of new construction (supply) and net absorption (demand). minimal demand in 2011 coupled with a virtually equal level of new construction has very little to affect vacancy to a significant degree. Conditions are not likely to be much better in 2012 so vacancy should settle at or near 11% by year-end.
NEW SUPPlY no new construction was completed in Q4. Only 202,340 square feet was completed countywide during all of 2011. This included
a 176,000-square-foot build-to-suit for isis pharmaceuticals in Carlsbad and a 26,340-square-foot build-to-suit for Hidden Valley Transfer in Escondido.
There is 253,245 square feet under construction that is all expected to be completed in 2012. This includes a 129,845-square-foot build-to-suit for HOiST Fitness in poway and a 123,400-square-foot additional building in the illumina campus in the Campus point/Eastgate submarket.
proposed new development totals about 7.52 million square feet with over 70% of this space concentrated in just four submarkets: Otay mesa, Carlsbad, East County and Oceanside. most proposed future development is concentrated in build-to-suits with speculative development trailing for several years to come.
512 offices in 61 countries on 6 continentsUnited States: 125Canada: 38Latin america: 18Asia Pacific: 214EmEa: 117
• $59.6 billion in annual transactions
• 1.0 billion square feet under management
• Over 12,500 professionals
MARKET REPORT | Q4 2011 | INDUSTRIAL | SAN DIEGO COUNTY
SAN DIEGO cOUNtY
The San Diego County industrial/R&D market is comprised of 188.3 million square feet of industrial and R&D space. The county is divided into three major market areas with 21 submarkets within them. nearly 62% of countywide industrial/R&D space is located within the 13 submarkets of the Central County market. industrial buildings (including manufacturing, warehouse, distribution, and multi-tenant/incubator) make up 70% of total inventory while R&D buildings (including flex, wet lab and corporate headquarters) make up the remaining 30% of the total inventory.
PROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF SALE PRICE PRICE/SF
4000 Ruffin Road Kearny Mesa Industrial 424,766 $50,000,000 $118
Wateridge Summit Sorrento Mesa Wet Lab 106,490 $46,500,000 $437
16550 Via Esprillo Rancho Bernardo R&D 165,600 $26,500,000 $160
Kearny Villa Center Kearny Mesa Industrial 103,108 $23,000,000 $223
Palomar Oaks Tech Park Carlsbad R&D 172,553 $15,800,000 $92
PROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF
10300 Campus Point Drive Campus Point Wet Lab 192,832 Celgene
2081 Faraday Avenue Carlsbad R&D 150,159 SKLZ
4605-4649 Morena Boulevard Morena Industrial 88,619
5823 Newton Drive Carlsbad Industrial 47,548
10864 Thornmint Road Rancho Bernardo R&D 38,613 General Atomics
TRANSACTION ACTIVITY - Q4 2011
SALES ACTIVITY
LEASING ACTIVITY
Callaway Golf
TENANT NAME
Floor & Décor Outlets of America
NEt ABSOrPtION Q4 combined industrial/R&D net absorption totaled a positive 180,204 square feet. This brought the total to 236,197 square feet of positive absorption for the year. This equaled a nearly 82% decrease in demand compared to 2010. Countywide net absorption for industrial space (manufacturing, warehouse, distribution, and multi-tenant/incubator building uses) totaled a positive 471,078 square feet and R&D space (flex, wet lab and corporate headquarters building uses) totaled a negative 290,874 square feet.
Significant positive net absorption occurred in the north County market where San marcos (103,838 SF) and Carlsbad (93,652 SF) were two strongest submarkets countywide in Q4. Conversely, Campus point/Eastgate (-139,813 SF) and Scripps Ranch (-117,557 SF) put the most space back onto the market.
Leasing activity totaled approximately 2.26 million square feet in Q4. Quarterly leasing activity has averaged 2.61 million square feet for the last four quarters, but most of this activity has been centered on lease renewals. Q4 leasing activity was 21% less than the previous quarter and at its lowest level in nearly three years. Because of this, it can be expected that net absorption will
remain generally low – but still positive – during at least the first half of 2012.
after ten consecutive quarters of decreasing average asking rental rates, $0.01 per-square-foot increases were recorded in Q2, Q3 and Q4. The countywide average monthly asking rent for combined industrial/R&D space reached $0.83 per square foot in Q4 with no net change in the rate for 2011.
VAcANcY The Q4 overall vacancy rate decreased by 9 basis points to stand at 11.5%. The industrial and R&D vacancy components measured 9.9% and 15.4%, respectively. Compared to one year ago, R&D vacancy has increased by 102 basis points (14.4% in Q4 2010) while industrial vacancy has decreased by 18 basis points (10.1% in Q4 2010).
The Q4 combined industrial/R&D direct vacancy rate was 10.8% compared to 10.9% at the end of Q3. Sublease vacancy ticked up by 5 basis points to 0.8% in Q4. Vacant sublease space made up 1.5 million square feet countywide. Over one-third of all this space is concentrated in wet lab and R&D space in the Golden Triangle submarkets
NORTH COUNTYI-15 CORRIDORCENTRAL COUNTYDOWNTOWNSOUTH BAY/EAST COUNTY
NORTh cOUNTy
I-15 cORRIDOR
McAS MIRAMAR
cENTRALcOUNTy
cOllIErS INtErNAtIONAl | P. 3
MARKET REPORT | Q4 2011 | INDUSTRIAL | SAN DIEGO COUNTY
continued on page 4
Submarket / Class Bldgs
Total
Inventory
SF
Direct
Vacancy
Rate
Sublease
Vacancy
Rate
Total
Vacancy
Rate
Prior Qtr
Vacancy
Rate *
Net Abs
Current Qtr
SF
Net Abs
YTD
SF
New Supply
Current Qtr
SF
Under
Construction
SF
Proposed
SF
INDUSTRIAL TOTALS BY MARKET Manufacturing, warehouse, distribution, and multi-tenant/incubatorCentral County 3,053 81,745,519 9.5% 0.5% 10.0% 10.2% 176,251 (25,701) 0 0 2,361,960 $0.63North County 2,190 40,293,196 10.4% 0.0% 10.4% 11.0% 234,073 321,416 0 0 1,315,951 $0.72I-15 Corridor 302 10,569,503 6.9% 0.4% 7.3% 7.9% 60,754 167,557 0 129,845 382,900 $0.87TOTAL 5,545 132,608,218 9.6% 0.3% 9.9% 10.2% 471,078 463,272 0 129,845 4,060,811 $0.68R&D TOTALS BY MARKET Flex, wet lab and corporate headquartersCentral County 823 34,381,380 12.9% 2.2% 15.1% 14.4% (236,891) (329,367) 0 123,400 1,517,633 $1.12North County 347 12,017,146 12.3% 0.3% 12.6% 12.7% 8,908 245,346 0 0 1,331,674 $1.06I-15 Corridor 134 9,331,288 18.1% 2.4% 20.5% 19.8% (62,891) (143,054) 0 0 605,000 $1.01TOTAL 1,304 55,729,814 13.6% 1.8% 15.4% 14.9% (290,874) (227,075) 0 123,400 3,454,307 $1.08COMBINED INDUSTRIAL / R&D BY MARKET AND SUBMARKETCentral CountyAirport / SA 76 1,878,846 1.3% 0.0% 1.3% 1.5% 4,252 13,432 0 0 0 $0.68Campus Pt / Egate 42 4,065,259 16.1% 10.1% 26.1% 22.7% (139,813) (219,712) 0 123,400 601,967 $2.80Central San Diego 397 8,377,286 5.0% 0.6% 5.6% 6.1% 45,036 15,019 0 0 0 $0.60East County 604 14,145,674 7.7% 0.1% 7.8% 7.9% 6,774 (189,516) 0 0 1,229,000 $0.67Kearny Mesa 650 17,391,588 5.9% 0.6% 6.5% 6.3% (38,169) (80,017) 0 0 65,691 $0.94Miramar 586 13,792,057 10.9% 0.4% 11.4% 11.7% 40,342 59,754 0 0 0 $0.86Mission Gorge / Vly 95 2,273,798 9.7% 3.5% 13.2% 12.6% (12,142) (94,241) 0 0 0 $0.85Otay Mesa 293 14,581,198 21.6% 1.4% 23.0% 23.1% 25,897 105,615 0 0 1,619,960 $0.48Rose Cyn / Morena 189 4,140,283 3.9% 0.0% 3.9% 3.7% (7,184) 102,247 0 0 0 $0.71Sorrento Mesa 273 13,495,940 13.8% 0.4% 14.2% 14.3% 15,773 26,544 0 0 229,136 $1.07Sorrento Valley 106 3,411,705 9.6% 2.0% 11.6% 14.4% (6,901) (21,048) 0 0 0 $1.43South Bay 498 13,557,006 7.5% 0.0% 7.5% 7.7% 23,722 (61,684) 0 0 0 $0.59Torrey Pines 67 5,016,259 14.4% 2.0% 16.3% 16.0% (18,227) (11,461) 0 0 133,839 N/ATOTAL 3,876 116,126,899 10.5% 1.0% 11.5% 11.4% (60,640) (355,068) 0 123,400 3,879,593 $0.79North CountyCarlsbad 485 15,011,955 14.0% 0.2% 14.1% 14.8% 93,652 18,615 0 0 1,239,832 $1.02Escondido 637 7,183,097 6.0% 0.1% 6.2% 6.5% 25,184 128,536 0 0 30,000 $0.75Oceanside 396 8,038,044 17.0% 0.1% 17.1% 17.1% (2,840) 175,138 0 0 1,227,361 $0.63San Marcos 489 8,703,364 7.1% 0.0% 7.1% 8.3% 103,838 103,417 0 0 53,000 $0.86Vista 530 13,373,882 8.6% 0.0% 8.6% 8.8% 23,147 141,056 0 0 97,432 $0.69TOTAL 2,537 52,310,342 10.8% 0.1% 10.9% 11.4% 242,981 566,762 0 0 2,647,625 $0.82I-15 CorridorPoway 215 8,196,473 3.8% 0.6% 4.3% 4.9% 49,623 104,733 0 129,845 447,900 $0.78Rancho Bernardo 146 9,559,699 17.6% 0.5% 18.1% 18.8% 65,797 114,218 0 0 0 $1.01Scripps Ranch 75 2,144,619 19.6% 8.1% 27.7% 22.2% (117,557) (194,448) 0 0 540,000 $0.97TOTAL 436 19,900,791 12.1% 1.4% 13.5% 13.5% (2,137) 24,503 0 129,845 987,900 $0.95SAN DIEGO COUNTY COMBINED INDUSTRIAL / R&DTOTAL 6,849 188,338,032 10.8% 0.8% 11.5% 11.6% 180,204 236,197 0 253,245 7,515,118 $0.83QUARTERLY COMPARISONQ4 2011 6,849 188,338,032 10.8% 0.8% 11.5% 11.6% 180,204 236,197 0 253,245 7,515,118 $0.83Q3 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 $0.82Q2 2011 * 6,846 188,135,692 10.9% 0.8% 11.7% 11.5% (297,544) (224,427) 0 202,340 7,160,249 $0.81Q1 2011 * 6,846 188,135,692 10.7% 0.9% 11.5% 11.3% 73,117 73,117 0 202,340 6,264,113 $0.80Q4 2010 6,835 188,521,231 10.5% 0.9% 11.3% 11.6% 819,595 1,278,337 54,313 212,000 5,853,913 $0.83
* Revised in Q4 2011.Average rental rates are defined as the average asking monthly rate per square foot normalized to a "triple net" basis.
San Diego County Industrial Market
VACANCY NET ABSORPTIONAvg
Rental
Rate
(NNN)
CONSTRUCTIONEXISTING PROPERTIES
INDUSTRIAL OVERVIEW
Q4 2011
P. 2 | cOllIErS INtErNAtIONAl
MARKET REPORT | Q4 2011 | INDUSTRIAL | SAN DIEGO COUNTY
SAN DIEGO cOUNtY
The San Diego County industrial/R&D market is comprised of 188.3 million square feet of industrial and R&D space. The county is divided into three major market areas with 21 submarkets within them. nearly 62% of countywide industrial/R&D space is located within the 13 submarkets of the Central County market. industrial buildings (including manufacturing, warehouse, distribution, and multi-tenant/incubator) make up 70% of total inventory while R&D buildings (including flex, wet lab and corporate headquarters) make up the remaining 30% of the total inventory.
PROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF SALE PRICE PRICE/SF
4000 Ruffin Road Kearny Mesa Industrial 424,766 $50,000,000 $118
Wateridge Summit Sorrento Mesa Wet Lab 106,490 $46,500,000 $437
16550 Via Esprillo Rancho Bernardo R&D 165,600 $26,500,000 $160
Kearny Villa Center Kearny Mesa Industrial 103,108 $23,000,000 $223
Palomar Oaks Tech Park Carlsbad R&D 172,553 $15,800,000 $92
PROPERTY NAME/ADDRESS SUBMARKET TYPE SIZE SF
10300 Campus Point Drive Campus Point Wet Lab 192,832 Celgene
2081 Faraday Avenue Carlsbad R&D 150,159 SKLZ
4605-4649 Morena Boulevard Morena Industrial 88,619
5823 Newton Drive Carlsbad Industrial 47,548
10864 Thornmint Road Rancho Bernardo R&D 38,613 General Atomics
TRANSACTION ACTIVITY - Q4 2011
SALES ACTIVITY
LEASING ACTIVITY
Callaway Golf
TENANT NAME
Floor & Décor Outlets of America
NEt ABSOrPtION Q4 combined industrial/R&D net absorption totaled a positive 180,204 square feet. This brought the total to 236,197 square feet of positive absorption for the year. This equaled a nearly 82% decrease in demand compared to 2010. Countywide net absorption for industrial space (manufacturing, warehouse, distribution, and multi-tenant/incubator building uses) totaled a positive 471,078 square feet and R&D space (flex, wet lab and corporate headquarters building uses) totaled a negative 290,874 square feet.
Significant positive net absorption occurred in the north County market where San marcos (103,838 SF) and Carlsbad (93,652 SF) were two strongest submarkets countywide in Q4. Conversely, Campus point/Eastgate (-139,813 SF) and Scripps Ranch (-117,557 SF) put the most space back onto the market.
Leasing activity totaled approximately 2.26 million square feet in Q4. Quarterly leasing activity has averaged 2.61 million square feet for the last four quarters, but most of this activity has been centered on lease renewals. Q4 leasing activity was 21% less than the previous quarter and at its lowest level in nearly three years. Because of this, it can be expected that net absorption will
remain generally low – but still positive – during at least the first half of 2012.
after ten consecutive quarters of decreasing average asking rental rates, $0.01 per-square-foot increases were recorded in Q2, Q3 and Q4. The countywide average monthly asking rent for combined industrial/R&D space reached $0.83 per square foot in Q4 with no net change in the rate for 2011.
VAcANcY The Q4 overall vacancy rate decreased by 9 basis points to stand at 11.5%. The industrial and R&D vacancy components measured 9.9% and 15.4%, respectively. Compared to one year ago, R&D vacancy has increased by 102 basis points (14.4% in Q4 2010) while industrial vacancy has decreased by 18 basis points (10.1% in Q4 2010).
The Q4 combined industrial/R&D direct vacancy rate was 10.8% compared to 10.9% at the end of Q3. Sublease vacancy ticked up by 5 basis points to 0.8% in Q4. Vacant sublease space made up 1.5 million square feet countywide. Over one-third of all this space is concentrated in wet lab and R&D space in the Golden Triangle submarkets
NORTH COUNTYI-15 CORRIDORCENTRAL COUNTYDOWNTOWNSOUTH BAY/EAST COUNTY
NORTh cOUNTy
I-15 cORRIDOR
McAS MIRAMAR
cENTRALcOUNTy
cOllIErS INtErNAtIONAl | P. 3
MARKET REPORT | Q4 2011 | INDUSTRIAL | SAN DIEGO COUNTY
continued on page 4
Submarket / Class Bldgs
Total
Inventory
SF
Direct
Vacancy
Rate
Sublease
Vacancy
Rate
Total
Vacancy
Rate
Prior Qtr
Vacancy
Rate *
Net Abs
Current Qtr
SF
Net Abs
YTD
SF
New Supply
Current Qtr
SF
Under
Construction
SF
Proposed
SF
INDUSTRIAL TOTALS BY MARKET Manufacturing, warehouse, distribution, and multi-tenant/incubatorCentral County 3,053 81,745,519 9.5% 0.5% 10.0% 10.2% 176,251 (25,701) 0 0 2,361,960 $0.63North County 2,190 40,293,196 10.4% 0.0% 10.4% 11.0% 234,073 321,416 0 0 1,315,951 $0.72I-15 Corridor 302 10,569,503 6.9% 0.4% 7.3% 7.9% 60,754 167,557 0 129,845 382,900 $0.87TOTAL 5,545 132,608,218 9.6% 0.3% 9.9% 10.2% 471,078 463,272 0 129,845 4,060,811 $0.68R&D TOTALS BY MARKET Flex, wet lab and corporate headquartersCentral County 823 34,381,380 12.9% 2.2% 15.1% 14.4% (236,891) (329,367) 0 123,400 1,517,633 $1.12North County 347 12,017,146 12.3% 0.3% 12.6% 12.7% 8,908 245,346 0 0 1,331,674 $1.06I-15 Corridor 134 9,331,288 18.1% 2.4% 20.5% 19.8% (62,891) (143,054) 0 0 605,000 $1.01TOTAL 1,304 55,729,814 13.6% 1.8% 15.4% 14.9% (290,874) (227,075) 0 123,400 3,454,307 $1.08COMBINED INDUSTRIAL / R&D BY MARKET AND SUBMARKETCentral CountyAirport / SA 76 1,878,846 1.3% 0.0% 1.3% 1.5% 4,252 13,432 0 0 0 $0.68Campus Pt / Egate 42 4,065,259 16.1% 10.1% 26.1% 22.7% (139,813) (219,712) 0 123,400 601,967 $2.80Central San Diego 397 8,377,286 5.0% 0.6% 5.6% 6.1% 45,036 15,019 0 0 0 $0.60East County 604 14,145,674 7.7% 0.1% 7.8% 7.9% 6,774 (189,516) 0 0 1,229,000 $0.67Kearny Mesa 650 17,391,588 5.9% 0.6% 6.5% 6.3% (38,169) (80,017) 0 0 65,691 $0.94Miramar 586 13,792,057 10.9% 0.4% 11.4% 11.7% 40,342 59,754 0 0 0 $0.86Mission Gorge / Vly 95 2,273,798 9.7% 3.5% 13.2% 12.6% (12,142) (94,241) 0 0 0 $0.85Otay Mesa 293 14,581,198 21.6% 1.4% 23.0% 23.1% 25,897 105,615 0 0 1,619,960 $0.48Rose Cyn / Morena 189 4,140,283 3.9% 0.0% 3.9% 3.7% (7,184) 102,247 0 0 0 $0.71Sorrento Mesa 273 13,495,940 13.8% 0.4% 14.2% 14.3% 15,773 26,544 0 0 229,136 $1.07Sorrento Valley 106 3,411,705 9.6% 2.0% 11.6% 14.4% (6,901) (21,048) 0 0 0 $1.43South Bay 498 13,557,006 7.5% 0.0% 7.5% 7.7% 23,722 (61,684) 0 0 0 $0.59Torrey Pines 67 5,016,259 14.4% 2.0% 16.3% 16.0% (18,227) (11,461) 0 0 133,839 N/ATOTAL 3,876 116,126,899 10.5% 1.0% 11.5% 11.4% (60,640) (355,068) 0 123,400 3,879,593 $0.79North CountyCarlsbad 485 15,011,955 14.0% 0.2% 14.1% 14.8% 93,652 18,615 0 0 1,239,832 $1.02Escondido 637 7,183,097 6.0% 0.1% 6.2% 6.5% 25,184 128,536 0 0 30,000 $0.75Oceanside 396 8,038,044 17.0% 0.1% 17.1% 17.1% (2,840) 175,138 0 0 1,227,361 $0.63San Marcos 489 8,703,364 7.1% 0.0% 7.1% 8.3% 103,838 103,417 0 0 53,000 $0.86Vista 530 13,373,882 8.6% 0.0% 8.6% 8.8% 23,147 141,056 0 0 97,432 $0.69TOTAL 2,537 52,310,342 10.8% 0.1% 10.9% 11.4% 242,981 566,762 0 0 2,647,625 $0.82I-15 CorridorPoway 215 8,196,473 3.8% 0.6% 4.3% 4.9% 49,623 104,733 0 129,845 447,900 $0.78Rancho Bernardo 146 9,559,699 17.6% 0.5% 18.1% 18.8% 65,797 114,218 0 0 0 $1.01Scripps Ranch 75 2,144,619 19.6% 8.1% 27.7% 22.2% (117,557) (194,448) 0 0 540,000 $0.97TOTAL 436 19,900,791 12.1% 1.4% 13.5% 13.5% (2,137) 24,503 0 129,845 987,900 $0.95SAN DIEGO COUNTY COMBINED INDUSTRIAL / R&DTOTAL 6,849 188,338,032 10.8% 0.8% 11.5% 11.6% 180,204 236,197 0 253,245 7,515,118 $0.83QUARTERLY COMPARISONQ4 2011 6,849 188,338,032 10.8% 0.8% 11.5% 11.6% 180,204 236,197 0 253,245 7,515,118 $0.83Q3 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 $0.82Q2 2011 * 6,846 188,135,692 10.9% 0.8% 11.7% 11.5% (297,544) (224,427) 0 202,340 7,160,249 $0.81Q1 2011 * 6,846 188,135,692 10.7% 0.9% 11.5% 11.3% 73,117 73,117 0 202,340 6,264,113 $0.80Q4 2010 6,835 188,521,231 10.5% 0.9% 11.3% 11.6% 819,595 1,278,337 54,313 212,000 5,853,913 $0.83
* Revised in Q4 2011.Average rental rates are defined as the average asking monthly rate per square foot normalized to a "triple net" basis.
San Diego County Industrial Market
VACANCY NET ABSORPTIONAvg
Rental
Rate
(NNN)
CONSTRUCTIONEXISTING PROPERTIES
INDUSTRIAL OVERVIEW
Q4 2011
P. 2 | cOllIErS INtErNAtIONAl
MARKET REPORT | Q4 2011 | INDUSTRIAL | SAN DIEGO COUNTY
SAN DIEGO:
Jim Spain, SiORRegional managing Director | San Diego Region
License no. 00804745
4660 La Jolla Village Drive, Suite 100 San Diego, Ca 92122 | USatEl +1 858.677.5311FAX +1 858.795.4111
rESEArchEr:
CHRiSTOpHER REUTZResearch Director | San Diego Region
4660 La Jolla Village Drive, Suite 100 San Diego, Ca 92122 | USatEl +1 858.677.5385FAX +1 858.795.4185
This report has been prepared by Colliers international for general information only. information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers international does not guarantee, warrant or represent that the information contained in this document is correct. any interested party 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.
accelerating success.
0%
2%
4%
6%
8%
10%
12%
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vaca
ncy
Rate
SF (M
illio
ns)
Net Absorption New Supply Vacancy
NEW SUPPLY, ABSORPTION AND VACANCY RATES
7.3%
10.4%
10.0%
9.9%
20.5%
12.6%
15.1%
15.4%
0% 5% 10% 15% 20% 25%
I-15 Corridor
North County
Central County
S.D. County
R&D Industrial
INDUSTRIAL VACANCY RATES Q4 2011
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
$ /
SF /
Mon
th (N
NN
)
Industrial R&D Combined
HISTORICAL RENTAL RATE TRENDS Industrial, R&D and Combined Rates Quarterly Average Asking Rate Per SF Per Month (NNN)
41.8%
35.6%
11.7% 6.7%
4.2% <= 2,000 SF [168]
2,001 - 5,000 SF [143]
5,001 - 10,000 SF [47]
10,001 - 20,000 SF [27]
>= 20,001 SF [17]
INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q4 2011
0%
2%
4%
6%
8%
10%
12%
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vaca
ncy
Rate
SF (M
illio
ns)
Net Absorption New Supply Vacancy
NEW SUPPLY, ABSORPTION AND VACANCY RATES
7.3%
10.4%
10.0%
9.9%
20.5%
12.6%
15.1%
15.4%
0% 5% 10% 15% 20% 25%
I-15 Corridor
North County
Central County
S.D. County
R&D Industrial
INDUSTRIAL VACANCY RATES Q4 2011
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
$ /
SF /
Mon
th (N
NN
)
Industrial R&D Combined
HISTORICAL RENTAL RATE TRENDS Industrial, R&D and Combined Rates Quarterly Average Asking Rate Per SF Per Month (NNN)
41.8%
35.6%
11.7% 6.7%
4.2% <= 2,000 SF [168]
2,001 - 5,000 SF [143]
5,001 - 10,000 SF [47]
10,001 - 20,000 SF [27]
>= 20,001 SF [17]
INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q4 2011
rENtAl rAtES
Since a historical high point in Q3 2008, the countywide average asking rental rate for combined industrial and R&D space had been steadily decreasing for one-and-a-half years. a reversal in this trend commenced in Q2 2011 with the average rate gaining nearly 4% over three quarters. The Q4 average rate of $0.83 is still 16% less than the historical high.
lEASING ActIVItY
Over 400 leases were completed in Q4 totaling nearly 2.3 million square feet. Over three-quarters all leases were 5,000 SF or less. While only 11% of all leases were over 10,000 SF in size, this category has the largest influence on overall net absorption.
www.colliers.com/sandiego
maRKET REpORTSAN DIEGO cOUNtY
www.colliers.com/sandiego
Q4 absorption drives most of 2011’s meager demandMArKEt OVErVIEW
Demand continued to improve in Q4 as positive net absorption was recorded totaling over 180,000 square feet in San Diego County. This continued the trend of countywide industrial improvement that was disrupted in Q2 when approximately 298,000 square feet of negative net absorption was recorded. prior to Q2, the four previous quarters each posted positive demand. The relatively low magnitude of net absorption over the last couple of quarters indicates the industrial market will continue to progress in the direction of slow and steady recovery for the foreseeable future. The overall countywide average asking rent increased slightly the last three quarters suggesting that for the most part, rents have bottomed out and are generally trending upward. not all submarkets and/or industrial and R&D building uses are following this trend though.
The november 2011 San Diego County unemployment rate measured 9.2% – a 0.5% decrease from the previous month. The California unemployment rate decreased in november and stood at 10.9% while the national rate decreased to 8.2%. as of november 2011, San Diego County experienced a year-over-year increase in non-farm employment totaling 26,600 jobs. The combined industry sectors of “Trade, Transportation, and Utilities” and “manufacturing” – the two predominant industrial-utilizing employment sectors – posted a net increase of 5,000 jobs over the same period.
in October, the USD index of Leading Economic indicators for San Diego posted a 0.2% decrease. For the first ten months of 2011, the index increased by 4.7% with the February 2011 increase of 2.0% being the largest one-month increase on record according to the index’s publisher, Dr. alan Gin. October’s decrease was driven by significant decreases in local consumer confidence and authorized residential building permits.
MArKEt trENDS
positive demand drove countywide net absorption to over 180,000 square feet in Q4 for a total of 236,000 square feet in 2011. Only 202,000 square feet of new construction was finished in 2011 with nothing completed in Q4.
MArKEt INDIcAtOrS
INDUStrIAl VAcANcY rAtESQ4 2011
Q4 2011 Q1 2012 (P)
VAcANcY
NEt ABSOrPtION
cONStrUctION
rENtAl rAtE
Q4 2011 | INDUSTRIAL
0%
2%
4%
6%
8%
10%
12%
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vaca
ncy
Rate
SF (M
illio
ns)
Net Absorption New Supply Vacancy
NEW SUPPLY, ABSORPTION AND VACANCY RATES
7.3%
10.4%
10.0%
9.9%
20.5%
12.6%
15.1%
15.4%
0% 5% 10% 15% 20% 25%
I-15 Corridor
North County
Central County
S.D. County
R&D Industrial
INDUSTRIAL VACANCY RATES Q4 2011
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
$ /
SF /
Mon
th (N
NN
)
Industrial R&D Combined
HISTORICAL RENTAL RATE TRENDS Industrial, R&D and Combined Rates Quarterly Average Asking Rate Per SF Per Month (NNN)
41.8%
35.6%
11.7% 6.7%
4.2% <= 2,000 SF [168]
2,001 - 5,000 SF [143]
5,001 - 10,000 SF [47]
10,001 - 20,000 SF [27]
>= 20,001 SF [17]
INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q4 2011
0%
2%
4%
6%
8%
10%
12%
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Vaca
ncy
Rate
SF (M
illio
ns)
Net Absorption New Supply Vacancy
NEW SUPPLY, ABSORPTION AND VACANCY RATES
7.3%
10.4%
10.0%
9.9%
20.5%
12.6%
15.1%
15.4%
0% 5% 10% 15% 20% 25%
I-15 Corridor
North County
Central County
S.D. County
R&D Industrial
INDUSTRIAL VACANCY RATES Q4 2011
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
$ /
SF /
Mon
th (N
NN
)
Industrial R&D Combined
HISTORICAL RENTAL RATE TRENDS Industrial, R&D and Combined Rates Quarterly Average Asking Rate Per SF Per Month (NNN)
41.8%
35.6%
11.7% 6.7%
4.2% <= 2,000 SF [168]
2,001 - 5,000 SF [143]
5,001 - 10,000 SF [47]
10,001 - 20,000 SF [27]
>= 20,001 SF [17]
INDUSTRIAL LEASING ACTIVITY BY TENANT SIZE Percentage of Total Leases Completed in Q4 2011
of Campus point/Eastgate and Torrey pines. Otay mesa – with over 197,000 square feet – has the most vacant warehouse sublease space in the county.
Vacancy has tended to remain stable in the 11%-12% range for the last two years due in part to comparable levels of new construction (supply) and net absorption (demand). minimal demand in 2011 coupled with a virtually equal level of new construction has very little to affect vacancy to a significant degree. Conditions are not likely to be much better in 2012 so vacancy should settle at or near 11% by year-end.
NEW SUPPlY no new construction was completed in Q4. Only 202,340 square feet was completed countywide during all of 2011. This included
a 176,000-square-foot build-to-suit for isis pharmaceuticals in Carlsbad and a 26,340-square-foot build-to-suit for Hidden Valley Transfer in Escondido.
There is 253,245 square feet under construction that is all expected to be completed in 2012. This includes a 129,845-square-foot build-to-suit for HOiST Fitness in poway and a 123,400-square-foot additional building in the illumina campus in the Campus point/Eastgate submarket.
proposed new development totals about 7.52 million square feet with over 70% of this space concentrated in just four submarkets: Otay mesa, Carlsbad, East County and Oceanside. most proposed future development is concentrated in build-to-suits with speculative development trailing for several years to come.
512 offices in 61 countries on 6 continentsUnited States: 125Canada: 38Latin america: 18Asia Pacific: 214EmEa: 117
• $59.6 billion in annual transactions
• 1.0 billion square feet under management
• Over 12,500 professionals
MARKET REPORT | Q4 2011 | INDUSTRIAL | SAN DIEGO COUNTY