WESTERN SNAPSHOT, OCTOBER 2004

San Diego Industrial Market

Industrial developers in the San Diego market are favoring the construction of small spec buildings over multi-tenant facilities, says Adam Robinson, principal at Lee & Associates’ Carlsbad, California, office. Large spec industrial buildings (25,000 – 100,000 square feet) are giving way to the development of “build-to-suites,” he says.

In Vista, California, the 450,000-square-foot Burke Sycamore Business Center is being built. The first phase, consisting of small industrial units totaling 150,000 square feet, sold out before the end of construction. The remaining 300,000 square feet will comprise small for-sale condos ranging from 3,000 to 27,000 square feet. “As the first project of its kind in recent years, Burke-Sycamore Business Center has led the way in the development of small buildings in north San Diego County,” says Robinson.

Another significant industrial development in the San Diego area is Pacific Coast Business Park, developed by Monarch Group, DWO Enterprises and Guthrie Development Company in Oceanside. The 124-acre master-planned business park will encompass approximately 1.85 million square feet of research and development, manufacturing, distribution, and office space. The project owners will offer a for-sale program on buildings ranging from 3,000 to 50,000 square feet. Bressi Ranch in Carlsbad, California, will offer 132 acres of industrial lots to tenants. Seris Regis will be selling lots between 1 and 26 acres to developers.

According to Robinson, the majority of industrial development in the market will take place in north San Diego County due to the lack of available land elsewhere. Oceanside in north San Diego County will experience the most growth in the market with approximately 3 million square feet coming online in the next few years. “The industrial market seems to follow the housing market. As developers build homes more north and east, that industrial submarket continues to grow as companies move to areas that their employees can afford.”

H.G. Fenton Company will break ground on the 43,000-square-foot first phase of Fenton Technology Park, a 131-acre master-planned complex in central San Diego. BioSite Inc., a medical diagnostics company, purchased 26 acres in the center of the property where it will build an 800,000-square-foot campus.

The average industrial vacancy rate for San Diego County is 8.3 percent. Rental rates range from $0.57 to $1.15 per square foot. Major industrial leases that have closed recently include Zimmer Dental for 73,057 square feet at North Point Tech Center in Carlsbad, K-1 Speed for 62,289 square feet at 6121 Corte Del Abeto, also in Carlsbad, and Creative Nail Design’s 55,000-square-foot signing at Oak Ridge Business Center in Vista.

Robinson says that developers/owners are trying to attract pharmaceutical and high-tech/manufacturing firms to Oceanside facilities, research and development tenants to Carlsbad properties, and light manufacturing and high-tech companies to Vista’s industrial product. “[Industrial tenants] should watch out for the Oceanside and Carlsbad submarkets if they want small buildings,” he says. “The developers will have to be careful that they don’t overbuild like they did in the Carlsbad office market where vacancy rates hit 30 percent.”

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