SD County industrial absorption positive for 8th consecutive quarter

By THOR KAMBAN BIBERMAN , The Daily Transcript

Tuesday, July 9, 2013

With nearly 348,000 square feet of net industrial absorption in the second quarter, San Diego County ranked on the positive side of the ledger for the eighth period in a row.

Colliers International reported industrial net absorption exceeded 1 million square feet for 2013's first half and is expected to meet or exceed that pace during the remainder of the year.

The total 347,598 square feet of quarterly net absorption translated to 254,756 square feet of industrial space (manufacturing, warehouse, distribution and multi-tenant/incubator building uses); and 92,842 square feet of flex, wet lab and R&D building uses.

The 2.3 million square feet of gross leasing activity during the second quarter was down from the 2.6 million square feet in the first quarter of 2013.

New arrivals have continued to whittle away at vacancy rates, which dropped to 9.4 percent countywide at the second quarter's end.

This equates to a 114 basis-point drop from a year ago. By year's end, the county’s vacancy rate is projected to settle at about 9 percent.

The countywide overall vacancy rate decreased by 11 basis points in the second quarter.

This is the third consecutive quarter where vacancy has been below 10 percent over the course of the last four years, Colliers wrote.

The countywide vacancy rate should settle at around 9 percent by the end of the year.

The industrial and R&D vacancy components measured 8.4 percent and 12 percent respectively. R&D vacancy increased by 3 basis points in the second quarter, while industrial vacancy decreased by 16 basis points.

With a 24.4 percent vacancy rate, the Campus Point/Eastgate/ UTC submarket posted the highest rate in the county at the end of the second quarter.

Only two other submarkets  Scripps Ranch (18.7 percent) and Otay Mesa (16.5 percent)  had rates higher than 15 percent.

The second half of the year, meanwhile, is not expected to be as strong as the first.

“The drop in leasing activity will likely be translated in lower  but still positive  net absorption in the second half of the year,” Colliers wrote.

“Based on leases currently executed and continued strong activity throughout 2013, net absorption is likely to fall between 2 million and 2.5 million square feet for the year.”

Carlsbad, with 181,399 square feet of net absorption, stood ahead of all submarkets and posted the most demand in the second quarter.

This standing was driven in part by the ViaSat telecommunications firm that took 37,328 square feet in the Carlsbad Research Center, and Pizza Port, which took 37,050 square feet in Bressi Ranch.

Additionally, East County with 113,921 square feet and Scripps Ranch with 89,360 square feet, posted significant industrial absorption.

Conversely, the Campus Point/Eastgate/UTC submarket had the most negative industrial absorption with minus 63,119 square feet in the second quarter.

The Colliers report stated even though Illumina (Nasdaq: ILMN) occupied its new 123,429 square-foot building andUnion Bank absorbed 83,866 square feet of sublet space in the Campus Point/Eastgate/UTC submarket, major move-outs in the area by Celgene (-78,470 square feet), Amylin (-71,390 square feet), CovX/Pfizer (-58,191 square feet) and Costar (-41,924 square feet) put several large blocks of flex, R&D and lab space on the Campus Point/Eastgate submarket.

Other submarkets with significant negative net absorption during the second quarter, included Escondido (-40,843 square feet), Sorrento Valley (-36,308 square feet) and Miramar (-35,138 square feet.)

The Otay Mesa industrial submarket, which was overbuilt in the middle part of the last decade, still has a ways to go before being completely recovered. The market by most accounts still has about 2 million square feet of available industrial space.

The Colliers report said while Otay Mesa posted 139,489 square feet of net absorption through the first half of the year, the submarket posted 8,546 square feet of negative absorption in the second quarter.

The vacant sublease inventory accounted for 1.2 million square feet countywide, with Campus Point/Eastgate/UTC (428,469) and Miramar (224,105) comprising the most sublet inventory. Their sublease vacancy rates stood at 10.8 percent and 1.6 percent, respectively.

 

 

  • Posted on   07/11/13 at 11:02:47 PM   by Josh  | 
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