The San Diego industrial market has all the markings of a boom: absorption is up, vacancies are down and rents are seeing healthy growth. The economy is growing as well, with San Diego MSA unemployment now at 2.9%.
That has investors on the prowl for strong properties in the market, including those that will serve the growing need for last-mile distribution.
Recently Realterm Logistics obtained permanent financing for a San Diego last-mile property it acquired last year — the 180K SF 16550 Via Esprillo.
“The online sales evolution requires a network of regional and final-mile facilities to capture the shift in consumer trends, while at the same time minimizing the delivery cost structure for users,” Realterm Logistics Senior Vice President Paul Underwood said.
“The property achieves that through proximity to I-15 and California Highway 56, providing efficient access to a dense, affluent residential population," Underwood said. "Also, the property is expandable and configured with the loading, excess parking and delivery vehicle flow characteristics demanded by e-commerce logistics."
The property, which underwent renovation not long before the deal, is on 14.8 acres and is fully leased to a global e-commerce company.
Maryland-based Realterm Logistics, which specializes in high-flow-through logistics facilities, also owns 6930 Cactus Court, 6855 Calle De Linea, 2420 Bowsell Road, 2719 Kurtz St. and 2727 Kurtz St. in San Diego.
NorthMarq Capital’s Bill Libercci and Tim Greisman in the company's Baltimore office, along with colleague Steve Hollister in San Diego, facilitated the financing.
San Diego's industrial market is tight. At the end of Q2, industrial vacancy was 4.9%, slightly higher than the quarter before, but down 20 basis points compared with the same period in 2017, according to Cushman & Wakefield data. Distribution vacancies are at 4.4%, down 40 basis points from last year.
That is because demand for space is high, the company said. Of the 1.2M SF of new industrial product delivered in metro San Diego during the second quarter, fully 70% of it was already leased, and several pre-leased projects broke ground during the quarter.
Also, tenants leased a net of 632K SF of industrial space during the second quarter in the San Diego market. Occupancy in Poway was up by about 299K SF, making it the most active submarket for the quarter.
Average asking rent for all industrial product, Cushman & Wakefield reports, was $1.06/SF in Q2, compared with $0.98/SF a year ago. Rents are as high as the company has ever tracked them, and up more than 15% since the end of the recession in Q2 2009. Rents for distribution space are up more than 17% over that period.
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