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2019 Q3 Industrial San Diego Region

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Industrial demand slows in Q3 and for 2019 overall

Behind the Numbers

  • Countywide vacancy increased slightly in Q3 to 5.4% (+0.1%) as net absorption of 39,646 SF did not keep pace with new construction completions totaling 379,137 SF
  • Nearly 1.6 million SF of construction has been completed year-todate. By year-end, this total will reach 1.8 million SF – the second highest level of construction in the last 12 years.
  • Countywide average asking NNN rental rate spiked up by $0.04/SF in Q3 to reach an all-time high of $1.21/SF/month. This equated to a 12% increase year-over-year.

Net Absorption

Combined Industrial/R&D net absorption in San Diego County totaled 39,646 SF during Q3 2019. Industrial buildings (manufacturing, warehouse, distribution and multi-tenant/incubator uses) posted 102,079 SF of positive net absorption and R&D buildings (flex, wet lab and R&D uses) posted negative net absorption of 62,433 SF.

Torrey Pines posted the greatest net absorption (+169,229 SF) in Q3. All the absorption was concentrated in life science/lab space with Pacira occupying 93,819 SF at 10410 Science Center Dr, Mirati Therapeautics moving into 58,234 SF at 3545 Cray Ct, and PCI leasing 38,460 SF at 3040 Science Center Dr.

After two prior quarters of having the most positive net absorption, Otay Mesa was the second most active market in Q3 with 109,719 SF. Mad Engine occupied 45,934 SF at 8500 Kerns St, while Zucarmex USA expanded into 44,757 SF at 7110 Enrico Fermi Pl. Label ID Technologies also moved into 29,022 SF at 2339 Marconi Pl.

Other large tenant move-ins included BioLegend (+130,000 SF) and Tandem Diabetes (+40,095 SF) in Miramar, Nordic Naturals (+42,000 SF) and Baypoint Academy Properties (+41,000 SF) in San Marcos, and Jeld-Wen (+43,186 SF) in Vista.


Countywide combined industrial/R&D vacancy stood at 5.4% at the end of Q3 - a 16 basis point increase from the prior quarter. Direct vacancy made up 5.0% of the inventory, while sublease vacancy stood at 0.5%. 

Torrey Pines (13.2%), Sorrento Mesa (12.8%), and Carlsbad (11.0%) were the only submarkets with double-digit vacancy rates. Negative net absorption triggered vacancy increases in Sorrento Mesa and Carlsbad, but strong demand in Torrey Pines caused vacancy to drop by more than 3% over the course of the quarter.

New Supply

Construction completions in Q3 totaled 379,137 SF. A 24,188 SF spec building was completed at 8840 Complex Dr in Kearny Mesa, a 130,000 SF build-to-suit for owner/user BioLegend was occupied at 8958 Terman Ct in Miramar, and Label ID Techonologies’ 29,022 SF build-to-suit at 2339 Marconi Pl in Otay Mesa was finished. The 77,725 SF two-building Keystone Innovation Industrial Park by on Keystone Way in Vista was completed along with the 43,669 SF three-building Poway Tech Center in Poway and the 57,473 SF three-building Marshall Avenue Industrial Park in El Cajon. Finally, a 17,060 SF spec building in Weld Business Park – also in El Cajon – was completed and is currently available for lease.

At the end of Q3, there was 1.70 million SF under construction throughout the county. Approximately 1.52 million SF of that is expected to be completed next year with only 173,024 SF of additional construction completing in Q4 2019.

Trends, Forecast & Outlook

The San Diego County vacancy rate has been in the 4% range for the four years leading up to Q3 2018, when it reached its lowest rate ever (4.2%). Over the past year, the vacancy rate has increased by a little more than a percentage point due to increased construction completions of more than 2.4 million SF, while net absorption was just under 551,000 SF. By year-end, the vacancy will likely increase or decrease by no more than 20 basis points, staying well within the  5.2% to 5.6% range.

In Q3 the countywide average asking NNN rental rate increased by nearly 3.5% to $1.21/SF/month. This was the sixth consecutive quarter where rents have been increasing since remaining generally flat in the prior three years (Q2 2015 through Q1 2018). This trend of increasing rents is expected to continue if  vacancy remains at historically low levels.


2019 Q3 Industrial San Diego Region

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