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Strange Days
Optimism ruled the days following the surprise November election results. The Dow went on a 3,000-point tear on speculation that the tax code would be recast as more business friendly, the health care law would be enacted and infrastructure projects would start popping up from coast to coast. While none of that is even close to becoming reality, the equities markets continue at record levels, despite the fact that GDP growth remains anemic.
Despite sluggish economic activity, the Fed has hiked its benchmark Fed Funds rate twice this year, once in March and again in June. The Fed’s Board of Governors is taking advantage of market optimism to work its way out of the corner it painted itself into over recent years. With the Fed Funds rate now above 1%, central bankers can lower rates in the event of an economic reversal without going into negative territory like its European and Japanese counterparts have done.
After spiking to 2.6% in March, the yield on the 10-Year T-bill, the metric used to set commercial property mortgage rates, has stabilized in the 2.2% range. Normally, Fed rate hikes push the yield on the 10-Year higher. But, investor uncertainty has increased demand for Treasuries, sending yields lower instead. That has the bulls and the bears in all asset classes scratching their heads, wondering if the rules have somehow changed.
So, at what point Fed rate hikes push cap rates higher is anybody’s guess, but we do see cap rate decompression for less-than-prime product. The demand for top quality industrial product remains strong and well ahead of supply. Rents continue to increase in industrial product, but the rate of increase is leveling off. Multi-family investments remain a favorite of investors at all price levels.
Ponderosa Technology Park in Kearny Mesa sells for $28.5 million (Kearny Mesa Landing)
4205 - 4247 Ponderosa Avenue
This 8 building flex project totalled 155,691 square feet. The project is a well designed multi-tenant project accommodating tenants from 2,962 square feet to 16,331 square feet. The project was 87% leased at the time of sale to 17 tenants. Built in 1978, the project previously sold in 2005 for $27,750,000.00. The buyer plans on upgrading the project inside and out.
9 building industrial portfolio in Scripps Ranch sells for $31.4 million
9825, 9855, 9965 Carroll Canyon Rd10010 - 10090 Willow Creek Rd9850 Business Park AveThis portfolio consisted of 9 free-standing industrial/flex buildings ranging in size from 13,248 square feet to 42,947 square feet. Each building is situated on its own fee-simple lot. All 9 buildings were 100% to individual tenants. The project was built between 1971 and 1980.
Project Size: 186,157 SF
Sale Date: 04/2017
Sales Price: $31,400,000
Price PSF: $168.67
Cap Rate: 7.75%
Project Size: 155,691 SF
Sale Date: 06/2017
Sales Price: $28,525,000
Price PSF: $183.22
Cap Rate: 6.5%
San Diego County InvestmentsQUARTERLY NEWSLETTER
ISSUE 73 Second Quarter 2017
PREPARED BY: RANDY LaCHANCE, SIOR SENIOR VICE PRESIDENT, (Lic. # 00969674)
San Diego County InvestmentQUARTERLY NEWSLETTER ISSUE 73 Second Quarter 2017
2
Poway building sells for $20 million
14145 Danielson Street
This two tenant flex building was 60% leased at the time of sale. The buyer was General Atomics (the largest user in Poway) who plans on occupying the vacant space immediately. General Atomics has been actively leasing and purchasing large blocks of space in Poway for the past 5 years to accommodate their growth. This building previously sold in 2001 for $12.38 million.
Project Size: 117,354 SF
Sale Date: 05/2017
Sales Price: $20,000,000
Price PSF: $170.42
Cap Rate: N/A
Miramar Business Park sells for $21.25 million
7328 - 7340 Trade Street
Miramar Trade Center is a three building flex project consisting of 2 single tenant buildings with mezzanine space and 1 multi-tenant single story building. The project totalled 118,457 square feet and was 100% leased at the time of sale. The seller purchased this project as part of a portfolio from a lender in 2015.
Project Size: 118,457 SFSale Date: 05/2017Sales Price: $21,250,000Price PSF: $179.39Cap Rate: 7%
3
Brown Field Business Park in Otay Mesa sells for $19.3 Million
2055 Dublin Drive
This multi-tenant distribution building totalled 205,800 square feet and was 100% leased to three tenants at the time of sale, with Honeywell International being the largest. The project was built in 1990 and previously sold in 1993 for $8,350,000.00 from a lender. This was the first purchase in San Diego by STAG Industrial, a REIT based out of Boston.
Project Size: 205,800 SF
Sale Date: 05/2017
Sales Price: $19,300,000
Price PSF: $93.78
Cap Rate: 6.3%
Governor Park building sells for $11.2 million
5015 Shoreham Place
This "creative office" building totalled 25,600 square feet and was 100% leased at the time of sale. The seller had purchased the building vacant in 2014 for $3.9 million and had completely renovated the building inside and out. After the renovations, they successfully leased the project to two tenants. The buyer was completing a 1031 exchange.
Project Size: 25,600 SF
Sale Date: 04/2017
Sales Price: $11,200,000
Price PSF: $437.50
Cap Rate: 6.75%
Licensed as a Real Estate Salesperson by the CA Bur of Real Estate. The information contained herein has been obtained from sources we deem reliable. While we have no reason to doubt its accuracy, we do not guarantee it. ©2017 Voit Real Estate Services, Inc. All Rights Reserved. Real People. Real Solutions.® is a registered trademark of Voit Real Estate Services. • Lic. #01991785 • www.voitco.com
As a client of ours, we are happy to provide you with this useful information. For more detailed information, please feel free to give me a call.
Randy LaChance, SIORSenior Vice PresidentLic. #[email protected]
ISSUE 73 Second Quarter 2017
4747 Executive Drive, Suite 800San Diego, CA 92121858.453.0505 [Main]858.408.3976 [Fax]
WE'RE GOING GREEN!I have been providing you with the San Diego County Investments newsletter for over 10 years, and I hope you find this information useful in understanding San Diego's Real Estate Investment Market. In an effort to be more environmentally conscious, I would like to start providing you with this report electronically. If you are interested, please email the following information to me at [email protected]:
NAMEEMAIL ADDRESSPHONE NUMBER
10-Year T-Bill Rate
USD Index of Leading Economic Indicators
San Diego County Unemployment
RANDY LACHANCE is a Senior Vice President at Voit Real Estate Services and a member of the Society of Industrial and Office Realtors. He has over twenty-eight years of experience and is an active investment agent specializing in the sale of business parks and office buildings.
I am pleased to present you with this quarterly newsletter and hope you find it informative. If you ever have questions regarding your San Diego property, please do not hesitate to call. I am always willing to help and give you my opinion. If you are considering selling, I would appreciate the opportunity to earn your business.”
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