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ARE WE THERE YET?This is a question for all ages, and is not lost on those of us trying to figure out where we are in this edition of the age-old real estate cycle. I’ve been around for a few of them now, and there is one thing that is the same for each one: every down-cycle is precipitated by something different. Last time it was a systemic failure in the financial services sector, which brought on the worst economic downturn since the Depression. We are well clear of that one now. In fact, the San Diego commercial real estate market, with variations based on product type, has returned to or exceeded the previous market peak of 2007.
So, how much more altitude can we gain before we level off? No one can say for sure, but what can be said is that San Diego’s economy is fundamentally stronger than it was during the last up-cycle. This recovery has been broad-based, with several major employment sectors making huge contributions to employment growth, the driver of net absorption. Gains in occupied space for industrial, office and retail real estate space has been consistently positive for more than three years. The defense, biotech and aerospace sectors have been leading the way, and new sectors like the craft brewing industry have experienced explosive growth. An ever-younger workforce is driving the multi-family and retail sectors, especially near re-developing urban cores throughout the county.
Although there is still some uncertainty in the market as it pertains to China, the world economy, lackluster GDP growth and a volatile stock market, positive factors such as low unemployment, low inflation, low energy cost and a stronger housing market should give this economy more room to grow despite the Fed's inevitable move on interest rates.
As it pertains to San Diego real estate, the markets/product types with single digit vacancies should see continued rent growth due to the tight market, good demand and limited to no land available for future development.
So, you ask “Are we there yet?” I don’t believe so. I believe this market is on solid ground and as much as I did not like the slow-growth recovery from 2009 to now, it has produced a more balanced and stable market that should continue to grow (albeit slowly) for the next couple of years.
6260-6350 Sequence Drive and 4921 Directors Place
This 6 building office portfolio totalled 537,654 square feet. The office buildings were located in Sorrento Mesa and Governor Park. The portfolio was 73% leased at the time of sale. This is the second portfolio sale in San Diego by Kilroy Realty. The Buyer was John Hancock Life Insurance.
Project Size: 537,654 SF
Sale Date: 07/2015
Sale Price: $163,000,000
Price PSF: $303.17
Cap Rate: 4.5%*
Kilroy Office Portfolio Sells for $163 Million
This 295,802 square foot retail portfolio was 100% leased at the time of sale and included credit tenants, such as, McDonald's, WalMart, LA Fitness, Starbucks and Verizon. The project was built between 1991 and 2001. The Buyer was a Pension advisor.
Project Size: 296,802 SF
Sale Date: 08/2015
Sale Price: $107,150,000
Price PSF: $362.24
Cap Rate: 5.22%
McGrath Retail Portfolio in Kearny Mesa Sells for $107.15 Million
Clairemont Mesa and Interstate 805
San Diego County InvestmentsQUARTERLY NEWSLETTERISSUE 66 Third Quarter 2015
PREPARED BY: RANDY LaCHANCE, SIOR SENIOR VICE PRESIDENT, (Lic. # 00969674)
San Diego County InvestmentQUARTERLY NEWSLETTER ISSUE 66 Third Quarter 2015
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Campus at Copley in Kearny Mesa Sells for $30.3 Million5751-5771 Copley DriveThis three building Flex/Industrial project totalled 101,726 square feet. The project was built in 2001 and was 100% leased at the time of sale. This project previously sold for $22,500,000 in 2013. The buyer was in an exchange.
Project Size: 101,726 SF
Sale Date: 07/2015
Sale Price: $30,300,000
Price PSF: $297.86
Cap Rate: 7%
Pacific Technology Park in Sorrento Mesa Sells for $90,000,000
9401-9477 Waples StreetThis 5 building Flex/Industrial project totalled 544,352 square feet. The project was __% leased at the time of sale. This project was built between 1989 and 1991 and previously sold for $60,000,000 in 2005. The Buyer was a Pension advisor.
Project Size: 544,352 SF
Sale Date: 08/2015
Sale Price: $90,000,000
Price PSF: $165.33
Cap Rate: 5.50%
33
Activity Business Center in Miramar Sells for $19.15 Million
9235-9265 Activity Road and 9520-9530 Padgett StreetThis five building Flex/Office project totalled 160,811 square feet. The project was built between 1971 and 1987 and was 87% leased at the time of sale. This project previously sold for $29,552,000 in 2006.
Project Size: 160,811 SF
Sale Date: 09/2015
Sale Price: $19,150,000
Price PSF: $119.08
Cap Rate: 5.27%
Community Business Park in Poway Sells for $16,900,000
12720-12860 Danielson CtThis five building industrial project totalled 112,515 square feet. The project was built in 1999 and was 100% leased at the time of sale. This project previously sold for $16,150,000 in 2005.
Project Size: 112,511 SF
Sale Date: 07/2015
Sale Price: $16,900,000
Price PSF: $150.20
Cap Rate: 5.75%
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. ©2015 Voit Real Estate Services, Inc. All Rights Reserved. Real People. Real Solutions.® is a registered trademark of Voit Real Estate Services. • Lic. #01333376 • 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 65 Third Quarter 2015
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 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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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
