SAN DIEGO—Year-to-date industrial sector absorption has reached1.2 million feet in San Diego County.

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Cassidy Turley has released its third quarter industrial reportshowing that San Diego County generated 386,000 square feetof positive net absorption across all product types in thethird quarter of 2014, bringing year-to-date activity to 1.2million square feet. More than half of which occurred in the busyNorth County submarkets.

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“This is the 13th consecutive quarter of positive activityduring which tenants have absorbed 7.2 million square feet,” saidBryce Aberg, magaging director with Cassidy Turleyin San Diego. “The San Diego industrial market has been in growthmode since the beginning of 2013, following a three-year recoveryperiod after 4.2 million square feet was returnedto the market in 2009, the worst year of the recession.”

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North San Diego County leads the market with 627,000square feet absorbed year-to-date.
“North San Diego County, particularly submarkets like Carlsbad andOceanside, have large blocks of available space in existingbuildings that are well positioned to meet growing tenant demand,”said Todd Davis, senior vice president with Cassidy Turley. “Thishas fueled a wave of investment activity, as investors seek toposition themselves in areas that have little new inventory on theimmediate horizon.”

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The Cassidy Turley report shows that the county's bestperforming submarkets in the third quarter were Poway,Mission Valley and Scripps Ranch, with267,000 squre feet of combined positive net absorption.

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The largest move-ins occurred in MissionValley, where CEVA Freight LLC moved into123,400 square feet at 7411 Goen Place; inMiramar, where Dynamex Operations West LLC movedinto 59,000 square feet at 7130 Miramar Road; and inVista, where Du FamilyPartnership bought and occupied a 54,200 square footbuilding at 2230 Oak Ridge Way.

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Miramar, San Marcos and EastCounty submarkets led the county in spacereturned to the market for the three months endingSeptember 30, 2014, with combined negative net absorption of194,000 square feet. The largest move-outs took place inSorrento Mesa, where EntropicCommunications vacated 90,000 square feet at 6290 SequenceDrive; in Sorrento Valley, where AmbitBiosciences vacated 55,000 square feet at 4215 SorrentoValley Boulevard; and in Carlsbad, whereBlack Box Inc. vacated 40,000 square feet at 2777Loker Avenue W.

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“Flight to quality and renewals of 40,000 square feet and lesswill be the main drivers of leasing activity, accounting for 56% oftotal square feet in lease obligations set to expire in 2015,” saidAberg. “Leases above 40,000 square feet will account for theremaining 44% of expirations in 2015.”

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Cassidy Turley reports that total countywide vacancy for allproduct types, including sublease space, has declined for 13consecutive quarters to 7.1%, finally below the pre-recession levelof 7.2% recorded more than eight years ago in the second quarter of2006. Current vacancy is 160 basis points (bps) lower than thevacancy rate of 8.7% a year ago, and 560 bps lower than the peakrate of 12.7% recorded five years ago in fourth quarter of2009.

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“The last time countywide vacancy below 7.1% was 13 years ago,in the fourth quarter of 2001,” said Aberg.

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Over the past four years, the countywide monthly askingrent for all product types has only increased from$0.78 to $.80 per month, per square foot triplenet (NNN). However, the local industrial market is seeing strongincreases in the lease rates for modern industrial facilities withlow-finish space. These asking rates have jumped by as much as 10%in some cases since last year. Still, industrial rental rate growthremains strongly dependent upon the age and quality of product onthe market.

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“That being said, with the expectation of continued healthyabsorption levels and falling vacancy, we anticipate that rentalrate growth will expand throughout the region's industrial sector,as will the tightening of concessions, in the months ahead,” saidDennis Visser, managing drector with CassidyTurley.

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David Phillips

David Phillips is a Chicago-based freelance writer and consultant with more than 20 years experience in business and community news. He also has extensive reporting experience in the food manufacturing industry for national trade publications.