SAN DIEGO—The San Diego industrial market is set to complete 1.5 million square feet of construction in 2017, which is expected to be the most active year in a decade, thanks to development of distribution buildings in Otay Mesa, Colliers International industrial expert Mark Lewkowitz tells GlobeSt.com.

According to a Q1 report from the firm, average asking rents stabilized to an all-time-high, triple-net rate of $1.03 per square foot per month and vacancy rates are at a continued historically low for the market of 4.9%. Total positive absorption of 548,193 square feet for the quarter was strongest in the Campus Point/Eastgate, Miramar and Carlsbad markets.

We spoke with Lewkowitz about the industrial-development boom in this market and what to expect after 2017.

GlobeSt.com: Why is 2017 expected to be the most active industrial-development year in a decade?

Lewkowitz: Otay Mesa has experienced quite a boom in development because it's one of the only areas in San Diego County where you can build a state-of-the-art industrial facility. The central areas are landlocked; there's nowhere to build for industrial-zoned properties in this area. Central San Diego offers 18-ft. clear heights in older properties with minimal parking, but in Otay, state-of-the-art industrial buildings are being built that are brand new and very functional. Otay has been a very good destination lately for a lot of San Diego companies.

GlobeSt.com: What types of industrial buildings are being developed in San Diego?

Lewkowitz: In Otay Logistics Park, for example, is a new development we're working on with Industrial Property Trust. They are building two class-A distribution-type buildings totaling 270,000 square feet. These are concrete, tilt-up buildings with very large truck courts for logistics companies and also some manufacturing uses. Those are the types of buildings being constructed—basically distribution buildings. There aren't really any true manufacturing buildings being built.

GlobeSt.com: Will we see more development of this type after 2017?

Lewkowitz: Yes. It goes back to my earlier thought about just an older product type being available in the Central San Diego areas. Depending on the business functions and type of use, Otay Mesa will continue to see more development. There is some space that needs to be absorbed in a larger building in Otay in particular: Factory 2-U vacated a 600,000-square-foot building, and we would like to see that space leased up, but that is not stopping developers from building large warehouses. There are two places in San Diego County where you can build a warehouse-and-manufacturing facility: the Oceanside/Carlsbad area or Otay Mesa. What I've noticed is a difference in building type. In the North County area, you see some live/work/play types of buildings; it's more lifestyle type of building, whereas in South County and Otay Mesa, it's strictly distribution/warehouse.

GlobeSt.com: What else should our readers know about San Diego industrial development?

Lewkowitz: What's interesting, what I've seen in San Diego, is there's been quite a lot of growth for the navy—NASSCO and BAE Systems—which is continuing to win contracts and grow, so we've seen that San Diego County has a big catcher's mitt for some of those contracts. In some cases, there has been a pivot west, and a lot of government contractors are focused on San Diego. Geographically, with Asia and a growing military, San Diego is well posed for future government contracts because of our location in the US and our large navy presence.

We spoke with Lewkowitz about the industrial-development boom in this market and what to expect after 2017.

GlobeSt.com: Why is 2017 expected to be the most active industrial-development year in a decade?

GlobeSt.com: What types of industrial buildings are being developed in San Diego?

GlobeSt.com: Will we see more development of this type after 2017?

GlobeSt.com: What else should our readers know about San Diego industrial development?

Instant Insights /

This Will Be a Banner Year for SD Industrial Builds

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