CHULA VISTA, CA—Stos Partners' recent acquisition of a 170,805-square-foot multi-tenant industrial building here marks a rare off-market transaction in a comparatively affordable region where space is scarce, principal CJ Stos and partner Jason Richards tell GlobeSt.com.

The property, which was acquired off-market, is widely considered desirable by private and institutional investors due to its size, location and mix of local and national tenants from many industries. We spoke with Stos and Richards about the South Bay market, the reasons why it is so tight and options for tenants seeking industrial space close to the US/Mexican border.

GlobeSt.com: Why is the South Bay market so tight for multi-tenant industrial space?

Richards: There are basically three reasons why market is so tight. First, there has been an increase in activity with the defense industry, which supports the naval base here; suppliers of the defense industry are also increasing demand in that submarket. Second, rents have grown significantly in core markets like Miramar and Kearny Mesa; space is tight there, so others who may have originally gone there have had to move east, south and north. Also, there's a lack of new product being delivered to the market; there's virtually no new development in Chula Vista or the South Bay market. There is some in North County, but that's just because rents up there support new development.

GlobeSt.com: Where are tenants going who can't find space in this market?

Stos: It's a combination of both staying in San Diego and going outside the market. Tenants are just trying to find locations, and it's so hard to do nowadays. By default, they can move up to North County, but they will pay a premium to do so. Our space will be 65 cents per square foot triple-net, and newly formed space is $1 per square foot, which is a huge difference to tenants.

GlobeSt.com: What other options are there for tenants seeking to be close to the US/Mexican border?

Stos: Otay Mesa, which is that border area, is almost like a specialty area for cross-border business; otherwise, firms prefer to be closer to Chula Vista, North County, Miramar or Central County.

Richards: People relying on cross-border trade will go the Otay Mesa market, but none of the tenants in the surrounding areas are reliant on being close to the border.

GlobeSt.com: What else should our readers know about this acquisition?

Stos: This size of this deal is one that is typically marketed on the open market, so the ability to get it off market was particularly unique.

Richards: Our largest tenant, Lyon Technologies, has been in business for more than 100 years. Also interesting is that the last three leases signed in our project were all done with national-credit tenants, and we believe that this submarket—for maybe some of the reasons we described—is attracting more national-credit tenants than previously. One thing we liked about our project: this space tends to be more functional than a lot of space in that market; there's a lot of functionally obsolete product there.

GlobeSt.com: Why is the South Bay market so tight for multi-tenant industrial space?

GlobeSt.com: Where are tenants going who can't find space in this market?

GlobeSt.com: What other options are there for tenants seeking to be close to the US/Mexican border?

Richards: People relying on cross-border trade will go the Otay Mesa market, but none of the tenants in the surrounding areas are reliant on being close to the border.

GlobeSt.com: What else should our readers know about this acquisition?

Stos: This size of this deal is one that is typically marketed on the open market, so the ability to get it off market was particularly unique.

Instant Insights /

Three Reasons Why South Bay Industrial is So Tight

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