MCA Enters San Diego Industrial Market
A sub 5% industrial vacancy rate and rising land values have made this the time to enter the San Diego industrial market.
“San Diego is an attractive industrial market for several reasons,” Tyler Mattox, a principal at MCA Realty, tells GlobeSt.com. “In addition to its proximity to our Irvine headquarters, market vacancy is tight in the low 5% range and demand has remained consistently strong for the last several years. Additionally, industrial land values in San Diego continue to escalate, as do construction costs. The construction of new projects similar to Auto Park are simply not viable today so there is an increased focus on the renovation of existing underperforming assets.”
While MCA is attracted to the fundamentals in the market, this particular asset was a perfect opportunity. “The project is prominently located at the junction of the 78 and I-15 freeways with excellent visibility from Mission Road and Auto Park Way – two major thoroughfares in the area,” says Mattox. “The exceptional location combined with a good tenant mix and rents below today’s market made it an especially attractive investment.”
Still, MCA is looking to increase its exposure to the San Diego market, focusing on small to mid-sized industrial product, like this, and for properties where the firm can create value. “Typically, this involves an injection of capital to renovate a property, combined with increasing rents to reflect the current market,” says Mattox. “Many of these assets have been owned generationally by families or small investors who have not been willing or able to spend the necessary capital to attract new tenants and increase rents. Our strategy is narrow; we will work to find these opportunities, then spend the necessary capital to bring rents closer to market and ultimately attract credible tenants.”
MCA believes that the barriers to new construction in San Diego will create a healthy market for investment activity. “The barriers to entry to existing assets in San Diego are not fundamentally different than other western markets; however, scarcity of land, difficult project entitlement and escalating construction costs create significant barriers to new construction,” says Mattox. “This dynamic bodes well for renovating existing underperforming assets, which is directly in line with our strategy.”