Dalfen Industrial Expands San Diego Portfolio

The investor purchased Otay South Logistics Center, its second purchase in San Diego in the last two months.

Dalfen Industrial has acquired Otay South Logistics Center, a 66,243 square foot industrial property fully occupied by Royal Flavor, a wholesale logistics company. The acquisition it the firm’s second in the San Diego market in the last two days.

Located near the 905 freeway and the Otay Mesa Port of Entry, the property was built in 2000 and features 24-foot clear heights, a 128-foot truck court and 14 dock-high doors. The property is located in an active industrial hub near Fedex, Amazon, Kraft, Honeywell, Bose, Panasonic and Costco. The location near the port is a significant benefit, allowing easy access to move goods across the border and access to labor, according to the firm. The property is also located near Tijuana Airport, 20 miles from the Port of San Diego and 25 miles from the San Diego International Airport.

Overall, San Diego’s industrial market is experiencing rapid growth. According to research from Marcus & Millichap, industrial rents in the market have increased 4.7% to $16.80 per square foot. Rents have grown consistently each quarter since the start of the pandemic. Limited supply is driving the rent growth, according to the report. In the fourth quarter, San Diego had a 4.4% industrial vacancy rate, down 70 basis points from the previous quarter. The vacancy rate has been on a downward trend since 2019, when the rate peaked at nearly 6%.

Otay Mesa is among the most active markets. The submarket has two industrial projects under construction at Brown Field Technology Park in Otay Mesa, totaling 200,000 square feet from Murphy Development. In addition, JLL Income Property Trust acquired South San Diego Distribution Center for $158.5 million from an affiliate of the Murphy Development Company. The three-building property totals 665,000 square feet, and it is 96% leased to eight tenants. JLL purchased the property with the assumption of an in-place, $72.5 million first mortgage at 3.18% fixed-rate. The mortgage is interest only for another four years with a maturity in 2031. In addition, JLL issued $75 million in Operating Partnership units to the sellers. The remainder of the purchase was funded with cash on hand.

Dalfen also plans to increase its holdings in the area. The firm’s market officer Rich Weiss said,

“San Diego is highly supply constrained and in conjunction with strong and unique demand drivers fosters very favorable market conditions. We will continue to target building and land acquisitions throughout the metro.”