SAN DIEGO-The city’s industrial market remained robust in 2004 as it was a year of solid growth and “expansion into peripheral markets from the northern border of Oceanside to Otay Mesa,” according to a report released by Grubb & Ellis.

For the year, positive net absorption hit 1.8 million sf. It was a major shift from the soft demand in 2003. The biggest jump in activity came in R&D/flex space, which experienced 600,000 sf of net absorption this year. That was in “contrast to the extremely weak demand seen after the tech wreck a few years ago,” according to the Grubb & Ellis report.As for the coming year, early news has more positive growth in store for the metro area industrial market, although vacancies are expected to climb from 7.6% at year-end 2004 to 8.3% during 2005, due to 2.7 million sf of product hitting the market. Preleasing has been brisk, with 1.1 million sf filling up.As for the submarkets, look for rents to remain relatively flat, with tenant concessions, such as free rent and increased tenant improvement dollars, continuing in 2005. But the mid-county region is getting tighter and tighter, according to Burnham senior vice president Mickey Morera. “Vacancy in Miramar stands at just 5.4% and in Kearny Mesa is just 3.2%.” Morera says that with “virtually no existing warehouse space left in the market, expect to see the redevelopment of older industrial space in the more mature submarkets of Miramar and Kearny Mesa.”Among trends in 2005: demand for defense, communications and biotech will be strong, according to the Grubb & Ellis report. Biotech particularly will look for strong employment growth. The Pharmaceutical Research and Manufacturers of America (PHRMA) has the biotech industry growing nationwide by 11%, or 130,000 workers in coming years. With San Diego ranking third nationally in biotech employment, those numbers bode well for the local economy. Already on tap are build-to-suits for Biosite and GenProbe that will hit the market in 2005.Another project to come on line is the Carlsbad Raceway Business Park, a massive mixed-use project that will add 1.5 million sf of office and industrial space at build-out. The project will be built on 147.1 acres and is set for multiple phases over several years. The tentative map, which includes a combination of speculative industrial/R&D product, owner-user lot sales and build-to-suits for lease or sale, received unanimous approval from the City of Carlsbad. Officials with HG Fenton Co., the project’s master planner, are to begin grading on the project, according to Kevin Hill, vice president of leasing with HG Fenton.

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