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11 Dec 2014
Updates Permalink
commercial property managers

The CRE Market Looking Forward

December 11, 2014

Commercial real estate in the San Diego market has made considerable gains in 2014. Where we have been and where we expect to go in 2015 for the office, retail, and industrial / flex markets? For more on these markets as well as the San Diego hotel and multi-family market, be sure to download the latest IRR Viewpoint, coming soon.

Office

Overall, the San Diego office market continues to recover, with Class A space remaining strong in both Downtown San Diego and Suburban San Diego. This is especially true in the northern part of the city, where speculative office development has resumed in areas like UTC and Del Mar Heights, and asking rents are reaching $4 per square foot per month. Recently, vacancy rates for Class B space have increased slightly since our mid-year update, but overall office market conditions are improving (albeit at a slower pace than other San Diego property types). One of the challenges that San Diego faces is stagnant job growth and competition from other states for companies to remain in San Diego (which happened earlier in the year when Websense moved to Texas). Similar to other property types, another challenge is finding developable sites in high-demand areas like Central San Diego to build more modern, efficient office space. The office market in San Diego is forecasted to remain steady overall, with Class A office space in Central San Diego improving at a stronger pace.

Retail

The San Diego retail market has remained generally stable since our mid-year update. The vacancy rate for regional shopping centers remains relatively low at 0.50%, and over the last six months the vacancy rate for community and neighborhood shopping centers has dropped 30 and 120 basis points, respectively. However, all three property types are showing a slight dip in the average asking rent, and there is not any new sale data to indicate significant improving market conditions. That said, local market participants are stating that a shift in the market is imminent. Sales, tourist traffic, and employment that support retail have recovered, and the eventual rise of interest rates is expected to cause sales volume to increase (due to investors taking advantage of the low cost of capital prior to the rate increase).

Similar to other property types, the focus for retailers in the immediate future will be in the urban core. Additionally, due to a lack of developable land, developers will continue to focus on redeveloping existing sites and developing mixed-use projects. In the immediate future, we forecast that the retail market will remain steady as the local economy continues to improve and demand begins to increase.

Industrial / Flex

Since our mid-year update, the San Diego industrial market has remained relatively stable, but the flex / Research & Development market has improved modestly. Over the past six months, both the average industrial market rent and industrial vacancy rate are relatively unchanged. On the other hand, the average flex / R&D market rent has increased over 6%, and the vacancy rate has decreased by over 6%.

In San Diego, the biotech industry continues to be a growing market, which will positively affect R&D space in submarkets such as Sorrento Valley and Sorrento Mesa, where the majority of this business is located.

Additionally, we note that although the industrial market has remained relatively stable, there is industrial development planned in select submarkets – local developer Murphy Development plans to construct millions of square feet in Otay Mesa, a submarket on the U.S. / Mexico border. Since the expansion of the San Ysidro Border Crossing, an increase in maquiladora operation is expected to occur in the region, which will lead to a demand in newer industrial space. Overall, the San Diego industrial market is on the brink of expansion and market conditions are forecasted to be positive.

Besides experiencing fluctuations due in large part to the recovering economy and competition with other states regarding retaining/attracting businesses to occupy space, San Diego is positioned to realize positive gains in 2015 due to its premier location and attractive quality of life.

Sources:

Integra Realty Resources – San Diego

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11 Dec 2014
Digest Permalink

Where Have All the Retailers Gone?

December 11, 2014

What will the retail market look like in 2015?  With the disappearance of popular tenants such as Mervyn’s, Borders, and Blockbuster due to e-commerce, e-readers, and online movie rentals, the retail landscape looks different than just 5 years ago.  Technology is only partially responsible for the decline in brick-and-mortar stores – during the first quarter of 2014, internet-based retail sales were 6.2% of total retail sales.  Despite the fears of many that online shopping would put an end to physical storefronts consumers still enjoy the social aspects that lifestyle shopping centers offer.

Yet the stigma still remains and some lenders are wary about underwriting large-format traditional retailers that sell commodities such as electronics, books, movies, music and appliances.  The good news is that money has returned to the market, and lenders are willing to underwrite.  For those wary lenders, a few good financing tools are sales figures and health ratios – and they’re readily available.  A health ratio is determined by dividing a store’s gross sales by its rent (plus common area costs).  For instance, if your nail salon tenant has 30% of her sales going toward rent payments, that doesn’t leave much room for anything else.

In addition to analyzing hard numbers, lenders should look at the demographics, location, neighborhood, and even weather, of the proposed retailer’s location.  ​Jerry Jacquet, a Principal with Meissner Jacquet Commercial Real Estate Services in San Diego, says that  “it’s “imperative that you get the whole picture – whether lending or interviewing a prospective tenant – you have to take into account if it’s going to appeal to the core demographic.  Making sure to take into account the desired term of the tenancy is also important.” Is it a trend that will result in a shorter tenancy or a necessity-based commodity such as a drugstore or grocer, who have long-term tenancies?

California, known for its abundance of sunshine, dense population, healthy income and housing prices, allow both retailers and lenders to feel more confident in a shopping center’s chance for success.  According to Bank of the West’s California Regional Economic Outlook, California is forecasted to add 356,000 new jobs in 2015, a 2.3% increase.

It’s apparent that retail is in recovery, not only due to lender activity, but to the projected housing starts and income growth.  These factors contribute to retail development – the sector is responding to an increasing population and consumer confidence.

So how do new or existing retail centers position themselves for success?  Retailers and developers must get more creative.  Incorporating omni-channel approaches by offering physical and online sales is a start.  Deloitte and the National Retail Federation published a report in early 2014 that revealed several of the top 20 internet retailers are companies that have a significance brick-and-mortar presence, such as Apple, Best Buy, Costco, Macy’s, and Walmart.

Knowing the right ratio of online to brick-and-mortar presence is key – many retailers expanded exponentially during boom-times and thus went out of business or closed a number of stores.  Smart retailers pay attention to the industry and to the discerning consumer.

Even though the economic recovery is still underway, and retail is in the process of defining a “new normal,” it is an exciting time to invest in retail real estate.  Whether you are a lender, an investor, a tenant, a leasing agent, or property manager, all signs point to the increasing value of retail.

Sources:

Western Real Estate Business

Meissner Jacquet Commercial Real Estate Services

20 Nov 2014
Updates Permalink
commercial real estate property management companies

Central San Diego Market 2014 Recap

November 20, 2014

As 2015 quickly approaches, we look back on the year and highlight 2014 trends in the Central San Diego market across the three major commercial property types: office, retail, and industrial.

The Central San Diego market is delineated by CoStar in the map below, and consists of the following submarkets: College Area, Kearny Mesa, Mission Gorge, Mission Valley, Old Town / Sports Arena / Point Loma, Park East (North Park / South Park /Golden Hill), Pacific Beach / Rose Canyon / Morena Blvd., Uptown East (University Heights / Kensington), and Uptown West / Park West (Mission Hills / Hillcrest).

commercial real estate property management companies

Rental and vacancy rates across the three property types, compiled by IRR San Diego, are shown in the table below:

a-chart

Out of the three property types, the office market has performed the strongest in 2014. The average asking rental rate increased 6%, and the vacancy rate has dropped by 60 basis points. No office properties are currently under construction in the Central San Diego market, however there are six proposed properties planned in Mission Valley. Going into 2015, the office market is expected to continue to improve.

Industrial properties in Central San Diego have had the second best performance in 2014 with an average rental rate increase of almost 5%. While the vacancy rate increased slightly since the first quarter, it is still relatively low at 4.4%. Industrial properties in this submarket benefit from the central location and convenient access to several freeways. This combined with the fact that there is no industrial product planned or under construction in Central San Diego will continue to benefit existing inventory.

The retail market in Central San Diego has remained relatively stable in 2014, with the average rental rate even dropping by 0.5%. That said, the vacancy rate continues to be relatively low at 3.0% (dropping 50 basis points from the beginning of the year). According to CoStar, there are 3 properties currently under construction in this submarket, and 12 proposed properties. Even though the rental rate has dropped, the low vacancy rate and apparent demand for retail space will positively affect the general retail market.

Overall, the Central San Diego market has generally improved over the course of the year. In the immediate future, expect market conditions for all three property types to continue to improve.

Sources:

Integra Realty Resources – San Diego

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CoStar

20 Nov 2014
Trends Permalink
real estate investment companies

Maintain Your Investment Without Emptying Your Wallet

November 20, 2014

trends investment services

You’re familiar with your asset, and all of its unique requirements. But sometimes keeping property costs in line can be overwhelming. And saving money can seem impossible. However, there are methods to keep your commercial property running efficiently and still save money.

Smart Vendor Selection

You want to find the right vendors who can quickly understand the intricacies of your property as well as you do. This will help you save both time and money by anticipating issues and making minor repairs before they escalate into bigger, more serious issues. The list of professional vendors required to keep your property operating in top condition is long and varied. It generally includes security, janitorial, trash removal, landscaping, pest control, and building systems, such HVAC specialists, painters, plumbers, and electricians.  Making sure that each and every vendor that interacts with your property has sterling references, a strong work ethic, and is appropriately insured in accordance with your property’s business plan is essential. Sometimes vendors who appear to be initially less expensive than others can end up costing more money due to inexperience or substandard services.

Look After Your Building Systems

Building systems can leak money if not well managed. Learn how to get the most out of each and every building system you have in place. By setting your systems for maximum efficiency, you can better control your operating costs.  While some of today’s office and industrial / warehouse building systems are hyped as being low maintenance, this does not mean you can simply install and ignore them. One quick and relatively easy way to start saving money is to define a maintenance program, including systems and equipment inspection and preventative maintenance at predefined intervals. Keeping a detailed service log of all system components will ensure that repairs are caught early, and equipment replacements are planned and budgeted.

Teaching Tenants

Your tenants can be coached on how to save money too. By offering constructive operating solutions and tips, including closing heating vents – or radiator valves in older buildings – in unused rooms, and ensuring that blinds, furniture or plants do not block registers. Another idea – encourage your tenants to opt for task lighting (over desks, tool benches, etc.) with compact fluorescent bulbs, so that only those areas that are currently occupied are lit versus lighting whole rooms. Compact fluorescent bulbs use 75 % less electricity than incandescent bulbs; they last almost 10 times longer, and can sometimes be used with dimmer switches.

Lighten Up

The type of paint and furniture in your commercial space can also have an impact on your energy costs. Darker-colored walls, ceilings, floors, and furniture absorb light and require higher lamp wattage to achieve a decent level of illumination. By placing lighting in a corner rather than against a flat wall, allows light to be reflected from two wall surfaces instead of just one. Two other easy ways to save on electricity include installing photo sensors that automatically adjust the amount of light needed, and utilizing occupancy sensors that turn lights on and off based on detection of motion in the area.

Diligent property maintenance, effective vendor management, and proper preventative measures can reduce commercial real estate owners’ operating costs and save tenants money in the long run.  Meissner Jacquet Commercial Real Estate Services is adept at retaining professional vendors for cost-effective maintenance and services.  Jerry Jacquet, a Principal at Meissner Jacquet, has helped many of the firm’s clients by instituting the right property management program for their commercial asset. Jacquet says that the firm’s commercial property managers stress the necessity of “monitoring all vendor work closely, performing annual contract reviews and re-bidding to ensure competitive pricing is in place, along with the correct scope of work.”   These measures, along with a detailed property business plan, will not only assist the property owner in economizing, but also have the added benefit of saving two limited resources, time and money.

Sources

Meissner Jacquet Commercial Real Estate Services

20 Nov 2014
Spotlight Permalink
san diego property management companies

Why an Electrician Should Provide More Than Just Electricity

November 20, 2014

spotlight electricity services

Robeck Electrical Maintenance is a full service contractor located in San Diego and has been providing superior electrical services to San Diego, Riverside and Orange Counties for over 40 years.  Robeck provides electrical and lighting maintenance services to over 500 commercial businesses and properties.

Robeck’s electrical services include:

  • basic electrical replacement of large electrical distribution and metering equipment
  • electrical testing
  • underground pipe and cable location services
  • power quality trouble-shooting & resolution
  • thermal scanning of electrical equipment for preventative maintenance
  • network & phone cabling
  • emergency lighting systems

Robeck’s contracts include monthly maintenance agreements for all commercial property types, including retail, office, industrial and commercial owners associations.  In addition, Robeck offers full-service, interior, building lighting maintenance with specific scheduling to meet customers’ needs. By appropriately outlining a commercial property’s electrical maintenance needs from the beginning, owners and commercial property managers are able to budget for expected costs and institute preventative maintenance that will reduce the need for larger repairs that require larger capital investments.

Additional services provided by Robeck include:

  • Ultrasonic straight line beam testing of steel and aluminum products used in parking lot light poles and sign support columns
  • Exterior & interior lighting fixture, motion sensor, and photo cells installation
  • Sign repair (including lamps, ballasts & neon)
  • Bird spike installation
  • Pole refurbishing

Robeck Electrical prides itself on our prompt response and 24-hour emergency assistance service.  To learn more about our services please contact us at 760-744-6880.

Sources:

Robeck Electrical

20 Nov 2014
Perspectives Permalink
commercial property management

Thinking of Managing In-House vs. a Third Party Manager? Choose Wisely

November 20, 2014

There are many reasons to self-manage, or manage in-house. Including not paying a third party commercial property manager. But before you head in that direction, give some thought to what you’re about to tackle and what might happen if you can’t hold on to all the strings attached. Determining the most effective and efficient way to manage commercial property involves a lot of strings, such as the ones identified below.

Regulations

As a commercial property owner, all the requirements you need to understand and abide by are not easy to grasp. There are laws and requirements at the federal level, coupled with regulations at the state and local level. Keeping on top of these ever-morphing requirements can be difficult. And even more problematic are the fines levied on property owners or landlords who fail to meet these requirements that relate to inspections, ease of access, ADA, tenant rights, and repairs and maintenance – just to cite a few.

Technology Trends

How can you leverage the benefits received from the latest trending technology that can provide you with real-time tracking of rent payments (and arrears), building systems performance, scheduled inspections, costs for repairs and costs for maintenance? Managing these systems on your own require a substantial portion of your time, not to mention a big chunk out of your wallet, if not negotiated and contracted correctly.

Choosing Vendors

Do you have contracts – and appropriate scopes of work – with trusted vendors that you’ve vetted for top service and competitive rates? How big is your vendor pool? How far do your vendor resources stretch? Self-managing might limit your resources and not allow for volume purchasing, such as what third party managers are privy to.

Advertising and Promotion

When you have space vacancies, do you get volume discounts and automatic savings on advertising your property’s availability – both digital and hard copy advertising? And do you have access to multiple industry promotion forums and channels? Third party managers have relationships with industry-leading leasing agents and brokers, who can expertly handle all the intricacies involved with marketing space.

Time

Time is both fleeting and precious. Especially your time. Do you have hours each day, week, month, and year to perform in-depth analysis of property information regarding your portfolio’s performance? Or handle urgent maintenance issues after-hours? What about opening vacant spaces for leasing agents and prospective tenants to view available space? Know what your time is worth and allocate to professionals.

Market Rent Rates

Of course you want to get the best possible rent for your property, but how do you determine what’s market? And how do you stay abreast of the ebb and flow of industry rates? Having a limited understanding of what you should expect in rental income – and offer your tenants what they demand – can be a truly daunting task.

Tenant Selection

Speaking of that all-important ideal tenant, what hoops are you ready to jump through to find them? And then vet them up to, and through, checking their background and credit? Third party commercial property managers are adept at leasing agent coordination and have processes in place to make this process as seamless as possible.

Continuing Education

A final item to ponder is gauging the time you can devote to networking with other commercial property owners and professionals, staying atop the wave of new trends, policies, and best practices – while attending industry conferences – that address each and every issue on this list.

The Solution

At Meissner Jacquet Commercial Real Estate Services, we provide experienced third party commercial real estate management services. Kevin Tagle, Vice President of Meissner Jacquet, underlines that “our experience working with both private and institutional clients provides us with the ability to fully understand our clients and their properties needs on all levels.” Meissner Jacquet will assemble a property plan that outlines how best to manage your commercial property for optimal results, so that your time is spent focused on your core business and not fixing leaking toilets.

Sources:

UpCounsel Blog

Nolo.com

Meissner Jacquet Commercial Real Estate Services

 

20 Nov 2014
Digest Permalink
retail property management, office property management

What Does Walkable Urbanism and Dogs Have In Common?

November 20, 2014

​What does walkable urbanism and dogs have in common? These trends are predictors of future development and are the current expectations of office, retail and multi-family tenants.

All across America, investors, developers and landlords are positioning their commercial assets to meet the needs of today’s tenants – particularly Millennials and Empty Nesters. These two generations are demanding vastly different amenities than just two decades ago.

Home used to be where the heart is but now dogs are demanding space in today’s multi-family developments. The average urban multi-family dweller now owns a dog and considers them more than just a pet but a crucial member of the family. And this family member comes along with specific needs, including dog parks, dog-only elevators, bathing facilities, and exercise areas.

Developers have picked up on this trend and are quickly incorporating space within their developments to make both fido and owner happy. Urban, pet-friendly developments include the $60-million, 211-unit, mixed-use Grant Park Village in Oregon; the 424-unit Camden Flatirons in Broomfield, Colorado; the $165-million, 585-unit AM-LI-MDR mixed-use development in Marina Del Rey, California, among others.

Dense urban cores, such as Denver, Washington D.C., New York, and Boston, have the amenities that Gen Y and Empty Nesters are looking for, in addition to the neighborhood and community feel commonly found in suburban areas.

Office and retail developers are taking note of these trends and identifying regionally significant walkable urban places (WalkUPs) in metro areas. They’ve found that the categories of ‘city’ or ‘suburb’ are no longer sufficient as a means of classifying metropolitan real estate. Instead metro America will be either ‘walkable urban’ or ‘driveable suburban.’ WalkUPs include traditional downtowns, downtown-adjacent neighborhoods, urban commercial districts, and urban university neighborhoods. As well as suburban town centers – including those developed on greenfield or brownfield sites – and urbanized suburban town centers.

Tim Meissner, a Principal with Meissner Jacquet Commercial Real Estate Services, says that the effects of WalkUPs are being seen in the firm’s headquartered location of San Diego. Meissner states that, “Due to the limited availability of land, developers are turning to redevelopment and taking into account the demand for walkable urban in city centers and driveable suburban in outlying communities. Today’s projects now incorporate mixed-use space with a much higher emphasis placed on the tenants’ needs.”

A report by Christopher Leinberger and Patrick Lynch of the Center for Real Estate and Urban Analysis at the George Washington University School of Business, found that both higher education levels and higher GDP per capita were present in WalkUPs. This information, coupled with the amenities demanded by Millennials and Empty Nesters, can suggest future demand for walkable urban development, which is a potential strategy for regional economic development.

For those investors who aren’t in the market of new development, there are other ways to attract or retain tenants while increasing rental rates and tenant satisfaction. Think of enhancing the community feel. Ways to execute upgrades to multifamily or mixed-use space include renovations to exercise centers, outdated pools, spas or community centers, and unit upgrades.

All of these upgrades require relatively minor capital investment but the potential return on investment makes these renovations a smart choice due to the ability to justify additional rent. For instance, modernizing space with finishes such as vinyl or concrete flooring, higher-end materials, and open floor plans provides a more modern look to prospective tenants.

Larger-scale renovations can have big payoffs too. Resort-style pools, and upscale outdoor entertainment and community centers, can increase occupancy and rental rates. In addition to meeting the demands of the tenants, property owners must keep a pulse on their competition. Understanding the property’s specific market and demographics is paramount to the success that larger improvements will be profitable in the long term.

A few less capital-intensive, relatively easy, upgrades can include installing Wi-Fi, or updating the equipment used in business centers or fitness centers. Although these are small improvements, they may attract tenants who value up-to-date amenities over the higher rent of a brand new development.

Investors and developers alike are keen to understand the importance of implementing not only upgrades and renovations but that in order to grow economically, urbanization of suburban regions is the next step for metro areas to meet the demand of Gen Y and Empty Nesters for walkable urbanism.

Sources:

NAIOP, Commercial Real Estate Development, Fall 2014

Western Real Estate Business, October 2014

​Meissner Jacquet Commercial Real Estate Services

 

20 Nov 2014
Case Study Permalink

Case Study – Grant Tucker Properties

November 20, 2014

Case Study - Grant Tucker Properties

Property Name: Grant Tucker Property Portfolio

Case Study: Property Management

Property Locations:
La Costa Plaza: 7668 – 7690 El Camino Real, Carlsbad, CA 92009
La Jolla Colony Plaza: 7728, 7748, 7770 Regents Rd., La Jolla, CA 92122
Rancho Bernardo: 15721 Bernardo Heights Pkwy., San Diego, CA 92064
Alpine Village Center: 2963 Alpine Village Dr., Alpine, CA 91901

Property Description: 4 Retail Centers at 82,000 Total Square Feet

Client Requirements

​Meissner Jacquet Commercial Real Estate Services manages four neighborhood shopping centers – La Costa Plaza, La Jolla Colony Plaza, Rancho Bernardo Center, and Alpine Village Center – for Grant Tucker Properties, a private investment group. The four retail properties are each anchored by a major grocery store, total 82,000 square feet, and are located in cities throughout San Diego County. The objectives for these accounts vary, based on the age of each asset, but the goals remain the same, responsive tenant service, accurate and complete CAM billings and collections, and excellent property operations.

Process

Upon takeover of management from the first property in 2003 to the fourth in 2008, Meissner Jacquet enacted its routine commercial property operations. Including instituting appropriate vendor contract services, preventative maintenance programs, resolving physical plant issues, responding to tenant needs, and ensuring safety is maintained through compliance with federal, state and local mandates.

By establishing appropriate scopes of work, negotiating, and supervising contracts for typical vendor services, such as janitorial, landscaping and trash removal, Meissner Jacquet is able to obtain professional services at competitive pricing. This, coupled with a well-defined operating budget, allows for the control and reduction of operating costs.

Equally important to the ability to monitor and control operating costs, is tenant retention. Meissner Jacquet, with the help of ownership, creates a long-term, stable environment where tenant satisfaction is at the forefront. By performing regular property visits, ensuring superior property and tenant services, and promptly responding to tenant requests, Meissner Jacquet maintains a hands-on management style that enforces tenant retention.

Result

Due to Meissner Jacquet’s effective commercial property management services, the retail centers experience high occupancy rates – three centers are 100% occupied and one is 90% occupied. Ownership is consistently pleased with Meissner Jacquet’s results over the past 11 years of management.

Sources:

Meissner Jacquet Commercial Real Estate Services

 

22 Oct 2014
Spotlight Permalink
commercial property managers

Does your HVAC System Save You Money?

October 22, 2014

Ontario Refrigeration has been providing commercial air conditioning services to California, Arizona, and Nevada customers for over 55 years. With offices in San Diego, Costa Mesa, Ontario, Los Angeles, Ventura, San Jose, Phoenix, and Las Vegas, the company is ideally positioned to serve the South Western United States. Company president, Phil Talleur, is the third-generation to lead the HVAC firm. Talleur states that his “grandfather and father were both excellent HVAC technicians, and would demand that best practices were always adhered to, and insisted that all systems under our care are fine tuned for efficiency.”

Ontario Refrigeration runs its business much like Meissner Jacquet Commercial Real Estate Services says Meissner Jacquet’s Vice President, Kevin Tagle, with a focus on “delivering proven solutions for commercial real estate property needs.” This is just one of the reasons that Meissner Jacquet enlists Ontario as a best-in-class service vendor. Recently, Meissner Jacquet contracted Ontario for a building improvement at Pacific Corporate Center, a 4 star flex light manufacturing building located in the Sorrento Mesa submarket, to replace 6 HVAC units.

According to the California Energy Commission, 44% of a commercial building’s energy consumption is attributed to its HVAC systems. A building’s energy consumption is typically its largest operating expense, and HVAC systems are one of the highest – if not the highest – contributors to that expense. Ontario Refrigeration specializes in assisting commercial building owners and property managers in controlling energy expenses, with building automation solutions and comprehensive preventive maintenance programs.

Recently, utility companies have implemented incentive programs to encourage commercial building owners and real estate managers to improve the ongoing maintenance of their HVAC systems. Ontario Refrigeration has partnered with the utility companies to enact those programs. “In my forty years in the HVAC business, this is the first time that the utilities have incentivized HVAC ‘maintenance’ in such a meaningful way,” Talleur states.

To learn more about Ontario Refrigeration’s services, visit their website at  www.ontariorefrigeration.com.

Sources:

Ontario Refrigeration

Meissner Jacquet Commercial Real Estate Services

22 Oct 2014
Updates Permalink
construction management companies, construction management services

Why New Development Might be Coming Your Way

October 22, 2014

Twice a year, Integra Realty Resources (IRR) produces ViewPoint, a market report that provides a snapshot of current market conditions, notes any trends, and forecasts where the market is going across its 63 offices in the U.S. and Caribbean. Below is an excerpt from IRR’s report touching on three property types in San Diego: Class A suburban office, Class A industrial warehouse, and neighborhood shopping centers.

construction management companies, construction management services

Across the three property types, only office rents have increased over the past 6 months. The other property types have either remained steady or have dipped slightly.

The vacancy rate for both office and retail space has dropped since our last report, with the retail vacancy rate dropping by over 100 basis points. While there have been no changes to the Class A industrial vacancy rate, it is still relatively low at 3.2% (which is near the vacancy rate for multifamily, a property type very much in demand in San Diego).

Upon review of sale data, only industrial properties have shown a decrease in overall cap rates; rates for both office and retail have remained steady at 7.0% and 6.5%, respectively.

Summary

The Class A office market in suburban San Diego continues to modestly improve, as evidenced by increasing rents and decreasing vacancy. While industrial asking rents and vacancy rates have remained relatively stable over the past six months, Class A warehouse is the only property type shown that is indicating a decrease in overall capitalization rates. The vacancy rate for neighborhood shopping centers has decreased considerably since six months ago, but at the same time the average asking rent has also decreased. That said, the decrease is insignificant (less than 0.5%), so this sector of the retail market should remain stable.

Based on the above, the commercial real estate market in San Diego has steadily improved over the past six months. Aside from increasing rents and decreasing vacancy rates, improving market conditions in San Diego is also leading to new development, as evidenced by speculative office development in north central San Diego as well as new industrial developments breaking ground in Otay Mesa. For now, the San Diego market is strengthening, which will have a positive impact on rents, vacancies, and cap rates going into 2015.