Q3 2011 Industrial Report

Industrial Report
North San Diego County

3rd Quarter 2011
PREPARED BY: COLLIERS INTERNATIONAL
Adam Molnar 5901 Priestly Drive, Suite 100
Greg Lewis Carlsbad, CA 92008
Tucker Hohenstein Fax 760 438 8925
Mike Erwin www.colliers.com/carlsbad
Mike Bench

Q3 2011 | INDUSTRIAL

CARLSBAD

AT A GLANCE

Market Conditions
After posting four consecutive quarters of positive absorption, Carlsbad’s Industrial/R&D
Oceanside
vacancy rate was dealt a slight blow in Q3 2011 with nearly 300,000 sf of negative
Vista absorption. However, if the layers are peeled back and examined it becomes clear that
the vast majority of this negative activity can be attributed to a very small number of large
buildings. Upper Deck (249,000 sf) and No Fear (65,000 sf) jettisoned their corporate
San
Carlsbad Marcos headquarters facilities in favor of much less space. Other users are taking advantage of
Ocean a depressed o ce market and upgrading their corporate image by relocating from highly
parked R&D properties into more traditional o ce space. Examples of this trend include
3E and NTN Buzztime. The most positive segment of the leasing market by far was the
MARKET INDICATORS 15,000 to 25,000 s.f. range with 5 transactions in 3Q 2011. This is encouraging as this
Q3 Q4 size range has been fairly stagnant in recent quarters.
2011 2011 (forecast)

There was a slight uptick in sales activity in Q3 with contributions from investors and
VACANCY owner-users. L.B.A. was able to complete a rare tenant-in-tow transaction by purchasing
NET ABSORPTION
the last remaining bank owned building at Raceway Point (64,000 sf). Prana Clothing
originally had this property tied up as an owner-user but then opted to assign the escrow
CONSTRUCTION and sign a long term lease. Other acquisitions included two investment deals on Las
Palmas Drive and an owner-user purchase on Rutherford Road.
RENTAL RATE

Despite a temporary setback in the vacancy rate, expect a more positive conclusion to
2011 with no new construction underway or in the planned stage and signi cant tenant
activity in the market.

INDUSTRIAL/R&D VACANCY RATES RATES
INDUSTRIAL/R&D VACANCY CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET
Q3 2011 Q3 2011
INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS
700 VISTA HISTORICAL MARKET TRENDS
16%
Q3 2011

15.1% 600 14%
Carlsbad
Carlsbad 14.5%
500
17.0% 12%
Escondido
5.9% 400
10%
Vacancy Rate
SF (000s)

Oceanside 10.9%
16.8% 300
8%
San Marcos 7.1% 200
9.2% 6%
100
Vista 5.9%
9.8% 4%
0
North County 12.7%
11.1% -100 2%

-200 0%
0% 5% 10% 15% 20%
2003 2004 2005 2006 2007 2008 2009 2010 2011
R&D Industrial YTD
Net Absorption New Supply Vacancy
OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS

OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL M
www.colliers.com/carlsbad

El C
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AT A GLANCE | Q3 2011 | INDUSTRIAL | CARLSBAD Ave
Rea more
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Carlsbad
Oaks North

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Whiptail Loop

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Research

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TRANSACTION ACTIVITY - Q3 2011
no
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Av
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a SALES ACTIVITY La Costa Resort
Av & Spa
# PROPERTY NAME/ADDRESS
ra ia BUYER TYPE SIZE SF SALE PRICE PRICE/SF
P kw
Park2261 Rutherford Road y
1 Hyatt Owner User 21,743 $2,032,500 $93.48
Aviara Resort
2 2151 Las Palmas Drive Investor 31,824 $3,250,000 $102.12
3 2070 Las Palmas Drive Investor 32,555 $3,030,000 $93.08
4 3209 Lionshead Avenue Investor 64,327 $5,775,000 $89.78
LEASING ACTIVITY

# PROPERTY NAME/ADDRESS TENANT NAME SIZE SF TERM EFF RATE
5 1815 Aston Avenue JetHead Development, Inc. 17,766 36 months $1.29 MG
6 1905 Aston Avenue Ryderz Compound, LLC 19,794 52 months $0.87 NNN
7 6190 Corte del Cedro Photothera, Inc. 20,423 48 months $0.85 NNN
8 5850 El Camino Real Project Walk 22,043 72 months $1.22 MG
9 3209 Lionshead Avenue prAna Clothing 64,327 108 months $0.88 NNN

This document has been prepared by Colliers International for advertising and general information only. Colliers
prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding
the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party
MIKE ERWIN, MIKE BENCH 760 438 8950 should undertake their own inquiries as to the accuracy of the information. Colliers International excludes
unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes
all liability for loss and damages arising there from.


VISTA

AT A GLANCE

Market Conditions
Recent leasing by large corporations may be a sign of increasing corporate con dence.
Oceanside
John Deere, Zodiac and DJO Global all signed leases during Q3 for a combined total of
Vista 234,000 sf. This is the rst time during 2011 that we have seen this level of demand
from large corporations. While leasing activity improved, there were no building sales
larger than 10,000 sf. Two consecutive quarters of reduced sales activity continues to put
San
Carlsbad Marcos downward pressure on pricing, even though supply is limited.
Ocean

Lease rates are averaging $0.56 psf per month NNN and have been relatively stable
during 2011. These rates could begin to move higher in 2012 due to dwindling supply.
MARKET INDICATORS
Q3 Q4 Companies looking to lease or purchase space larger than 50,000 sf in Vista may be
2011 2011 (forecast) surprised that there are currently only ve (5) existing opportunities totaling 386,000 sf.
When taking into consideration a company’s speci c clear height, loading and/or o ce
VACANCY requirements, this list could quickly drop to 1 or 2 viable options. Based on the Q3 gross
NET ABSORPTION
absorption rate of 234,000 sf there is approximately six (6) months of supply of buildings
larger than 50,000 sf.
CONSTRUCTION
One quarter of positive net absorption is not enough to establish a trend, but is certainly
RENTAL RATE
a welcome move in the right direction. Vacancy decreased from 11% at the end of Q2 to
9.33% at the end of Q3 due to larger user demand. This downward trend in vacancy is
expected to continue through Q4 although at a slower pace.

STORICAL MARKET TRENDS
INDUSTRIAL/R&D VACANCY RATES VISTA HISTORICAL MARKET TRENDS
Q3 2011
INDUSTRIAL/R&D VACANCY RATES 700
CARLSBAD HISTORICAL MARKET TRENDS 10%
VISTA HISTORICAL MARKET TRENDS
Q3 2011 9%
600
Carlsbad 15.1% 8%
14.5% 500
17.0% 7%
Escondido 400
5.9%
Vacancy Rate
SF (000s)

6%
10.9% 300
Oceanside 5%
16.8%
200
San Marcos 7.1% 4%
9.2% 100
3%
5.9%
Vista
Vista
9.8% 0 2%
North County 12.7% -100 1%
11.1%
-200 0%
0% 5% 10% 15% 20% 2003 2004 2005 2006 2007 2008 2009 2010 2011
R&D Industrial YTD

ISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS


AT A GLANCE | Q3 2011 | INDUSTRIAL | VISTA Ol
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Faraday Ave
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Pa
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Lionsh
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SALES ACTIVITY
TRANSACTION ACTIVITY - Q3 2011 ort
Rd
Airp
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Palo
SALES ACTIVITY BUYER TYPE SIZE SF SALE PRICE PRICE/SF

# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF
There were no buildings sales larger than 15,000SF during Q3

LEASING ACTIVITY

LEASING ACTIVITY TENANT NAME SIZE SF TERM EFF RATE
1 2611 Commerce Way Ste B-E Zodiac Pool Systems 104,832 84 months $0.59 NNN
2 990 Joshua Way John Deere 76,000 62 months $0.53 NNN
3 3151 Scott Street DJO Global 53,256 88 months Undisclosed



OCEANSIDE

AT A GLANCE

Market Conditions
Although the Oceanside industrial submarket continues to have the highest vacancy rate
in North County at 16.05%, the good news is that the rate decreased in the third quarter
Oceanside
Vista from 16.83%. This 0.78% reduction is signi cant and a trend that is expected to continue
into 2012.

San
Marcos
Users are taking longer to make decisions, and relocating is a time consuming process.
Carlsbad
Ocean However, tenants and buyers are using the down market to move from leased properties
to owned properties, and are opting for better properties at attractive terms.

MARKET INDICATORS Two industrial sales occurred in the quarter. The rst sale was a 19,628 sf user
INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET
purchase of a new building at 1338 Rocky Point Drive in the Paci c Coast Business Park.
Q3 2011 Q3 Q4
2011 2011 (forecast) The buyer will be using the property to warehouse vintage VW auto parts. The second
sale was a user purchase of a 43,500 sf life science lab building located at 4049 Avenida
VACANCY de la Plata. The seller was Genetech and the buyer was Gilead Sciences from the Bay
Area.
NET ABSORPTION

CONSTRUCTION Lease activity was good; 62,720 sf of positive net absorption occurred. Panoramic Doors
leased 12,000 sf for 3½ years at 3265 Production Avenue in the Oceanside Airport Area.
RENTAL RATE This is a positive sign as the residential service/supply market and subcontractors have
been one of the hardest hit industry sectors in the area.

A signi cant land transaction in Ocean Ranch is in escrow. U.S. Food Service has 28
acres of industrial land under contract with Hamann Construction. This is the largest
piece of contiguous industrial land in the market.

INDUSTRIAL/R&D VACANCY RATES OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL M
Q3 2011
INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS
800
VISTA HISTORICAL MARKET TRENDS
20%
Q3 2011
18%
Carlsbad 15.1%
14.5% 600
16%
Escondido 17.0%
5.9% 14%
400
Vacancy Rate
SF (000s)

10.9% 12%
Oceanside
Oceanside
16.8%
200 10%
San Marcos 7.1%
9.2% 8%
5.9% 0
Vista 6%
9.8%
4%
North County 12.7% -200
11.1% 2%
-400 0%
0% 5% 10% 15% 20%
2003 2004 2005 2006 2007 2008 2009 2010 2011
R&D Industrial
YTD


AT A GLANCE | Q3 2011 | INDUSTRIAL | OCEANSIDE

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Av
Ocean Ranch

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Sprinter Light
Rail Line

SALES ACTIVITY

1 1338 Rocky Point Drive Owner/User 19,628 SF $1,865,000 $95.02/SF
2 4049 Avenida de la Plata Owner/User 43,500 SF $11,000,000 $252.97/SF

LEASING ACTIVITY

EFF RATE
3 3265 Production Avenue Panoramic Doors 12,000 SF 42 months $0.50/g
4 4055 Oceanside Blvd Grace Anglican Church 10,964 SF 36 months $0.55/g



SAN MARCOS

AT A GLANCE

Market Conditions
The San Marcos Industrial Market had a positive Q3 absorption of approximately 36,000
sf, slightly decreasing vacancy to 8.92%. The positive absorption is mainly attributed to
Oceanside one large lease and a few small building buyers bene ting from the record low interest
Vista
rates and the stabilizing of real estate prices. Although the Year-to-Date absorption is still
a negative 45,000 sf, we should continue to see a positive trend in vacancy as the local
San Escondido market continues to recover from the signi cant negative impact the economy has had on
Carlsbad Marcos
Ocean local industrial companies since 2008.

There were four industrial building sales during this quarter, and the average price of these
MARKET INDICATORS building sales was approximately $100 psf. The largest sale was the 17,600 sf building on
130 Bosstick, which sold for $98 psf.
Q3 Q4
Lease activity during the 3rd quarter mainly consisted of small multi-tenant transactions
VACANCY and one large 41,000 sf lease by Teamwork Athletic Apparel at 740 Los Vallecitos.
Currently, there is only one building available larger than 30,000 sf in San Marcos, as
NET ABSORPTION the vacancy is mainly concentrated in the 15,000 sf – 30,000 sf range and multi-tenant
RLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET TRENDS
CONSTRUCTION
incubator space. The multi-tenant market lease rates continue to have downward pressure
as Landlords provide concessions to ll vacancy as the market recovers.
RENTAL RATE
The limited supply of available large buildings in San Marcos will put upward pressure
on lease rates throughout the North County industrial market. The multi-tenant market
will improve as the overall economy continues to recover, which will encourage local
entrepreneurs to start-up new ventures.

Overall, we should see continued improvement in the vacancy and absorption as no new
speculative industrial inventory is planned or under construction in San Marcos. Moreover,
INDUSTRIAL/R&D VACANCY RATES
Q3 2011
supply of industrial buildings and land parcels has been reduced by the City’s rezoning of
INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL properties to o ce, housing and retailVISTA HISTORICAL MARKET TRENDS
multiple MARKET TRENDS zones.
Q3 2011

EANSIDE HISTORICAL MARKET 15.1%
Carlsbad TRENDS
14.5% SAN MARCOS HISTORICAL MARKET TRENDS
Escondido 17.0%
300 10%
5.9%
9%
Oceanside 10.9%
200
16.8% 8%

San Marcos
San Marcos 7.1% 7%
100
9.2%
Vacancy Rate
SF (000s)

6%
Vista 5.9%
0 5%
9.8%
12.7% 4%
North County -100
11.1% 3%
2%
-200
0% 5% 10% 15% 20% 1%

R&D Industrial -300 0%

2003 2004 2005 2006 2007 2008 2009 2010 2011
YTD
OCEANSIDE HISTORICAL MARKET TRENDS
Net Absorption New Supply SAN
Vacancy MARCOS HISTORICAL MARKET TRENDS


AT A GLANCE | Q3 2011 | INDUSTRIAL | SAN MARCOS

SALES ACTIVITY
SALES ACTIVITY

1 130 Bosstick Blvd Owner User 17,637 $1,730,000 $98.09
2 1011 Rancheros Dr Owner User 10,250 $875,000 $85.37

LEASING ACTIVITY

LEASING ACTIVITY
3 220 Bingham Dr #103/104 R&M Industries 11,550 36 months $0.63 G
4 180 Bosstick Blvd Piercan USA 16,509 84 months $0.76 G
5 740 Los Vallecitos Blvd Teamwork Athletic Apparel 40,962 60 months $0.51 N



ESCONDIDO

AT A GLANCE

Market Conditions
Escondido continues to maintain the lowest vacancy rate in the North San Diego County
industrial market at 5.7%. This is up slightly from 5.5% at Q2 2011. The increase in
Oceanside
Vista vacancy is directly attributable to the challenging economy. Escondido’s service and
contracting rms struggle to procure new business. Owners and tenants have adopted a
San Escondido
“wait and see” attitude and are not relocating to larger properties.
Carlsbad Marcos
Ocean
Two industrial sales occurred in the quarter which include a 20,000 sf user purchase of
a distressed property for $73.75 psf at 622 South Vinewood; and the City of Escondido
bought a 40,680 sf building at 455 North Quince Street. The seller, Wickline Bedding,
MARKET INDICATORS
has been a long time manufacturer in Escondido. The City acquired the property as part
Q3 Q4 of the assemblage of surrounding properties including those on Spruce Street for the
proposed minor league baseball park.
VACANCY
Lease activity was limited but did include the renewal and expansion of Nexsan in the
NET ABSORPTION Enterprise Heights Industrial Park. Nexsan, a hardware and software storage products
rm, grew from 14,000 to 22,000 sf and extended their lease term. COR-O-VAN is
CONSTRUCTION expanding into a new 90,000 sf BTS by Hamann Construction in the Escondido Research
RENTAL RATE
& Technology Center.

Lease rates and sale prices have stabilized and are forecast to increase slightly by the
end of Q1 2012. No new speculative inventory is planned or under construction in
Escondido. The limited supply is positive for the owners of existing buildings.

ESCONDIDO HISTORICAL MARKET TRENDS
INDUSTRIAL/R&D VACANCY RATES
Q3 2011
700 16%
INDUSTRIAL/R&D VACANCY RATES CARLSBAD HISTORICAL MARKET TRENDS VISTA HISTORICAL MARKET TRENDS
Q3 2011 600 14%
Carlsbad 15.1% 500
14.5% 12%
17.0% 400
Escondido
Escondido 10%
Vacancy Rate

5.9%
SF (000s)

300
Oceanside 10.9% 8%
16.8% 200
San Marcos 7.1% 6%
9.2% 100
5.9% 4%
Vista 0
9.8%
-100 2%
North County 12.7%
11.1%
-200 0%

0% 5% 10% 15% 20% 2003 2004 2005 2006 2007 2008 2009 2010 2011
YTD
R&D Industrial



AT A GLANCE | Q3 2011 | INDUSTRIAL | ESCONDIDO

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SALES ACTIVITY
SALES ACTIVITY
1 622 S. Vinewood Street Owner-user (distressed) 20,000 $1,475,000 $73.75
2 455 N. Quince Street Agency (City of Escondido) 40,680 $4,925,000 $121.07

LEASING ACTIVITY
LEASING ACTIVITY
3 302 Enterprise Street Nexsan 22,000 12 $0.84 MG


Q3 2011 Industrial Report

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