Q3 2011 Industrial Report

Industrial ReportNorth San Diego County

3rd Quarter 2011PREPARED BY:

Adam Molnar

Greg Lewis

Tucker Hohenstein

Mike Erwin

Mike Bench

COLLIERS INTERNATIONAL

5901 Priestly Drive, Suite 100

Carlsbad, CA 92008

Fax 760 438 8925

www.colliers.com/carlsbad

AT A GLANCECARLSBAD


Market ConditionsAfter posting four consecutive quarters of positive absorption, Carlsbad’s Industrial/R&D

vacancy rate was dealt a slight blow in Q3 2011 with nearly 300,000 sf of negative

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

headquarters facilities in favor of much less space. Other users are taking advantage of

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

15,000 to 25,000 s.f. range with 5 transactions in 3Q 2011. This is encouraging as this

size range has been fairly stagnant in recent quarters.

There was a slight uptick in sales activity in Q3 with contributions from investors and

owner-users. L.B.A. was able to complete a rare tenant-in-tow transaction by purchasing

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

and sign a long term lease. Other acquisitions included two investment deals on Las

Palmas Drive and an owner-user purchase on Rutherford Road.

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.

MARKET INDICATORS

INDUSTRIAL/R&D VACANCY RATESQ3 2011

Q3 2011 | INDUSTRIAL

CARLSBAD HISTORICAL MARKET TRENDS

11.1%

9.8%

9.2%

16.8%

5.9%

14.5%

12.7%

5.9%

7.1%

10.9%

17.0%

15.1%

0% 5% 10% 15% 20%

North County

Vista

San Marcos

Oceanside

Escondido

Carlsbad

R&D Industrial


VISTA HISTORICAL MARKET TRENDS

OCEANSIDE HISTORICAL MARKET TRENDS SAN MARCOS HISTORICAL MARKET TRENDS

0%

2%

4%

6%

8%

10%

12%

14%

16%

-200

-100

0

100

200

300

400

500

600

700

2003 2004 2005 2006 2007 2008 2009 2010 2011

YTD

Vacancy R

ate

SF (

00

0s)

Net Absorption New Supply Vacancy

CARLSBAD HISTORICAL MARKET TRENDSINDUSTRIAL/R&D VACANCY RATESQ3 2011



Q3 2011

Q42011 (forecast)

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE

Ocean

Oceanside

Vista

SanMarcosCarlsbad

Carlsbad

# PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF

1 2261 Rutherford Road Owner User 21,743 $2,032,500 $93.48

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

# 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

SALES ACTIVITY

LEASING ACTIVITY

TRANSACTION ACTIVITY - Q3 2011

El C

amino R

eal

El C

amino R

eal

El C

amino R

eal

Gateway RdGateway Rd

Whiptail LoopWhiptail Loop

El Camino Real

Cannon Rd

Faraday Ave

Faraday Ave

College B

lvd

College B

lvd

Palom

ar A

irpo

rt R

d

Palom

ar A

irpo

rt R

d

Poinsettia Ave

Poinsettia Ave E

l Fuerte S

t

El F

uerte S

t

Alga Rd

Melrose D

r

Melrose D

r

Poinse

ttia Ave

Arm

ada D

r

Paseo

Del N

orte

Palomar Airport Rd

Aven

ida E

ncin

as

Aviara Pkwy

Busin

ess P

ark Dr

Busin

ess P

ark Dr

Sycamore Ave

Palomar Airport Rd

Palomar Airport Rd

El Fuerte St

El Fuerte St

Faraday AveFaraday Ave

Mel

rose

Dr

Mel

rose

Dr

Loker A

ve

Loker A

ve

Pacif icOcean

Lionshead Ave

Lionshead Ave

McClellan Palomar Airport

McClellan Palomar Airport

VistaC

ity B

oundary

Park Hyatt Aviara Resort

La Costa Resort & Spa

The Crossings at CarlsbadGolf Course

sings badurse

Legoland

Palomar AirportBusiness Park

Palomar AirportBusiness Park

Carlsbad Airport Center

Carlsbad Airport Center

CarlsbadResearchCenter

CarlsbadResearchCenter

Carlsbad Oaks

Carlsbad Oaks

Carlsbad

Oaks North

Carlsbad

Oaks North

Carlsbad RacewayCarlsbad Raceway

Palomar Forum

Palomar Forum

Bressi RanchBressi Ranch

CarlsbadRanch

7

8

9

prepared by ADAM MOLNAR, GREG LEWIS, TUCKER HOHENSTEIN

MIKE ERWIN, MIKE BENCH 760 438 8950

This document has been prepared by Colliers International for advertising and general information only. Colliers

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

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.

AT A GLANCE | Q3 2011 | INDUSTRIAL | CARLSBAD

AT A GLANCEVISTA


Market ConditionsRecent leasing by large corporations may be a sign of increasing corporate con dence.

John Deere, Zodiac and DJO Global all signed leases during Q3 for a combined total of

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

downward pressure on pricing, even though supply is limited.

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.

Companies looking to lease or purchase space larger than 50,000 sf in Vista may be

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

requirements, this list could quickly drop to 1 or 2 viable options. Based on the Q3 gross

absorption rate of 234,000 sf there is approximately six (6) months of supply of buildings

larger than 50,000 sf.

One quarter of positive net absorption is not enough to establish a trend, but is certainly

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.

MARKET INDICATORS




11.1%

9.8%

9.2%

16.8%

5.9%

14.5%

12.7%

5.9%

7.1%

10.9%

17.0%

15.1%

0% 5% 10% 15% 20%

North County

Vista

San Marcos

Oceanside

Escondido

Carlsbad

R&D Industrial





0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

-200

-100

0

100

200

300

400

500

600

700

2003 2004 2005 2006 2007 2008 2009 2010 2011

YTD

Vacancy R

ate

SF (

00

0s)




Q32011

Q42011 (forecast)

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE

Ocean

Oceanside

Vista

SanMarcosCarlsbad

Vista


There were no buildings sales larger than 15,000SF during Q3


SALES ACTIVITY

LEASING ACTIVITY




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

SALES ACTIVITY

LEASING ACTIVITY


Sycamore Ave

Sycamore Ave

Syc

amor

e Ave

Oleander Ave

eander Ave

Green Oak Rd

Green Oak Rd

Shadowridge Dr

University Dr

La Mirada Dr

La Mirada Dr

Mel

rose

Dr

Mel

rose

Dr

Par

k Cen

ter Dr

Par

k Cen

ter Dr

Lionshead AveLionshead Ave

Palomar Airport R

d

Poin

settia

Ave

Poin

settia

Ave

Shadowridge

Golf Course

Shadowridge

Residential

Business Park D

r

Business Park D

r

Faraday AveFaraday Ave

AT A GLANCE | Q3 2011 | INDUSTRIAL | VISTA









AT A GLANCEOCEANSIDE


Market ConditionsAlthough 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

from 16.83%. This 0.78% reduction is signi cant and a trend that is expected to continue

into 2012.

Users are taking longer to make decisions, and relocating is a time consuming process.

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.

Two industrial sales occurred in the quarter. The rst sale was a 19,628 sf user

purchase of a new building at 1338 Rocky Point Drive in the Paci c Coast Business Park.

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

de la Plata. The seller was Genetech and the buyer was Gilead Sciences from the Bay

Area.

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.

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.

MARKET INDICATORS




11.1%

9.8%

9.2%

16.8%

5.9%

14.5%

12.7%

5.9%

7.1%

10.9%

17.0%

15.1%

0% 5% 10% 15% 20%

North County

Vista

San Marcos

Oceanside

Escondido

Carlsbad

R&D Industrial






0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-400

-200

0

200

400

600

800

2003 2004 2005 2006 2007 2008 2009 2010 2011

YTD

Vacancy R

ate

SF (

00

0s)



Q32011

Q42011 (forecast)

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE

Ocean

Oceanside

Vista

SanMarcosCarlsbad

Oceanside


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


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

SALES ACTIVITY

LEASING ACTIVITY


El CorazonEl Corazon

Ocean Ranch

Plaza Retail

Ocean Ranch

Plaza Retail

Paci c CoastBusiness ParkPaci c CoastBusiness Park

OceanRanchOceanRanch

Rancho Del OroRancho Del Oro

OceansideGateway

OceansideGateway

Sprinter Light

Rail Line

Sprinter Light

Rail Line

Ran

cho D

el O

ro D

r

Ran

cho D

el O

ro D

r

College B

lvd

College B

lvd

Mes

a Dr

Mes

a Dr

Avenida De La PlataAvenida De La Plata

Old Grove Road

Old Grove Road

Ocean

Ranch

Blvd

Ocean

Ranch

Blvd

Nor

th

Ave

Nor

th

Ave

Temple H

eights Dr

Temple H

eights Dr

Avenida D

el Oro

Avenida D

el Oro

Melro

se Dr

Oceanside BlvdOceanside Blvd

Cor

po

rate

Cen

ter D

r

Cor

po

rate

Cen

ter D

r

AT A GLANCE | Q3 2011 | INDUSTRIAL | OCEANSIDE









EFF RATE

AT A GLANCESAN MARCOS


Market ConditionsThe 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

one large lease and a few small building buyers bene ting from the record low interest

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

market continues to recover from the signi cant negative impact the economy has had on

local industrial companies since 2008.

There were four industrial building sales during this quarter, and the average price of these

building sales was approximately $100 psf. The largest sale was the 17,600 sf building on

130 Bosstick, which sold for $98 psf.

Lease activity during the 3rd quarter mainly consisted of small multi-tenant transactions

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

the vacancy is mainly concentrated in the 15,000 sf – 30,000 sf range and multi-tenant

incubator space. The multi-tenant market lease rates continue to have downward pressure

as Landlords provide concessions to ll vacancy as the market recovers.

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,

supply of industrial buildings and land parcels has been reduced by the City’s rezoning of

multiple properties to o ce, housing and retail zones.

MARKET INDICATORS




11.1%

9.8%

9.2%

16.8%

5.9%

14.5%

12.7%

5.9%

7.1%

10.9%

17.0%

15.1%

0% 5% 10% 15% 20%

North County

Vista

San Marcos

Oceanside

Escondido

Carlsbad

R&D Industrial






OCEANSIDE HISTORICAL MARKET TRENDS

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

-300

-200

-100

0

100

200

300

2003 2004 2005 2006 2007 2008 2009 2010 2011

YTD

Vacancy R

ate

SF (

00

0s)


SAN MARCOS HISTORICAL MARKET TRENDS

Q32011

Q42011 (forecast)

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE

Ocean

Oceanside

Vista

SanMarcos

Escondido

Carlsbad

San Marcos



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

SALES ACTIVITY

LEASING 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


SALES ACTIVITY

LEASING ACTIVITY










AT A GLANCE | Q3 2011 | INDUSTRIAL | SAN MARCOS

AT A GLANCEESCONDIDO


Market ConditionsEscondido 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

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

“wait and see” attitude and are not relocating to larger properties.

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,

has been a long time manufacturer in Escondido. The City acquired the property as part

of the assemblage of surrounding properties including those on Spruce Street for the

proposed minor league baseball park.

Lease activity was limited but did include the renewal and expansion of Nexsan in the

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

expanding into a new 90,000 sf BTS by Hamann Construction in the Escondido Research

& 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.

MARKET INDICATORS




11.1%

9.8%

9.2%

16.8%

5.9%

14.5%

12.7%

5.9%

7.1%

10.9%

17.0%

15.1%

0% 5% 10% 15% 20%

North County

Vista

San Marcos

Oceanside

Escondido

Carlsbad

R&D Industrial




0%

2%

4%

6%

8%

10%

12%

14%

16%

-200

-100

0

100

200

300

400

500

600

700

2003 2004 2005 2006 2007 2008 2009 2010 2011

YTD

Vacancy R

ate

SF (

00

0s)


ESCONDIDO HISTORICAL MARKET TRENDS

Q32011

Q42011 (forecast)

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE

Ocean

SanMarcos

Oceanside

Vista

Escondido

Carlsbad

Escondido

Nor

dahl Roa

d

Nor

dahl Roa

Mission Road

Mission Road

Montiel Rd

Montiel Rd

Auto Park Way

Auto Park Way

Country Club DrCountry Club Dr

Industrial Ave

Industrial Ave

Simpson Way

Simpson Way

Citracado P

kwy

Citracado P

kwy

N A

ndr

ease

n D

rive

N A

ndr

ease

n D

rive

S A

ndr

ease

n D

rive

S A

ndr

ease

n D

rive

Enterprise St

Enterprise St

Val

ley

Par

kway

Val

ley

Par

kway

9th AveAv

Washington Avenue

Washington Avenue

Tulip

St

Tulip

St

Mission Avenue

Mission Avenue

Esco

ndid

o A

ve

Esco

ndid

o A

ve

Cen

ter City P

arkway

Cen

ter City P

arkway

Quin

ce St

Quin

ce St

Rock S

prin

gs R

d

Rock S

prin

gs R

d

PalomarPomeradoHospital

PalomarPomeradoHospital

EscondidoAuto ParkEscondidoAuto Park

Myers Avenue Myers Avenue

Auto Park Way

Auto Park Way

N. H

ale

Ave

nue

N. H

ale

Ave

nue

78

EscondidoResearch

& Tech Center

EscondidoResearch

& Tech Center

## PROPERTY NAME/ADDRESS BUYER TYPE SIZE SF SALE PRICE PRICE/SF

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


SALES ACTIVITY

LEASING ACTIVITY




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

SALES ACTIVITY

LEASING ACTIVITY










AT A GLANCE | Q3 2011 | INDUSTRIAL | ESCONDIDO

Colliers International is the leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence, and a shared sense of initiative, we have integrated the resources of real estate specialists worldwide to accelerate the success of our clients, our people and our communities.

We offer a complete range of services to real estate users, owners and investors on a local, regional, national and international basis. The foundation of our service is the strength and depth of our local specialists. Our clients depend on our ability to draw on years of direct local market experience.

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We offer our core services across a variety of property sectors including:

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AT A GLANCE

Colliers International512 offices in 61 countries

$1.5 billion USD in

annual revenue

12,500 employees

979 million* square feet

under management

$59.6 billion USD in

total transaction value

* Together, Colliers International and

FirstService manage 2.2 billion

square feet of property—second-

most in the world.

2011

™

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