February 20, 2014 MeissnerJacquet

The steady recovery of the nation’s economy will have a beneficial effect on the San Diego Industrial real estate market in the long term. The city is listed among the top contenders for positive real estate growth in the Emerging Trends in Real Estate 2014, the published report based on a survey of 1,000 credible professionals, produced by PriceWaterhouseCoopers and the Urban Land Institute. The document states, “San Diego’s recovery is forecast to strengthen in 2014 and 2015, though it faces the largest downside risk among California’s metro areas from federal budget austerity. Office is the San Diego property type that respondents feel is a “buy” in 2014.”

In general, studies show that industrial properties in San Diego have a great future. The ULI study reports “Investment and development prospects for the R&D industrial subsector, though not among the top rated, nonetheless are expected to improve, likely fueled by growth in the medical and technology fields.” A collaborating report, produced by Avison Young, asserts that of the 36 office markets followed  across North America (including San Diego), 24 markets saw vacancy rates drop  during 2013, with a greater number of U.S. markets seeing a gain. The report states, “San Diego is forecasted to see one of the largest declines in vacancy of all markets in 2014 (-230 bps to 14.9% and -270 bps to 12.6%, respectively). San Diego has experienced several consecutive quarters of positive absorption – a trend that will continue, as 92% of office space under construction is committed.”

Overall, commercial property investment activity among U.S. markets is trending higher and San Diego is poised to ride the wave. The nation is still in economic recovery, but it is trending in an upward direction with companies and investment firms opening their pocketbooks (that were clenched tightly during the recession) to buy business property.

Generation Y (people born between 1979 and 1995 and the most ethnically and racially diverse generation ever known in the US) is a key to predicting and planning commercial development type and growth. At this stage of their lives, Gen Y shows a marked preference for city living, compact development and staying on the move. As they age, Gen Y may trend towards the suburbs, but at this point they want to live (even if for a relatively short term) in an urban setting with work, stores and home all within walking distance. Future real estate development will parallel their movements.