San Diego is the eighth largest city in the U.S. and the second largest in California with a population of 1.4 million people. It is part of the San Diego-Tijuana conurbation, the second largest transborder agglomeration between the US and a bordering country, with a combined population of 4.9 million people. San Diego’s main economic engines are military and defense-related activities, tourism, international trade, and manufacturing. The city contains several major universities, including University of California, San Diego (UCSD), San Diego State University, and the University of San Diego. The presence of UCSD, with the affiliated UCSD Medical Center, has helped make the area a center of research in biotechnology. The economy of San Diego is influenced by its deepwater port, which includes the only major submarine and shipbuilding yards on the West Coast. Several major national defense contractors were started and are headquartered in San Diego, including General Atomics, Cubic, and NASSCO. San Diego hosts the largest naval fleet in the world. About 5% of all civilian jobs in the county are military-related, and 15,000 businesses in San Diego County rely on Department of Defense contracts. Top employers in San Diego are the U.S. Navy, UCSD, Sharp Healthcare, Qualcomm, Inc., Scripps Health, and Kaiser Permanente.
The San Diego County industrial market is made up of 189MM SF, currently 95.8% occupied after absorbing 522,609 SF in Q3 2017. With sustained tenant demand and the high barrier-to-entry environment restricting supply, the market is positioned for a long and sustained rental rate run as tenants compete for functional space.
Centrally located in the heart of San Diego County, Miramar contains attractive office buildings, light industrial districts, desirable residential communities, and plenty of restaurants and retailers. It is home to the Marine Air Corps Station and numerous military families and workforce housing communities, while offering convenient access to the coastal executive housing areas. It is easily accessible between the I-15 and I-805 freeways (connecting to the I-5), the two major north-south thoroughfares bisecting the county. Miramar also benefits from being in close proximity to the University of California, San Diego, a top research university, as well as the surrounding biotech and high-tech neighborhoods of Torrey Pines, UTC, Sorrento Valley, and Sorrento Mesa.
The submarket offers opportunities for a broad selection of manufacturing, distribution, and R&D users and is considered the preferred submarket for small tenants seeking multi-tenant business space given its relative affordability and proximity to large corporate anchors. As market-wide rental rates continue to grow, tenants are being pushed out of the Sorrento Mesa market, driving demand to Miramar and Kearny Mesa which offer affordable space without having to make a large compromise on image or functionality.
The Miramar industrial submarket is comprised of 384 buildings containing 14.4 million square feet. Since 2012, the market has experienced over 1 million square feet of net absorption, with more than 128,000 of positive absorption in 2016. Direct vacancy in the market has remained below 10% for over a decade, with a peak direct vacancy rate of 9.8% in 2011. Current vacancy is now 3.2% and is expected to remain low due to high barriers to entry from a lack of available land for development. No new construction completions have occurred since 2006. As of Q4 2017, Miramar industrial rents averaged $1.02 PSF NNN. R&D and IMT product command the highest rates, averaging $1.16 PSF and $1.11 PSF, respectively.
Activity Business Center is located in the Miramar submarket, just 20 minutes from downtown San Diego, and 27 minutes from San Diego International Airport. Many of San Diego’s most affluent neighborhoods are located nearby such as La Jolla, Del Mar, University City, Carmel Valley, Scripps Ranch, and Rancho Santa Fe. The property is conveniently located near the executive housing areas in addition to its close proximity to the world-renowned research centers of the University of California, San Diego. The research in various fields of science has made San Diego a major hub in the field of Biotechnology, as peripheral businesses look to locate themselves near the campus, driving tenant demand in the close-in submarkets. Westfield UTC, located less than 6 miles from the property, is undergoing a $600 million renovation/expansion that will add 395,000 sf of retail space to the current 1 million sf shopping center, which features luxury shopping and upscale dining. Another 300 million sf of retail space is currently in the planning stages, along with over 300 apartment units.