Demand for industrial space has become so intense that it nearly rivals demand for housing, with potential tenants bidding against each other for space, said Tom Simmons, executive vice president of Majestic Realty.
“The momentum in this market has been different than what we’ve seen in recent memory,” Simmons said.
Majestic and Sunroad are constructing a 240,975 square foot building at 1610 Landmark Road and a 235,085 square foot building at 1910 Landmark Road as part of the second phase of a 50-acre Landmark in Otay Industrial Park. The buildings are expected to be completed in February 2023, with rental being managed by Mark Lewkowitz, Chris Holder and Will Holder of Colliers International.
Late last year, the two companies completed the first section of the industrial park with the construction of a 153,630 square foot building at 1701 Landmark Road and a 216,140 square foot building at 1601 Landmark Road. .
The smaller building was leased to RL Jones Customhouse Brokers. The largest building has been leased to four tenants – 67,528 square feet to Global Logistics & Fulfillment, 40,435 square feet to Exportalia, 54,168 square feet to Avanza Loop and 54,009 square feet to Terry Town.
Majestic and Sunroad have acquired 17 acres of adjacent land to expand the industrial park to a total of 67 acres, with two more buildings planned, one 150,000 square feet and the other 115,000 square feet. Construction on these is expected to begin this summer, and Simmons said he is already receiving offers to lease them.
Simmons said he is not accepting any offers at this time because the market is so volatile, with rents rising so quickly and rapidly that he does not know how much to charge.
“By the time this property is complete, I may be leaving a significant amount of money on the table,” Simmons said. “I’ve actually seen right now that the valuations of our industrial buildings are higher than those of downtown office buildings. We haven’t seen the industry get this busy in decades.
Still to come, Simmons said development on an additional 60 acres at Otay Mesa is still in the planning stages.
Simmons predicted demand will remain strong for the rest of 2022, “but cracks are appearing in the armor.”
Rising energy and housing costs, a substantial rise in interest rates coupled with inflation could be a problem, Simmons said, because consumers would then have less money to spend.
Even so, Simmons said the products stored in its warehouses tend to be things like paper towels and other goods that aren’t considered discretionary.
“We don’t house shiny handbags,” Simmons said.
Majestic Realty Co.
President and Chairman of the Board: Ed Roski Jr.
Headquarters: City of Industry
Activity: Commercial real estate developer
Note: Majestic Realty Co. is the largest private developer and owner of planned business parks in the United States with an 87 million square foot portfolio that includes industrial, office and retail space, as well as sports, entertainment and hospitality projects.