A former manager of mine used to refer to the commercial real estate business as “Mr. Toads Wild Ride.” It was a phrase that described the unpredictability in the industry and to be ready for whatever life throws at us next and to create solutions whenever necessary. The phrase was mainly in context with our own brokerage careers, but it also applies to industrial tenants we represent. Especially those who have been in an expansion mode over the past twenty-four months.

Because of the COVID-19 pandemic that began just over two years ago, industrial businesses have had an involuntary crash course to learn how to act quickly to acquire property that supports their growing businesses. As folks hunkered down in quarantine with their fingers pressed on the “Buy Now” button on their phones, the supply chains have been stretched and the need for storage and distribution space has been in overdrive. Who knew this would be the result of pandemic?!

According to our data resource partner, CoStar, industrial rents in the country have risen over 8%, with San Diego country pushing rents by 9.3% in the last 12 months. More notably, it indicates a big gap to fill to make up for the lack of supply of available space. In fact, since the Pandemic began San Diego county’s already low vacancy rate was slashed nearly in half from 5.6%, down to just over 3%. With less product available, tenants discovered not only is real estate getting more expensive, but the options to choose from is dwindling quickly. In other words, there could be an available space, but now there’s a higher chance that potential new property may have too low of ceiling height, not enough loading doors, or far too much office space to maximize operations.

In situations like this, tenants have had to completely reimagine their occupancy plans and adjust accordingly. Instead of being located at the intersection of “Main & Main”, tenants have had to paint the market with a boarder brush and consider other outlying submarkets such as El Cajon or Spring Valley. Evidence of this migration to other submarkets can be noted with El Cajon’s Q1 2022 vacancy rate of 1.1%. Even some of the most basic warehouse standards such as 16’ ceiling heights or a skosh of yard area are key features that are now on our high priority list to find for our clients.

Flexibility is key in today’s wild market, but we are here to help provide creative solutions to help your company find a real estate solution.