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Production facilities are southbound

Departure of Callaway to leave a hole in Carlsbad manufacturing space

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Callaway Golf Co., which announced Tuesday it would be moving the bulk of its production facilities to Monterrey, Mexico, occupies approximately 600,000 square feet of industrial and office space in the North County.

However, the company isn't saying how much of it will keep here after the move.

Callaway's 219,000-square-foot headquarters building at 2180 Rutherford Road, which recently underwent a major renovation, was formerly a golf ball manufacturing facility until Callaway (NYSE: ELY) bought Top-Flite and moved that work to Chickapee, Mass., in 2003.

The firm also owns spaces with less than 100,000 square feet each at 5928 Pascal Court, 5960 Pascal Court, 2285 Rutherford Road, and 5860 Dryden Place.

The golf-club maker leases a 150,000-square-foot space at 2081 Faraday Road for its testing center that is expected to remain in place.

Tim Buckman, a Callaway spokesman, said while much of the manufacturing is being moved to Mexico, some distribution and manufacturing functions will remain in Carlsbad.

"Even with the shift, we will still maintain all of the functions we have here. It will just be on a smaller scale ..." Buckman said. "The idea here is to add speed and flexibility."

Buckman explained this week's announcement of the move wasn't something that came out of the blue.

Callaway has been tightening its belts by consolidating spaces and increasing offshore functions for years, and the firm also has plants in Asia and Europe.

Greg Lewis, a Colliers International associate vice president, said Callaway has been downsizing for a while.

"A while ago they consolidated out of 64,000 square feet at 5858 Dryden Place that was used for R&D," Lewis said. "That function went into the corporate headquarters building."

"An initiative like this is part of a long-term strategy," Buckman said. "We've already achieved $70 million in savings between 2006 and 2009 and we're projecting $35 million to $45 million in savings between now and 2012."

Still, if 100,000 to 200,000 square feet of Callaway space is placed on the market some time in the near future, that will have an impact.

Lewis said while it is difficult tell exactly how much space became available, with more than 1,000 workers locally, Callaway is one of the North County largest employers.

"If they move out of some of these buildings, it is going to have an effect on the marketplace," Lewis said.

Different surveys arrive at different conclusions as to the Carlsbad industrial market's size and how much is occupied.

For example, Colliers International said out of a 7.12 million-square-foot market, 749,058 was available for a direct industrial vacancy rate of 10.4 percent. This figure climbs to 10.98 percent if sublease space is added.

Todd Davis, of the Carlsbad office of Cassidy Turley BRE Commercial, said Carlsbad has about a 12.9 percent direct industrial vacancy rate.

"It's about 19 percent vacant with the sublease space," Davis said, adding that much of this vacant space is being leased but is not physically occupied.

While industrial vacancies more than 10 percent are considered high by the industry, Davis said even if Callaway were to vacate a larger building, buildings in the 100,000-square-foot-plus range remain in short supply.

"The choices are fairly limited," Davis said.

Buckman said as the new manufacturing facility is phased in, more than half of Callaway's business will be overseas.

"Our international footprint is expanding," Buckman said. "Golf is going to be an Olympic sport at the Olympics in 2016 and we want to tap into that market."

Callaway has pledged transition support to its displaced workers who will feel the impacts within the next 18 months.

Callaway manufactures and sells golf clubs and balls, and sells accessories, under the Callaway Golf, Odyssey, Top-Flite and Ben Hogan brands in more than 110 countries worldwide.

For the quarter ended June 30, Callaway posted $11.46 million in net income on $303.6 million in net sales -- compared to $6.91 million in net income on $302.22 million in net sales for the like quarter a year earlier.

The stock price was down by 24 cents or 3.52 percent on the day to $6.58 per share.

The stock has ranged from $5.55 to $10.19 during the past 52 weeks.

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