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Industrial permits at 0 in county; commercial improving

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Builders still can't find the justification to build new industrial space, but new commercial construction is picking up, while nonresidential alterations and additions keep surging ahead in San Diego County.

According to the Construction Industry Research Board (CIRB) report for June, zero industrial permits were pulled.

Only February and March recorded any industrial permit activity at all, and even then those months were only able to muster $1.29 million and $2.34 million worth of work, respectively.

Only $3.63 million worth of industrial permits were pulled through the first six months of the year.

A mid-year Co-Star Group (Nasdaq: CLGX) report said the state Route 78 Corridor had 176,000 square feet of industrial space under construction and the Interstate 15 Corridor had 26,340 square feet under way as of the end of June, but no other submarkets had any industrial space under construction.

The 176,000-square-foot building is a development of BioMed Realty Trust (NYSE: BMR) at 2855 Gazelle Court in Carlsbad that will be occupied by Isis Pharmaceuticals (Nasdaq: ISIS).

A 13,591-square-foot industrial building is also underway at 1230 Pacific Oaks Place in Escondido, and a 12,749-square-foot building at 1240 Pacific Oaks Place.

Before new large-scale speculative construction can happen, industrial space needs to be filled.

In Otay Mesa, with 3 million square feet of vacant industrial space, some brokers have said it may be the better part of a decade before those empty buildings are absorbed.

In the State Route 78 Corridor in north San Diego County, with 3.49 million square feet available, it could also be many years before anything but build-to-suit industrial projects are constructed there.

The Interstate 15 Corridor still has a backlog of obsolete industrial space, but much of what is left of that is expected to be converted to office when new construction may once more be justified.

In other parts of the central county, the lack of land as well as the economy may be what's keeping new projects from being built.

Despite San Diego's Central Suburban submarket returning 44,249 square feet during the second quarter according to CoStar, the vacancy was still only 6.3 percent.

New commercial construction, which includes everything from retail to office to hotels, amounted to $38.5 million in June -- a huge increase over $2.58 million in June of 2010.

The CIRB tallied $147 million in commercial permits through the first half of 2011 -- compared to just $57.3 million in permits pulled through June of last year.

Ben Bartolotto, CIRB research director, said one of the projects is a three-story wellness center, with about 300 parking being constructed at 300 Fir St.

Further details weren't available.

CoStar reported that one commercial project that is currently under construction is a 100,000-square-foot shopping center that Shea Properties is building at 1900 National Ave. in Barrio Logan.

That project, which was 49 percent pre-leased at the time of CoStar's mid-year survey, is slated for completion in the first quarter of next year.

Significant hotels under construction include Wave Crest Resorts' 215-room Hilton Carlsbad, ABA Development's 151-room Hyatt Place in Vista, and RD Olson Development's 140-room Marriott Courtyard Oceanside.

"Statewide, commercial construction actually had the lowest month this year in June, but it is expected to be up by the end of the year," Bartolotto said.

If past CIRB statistics are any guide, nonresidential alterations and additions is a category that always seems to fare well, whether or not there is a recession.

Permits were pulled for $74.9

million worth of nonresidential alterations and additions in June -- or nearly double the $38.8 million in the same month last year.

CIRB totaled $332.6 million worth

of nonresidential alterations and additions through June -- or 74.6 percent more than the $190.6 million through the first half of last year.

In the category of "other" -- which includes everything from outbuildings to minor roads and pump stations -- the CIRB tallied $18.2 million worth of work in June, or about three times the $6.09 million in June of last year.

A total of $111.55 million square feet of work was counted in the "other" category through June, nearly twice the $58.8 million in the first half of 2010.

The CIRB reported that all nonresidential construction permitting amounted to about $111.5 million in June alone -- or more than the double the $47.5 million in June 2010.

All told, countywide nonresidential permit activity amounted to $594.7 million through June -- or nearly twice the $307.3 million through 2010's first half.

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