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Nonresidential alterations/additions soar

S.D. permits in September still 0 for industrial; low for commercial

While industrial permit activity continued its long string of zeros earlier this fall and commercial permits remained at a low level, nonresidential alternation and addition activity is booming in San Diego County.

According to the October Construction Industry Research Board (CIRB) report, February and March were the only months in which any industrial permits were pulled in 2011, and those were valued at total of only $3.64 million.

Ben Bartolotto, CIRB senior analyst, said industrial continues to be slow throughout the state.

"It's a function of manufacturing in general. There just isn't that much happening," Bartolotto said.

With more than 3 million square feet of vacant space, it's clear there won't be speculative industrial construction in Otay Mesa for many years.

But even in submarkets where the vacancies are low, industrial permits aren't getting pulled.

For example, in Poway, there has been a lack of permit activity despite an industrial vacancy of 4.7 percent at the third quarter's end, according to a CoStar Group (Nasdaq: CSGP) report.

Santee was another one of those markets that had a low industrial vacancy -- 4.4 percent, CoStar said -- and had the same lack of industrial construction.

Another possible factor is that absorption may not be strong enough to convince lenders to lend and developers to build. Kearny Mesa returned 41,801 square feet of space through the year's first nine months.

Commercial permits

Permit activity for new commercial construction -- which includes office, retail and warehousing projects -- was nearly as dead as industrial last month. Permits were pulled for $464,000 worth of work in September.

"There were only $60 million in commercial permits pulled statewide in September," Bartolotto said.

Even with a sluggish September, however, commercial permit activity for the first nine months in San Diego County is running well ahead of the same period a year earlier.

Commercial permits totaled $165.3 million though September, or more than twice the $74.2 million during the comparable period in 2010.

The commercial permit activity within the past nine months included $53.7 million for the parking garage of Garden Communities' planned Casa Mira View apartment complex in Mira Mesa; $17.4 million for hotel in Carlsbad, $17 million for a medical office building on Fir Street in the Banker's Hill area; $10.9 million for a Von's on West Washington Street in the Mission Hills area; and a $13.9 million permit for demolition and redevelopment of Seacoast Inn in Imperial Beach.

Alterations/additions

Nonresidential alteration permit activity has continued like gangbusters in San Diego.

Bartolotto said he didn't know exactly why it is so strong, other than it may not be possible to find financing for speculative ground-up office buildings, for example.

"Green code changes that took effect on January 1 could have also had an impact on the cost," Bartolotto said.

September permits were pulled for $60.7 million worth of nonresidential alterations and additions in San Diego -- or about the same value as the commercial permits for the whole state last month.

The September figure was 36 percent more than the $44.6 million in September of last year.

The CIRB tallied $510.7 million in nonresidential alterations and additions for San Diego through September -- 59.8 percent more than the $300.8 million during the like period last year.

'Other permits'

The CIRB also has a catch-all category it refers to as "other" that includes everything for outbuildings to pump stations.

"Other" during September amounted to only $6.56 million for the entire county, a fraction of the $17.3 million in September of last year.

The research firm counted some $139.5 million worth of work in the "other" category through September -- up 52 percent from the $91.7 million during the comparable period a year earlier.

It's clear that September-- except for nonresidential alterations and additions -- was slow across most sectors.

A total of $67.8 million in nonresidential permits were pulled in September, with the alterations and additions accounting for more than $60 million.

In total, the CIRB tallied $819.1 million in nonresidential permits activity through September -- up 73.1 percent from $473.2 million during the like period a year earlier.

Nearly 10 percent of the 2011 nine-month permit total was $17 million for a medical office building on Fir Street.

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