BKM Capital Partners Buys San Diego-Area Industrial Park

Pacific Coast Industrial Center. Image courtesy of BKM Capital Partners

BKM Capital Partners has purchased Commerce Carlsbad, an eight-building, 129,928-square-foot industrial park in Carlsbad, Calif., and renamed it to Pacific Coast Industrial Center. Public records show the buyer paid $44 million for the asset and financed the acquisition with a $29.9 million loan from First Citizens Bank.

The firm picked up the Class B asset from Alexandria Real Estate Equities, according to CommercialEdge data, with the intention of conducting a number of improvements across the property.

Brad Tecca, former managing director of Cushman & Wakefield’s Southwest Capital Markets Group, represented the former owner in the sale, while BKM was self-represented.

A Carlsbad industrial park

Alexandria had acquired the property in 2021 also for $44 million, as part of a larger $135.5 million deal that also involved the purchase of a 175,000-square-foot office building located at 5600 Avenida Encinas, the same data provider and reporting from The Registry show.

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Completed in 1985 at 5205-5375 Avenida Encinas, Pacific Coast Industrial Center features 62 flexible small-bay facilities averaging 2,515 square feet, alongside 70,161 square feet of office space, spread across eight buildings on a 7.6-acre lot, as well as 133 parking spaces. The facilities feature 66 grade-level loading doors and 16- to 18-foot clear heights.

BKM plans to upgrade the property’s roofs, HVAC systems, signage, parking lots and landscaping, as well as to convert 18 percent of the existing office space to industrial. Conversions will gradually take place in direct correlations with the park’s vacancies.

Situated just west of Interstate 5, Pacific Coast Industrial Center is 33 miles north of downtown San Diego, while the southernmost point of the Los Angeles metro is 25 miles in the opposite direction. The Mexican border lies further 14 miles south of San Diego, giving the city direct trucking access to the nation’s largest importer.

Industrial demand in San Diego

Despite having fundamentals that trail the ones of the Inland Empire and the Bay Area, and experiencing a leasing slowdown over the first quarter of 2023, San Diego’s industrial market remains in high demand, with a vacancy rate of 2.5 percent and a pipeline of nearly 2.6 million square feet, according to a report from JLL.

Demand for small-bay space has been even sharper, in part due to its niche uses and low construction volume proportional to the rest of the metro’s pipeline. In a statement, BKM Senior Managing Director of Acquisitions and Dispositions Brett Turner said that only 1.2 million square feet of small-bay space has been added to the market in the past 5 years, accounting for less than 9 percent of new inventory and for less than 6 percent of the industrial pipeline.

Recent headlines from the city’s industrial sector include Rexford Industrial Realty’s $200 million purchase of 155,000 square feet of office and industrial space across two properties, which the firm was considering converting into a distribution center. That same week, Kearny Real Estate Co. announced the expansion of Otay Crossings Commerce Park, a 311-acre industrial property located half a mile from the border with Mexico.