THE BENEFITS OF BECOMING AN OWNER / USER

In today's unprecedented economic circumstances, many of San Diego's industrial business owners are asking how they make decisions to create stability and build long term value both personally and for their business. For companies and individuals that have saved funds during the prior year's profitable economic growth or those that have seen an uptick in business due to the changing market demands, right now is a tremendous opportunity to invest some of those funds into purchasing an industrial building. A culmination of financing opportunity, product type appreciation, and long term stability is why now may be the perfect time to become an owner-user.

A major influx of government subsidies has assisted in pulling SBA rates down to record lows of 2.76% on 25 year fixed rate debt. The SBA has even offered to pay six months of principal and interest to stimulate healthy businesses further to invest in buying their buildings. Since only 10% down is all that is needed to purchase owner/user buildings, interest rates being this low allows owners to build substantial equity in their property rapidly.

The value of this equity creation goes far beyond just being able to avoid the pitfall of watching rent disappear into a landlord's pocket. The San Diego industrial market has seen a 97.4% increase in value in the past ten years, and the businesses that have been able to capitalize on purchasing their industrial building along the way can cash-in on building resales and refinances. With vacancy rates across the county hovering below 5%, the local industrial market has seen substantial supply constraints across a majority of markets for both lease and sale. This has been to the benefit of building owners as leasing has not been challenging, rent growth has averaged above 6% on an annual basis for the past 6 years and buildings have remained fairly liquid because of the overall lack of supply coming to the market. Looking at San Diego's economy at a macro perspective, the industries of defense and biotech anchor a robust industrial market and give long term security to owners wondering if purchasing will continue to sustain the rapid appreciation seen in years past. Simply put, the laws of supply and demand all point towards a continued strong appreciation of this product type.

For those searching for stability, purchasing a building can provide consistency in expense budgeting and help business owners hedge against San Diego's rapid industrial rent inflation. Even in this bout of economic turbulence, there has not been a flood of vacancy to drive down rates below the effective cost of ownership in most markets. Given the market dynamics just discussed, there is justification as to why a short term business strategy can seamlessly transition into a retirement plan. Many owner-user buildings gracefully evolve into a passive investment property that provides long term returns and securitized equity stability. Extraordinarily low vacancy rates provide owner-users turned investors with ease of leasing and low turnover cost. Whether a long or short term approach, now is the time to start planning on when to invest in a building for your business, so you stop letting all this potential value go through your hands into your landlord's pockets. Let us know how we can start helping you plan today.