Industrial Vacancies Are the Lowest on Record
Well-located infill warehouse space close to major markets such as those in the East Bay is crucial to speedy delivery but is becoming increasingly scarce due to e-commerce demands and constrained supply.
SAN LEANDRO, ca—Well-located infill warehouse space close to major markets such as those in the East Bay is crucial to speedy delivery. Those areas are increasingly scarce due to constrained supply and strong demand from e-commerce, which is causing companies to fight to stay competitive with ever-faster delivery performance.
In fact, Ten-X Commercial recently released its latest US Industrial Market Outlook which found that changes in technology, supply chains and consumer habits continue to drive leasing demand for industrial properties, propelling vacancies to the lowest levels on record, GlobeSt.com learns. The research also shows that 2017 was the sixth straight year during which rent growth accelerated, and the first year on record in which the industrial sector’s rent growth outpaced that of the other three major commercial real estate sectors.
The forecast indicates that Los Angeles, San Jose, Oakland, San Francisco and San Diego are the top markets in which investors should consider buying industrial assets. While Los Angeles benefits from perennially tight vacancies and strong rent growth, the West is more broadly at the epicenter of other demand drivers including cloud computing and legalized cannabis. Industrial lease rates for Oakland are in the $6.00 range per square foot, with 6.3% vacancy at year-end 2017.
Colony Industrial made its first investment in the Oakland/East Bay market with two class-A light industrial buildings totaling 587,051 square feet, located at 2380-2388 Williams St. and 1717 Doolittle Dr. in San Leandro. Financial terms of the transaction were not disclosed but the portfolio is fully leased to five tenants with a weighted average lease term remaining of five years.
“San Francisco/Oakland is a terrific, high demand and low vacancy market,” said Lew Friedland, Colony NorthStar managing director and head of Colony Industrial. “The East Bay industrial portfolio is ideally situated near San Francisco and Silicon Valley businesses, highways, airports and the port. The properties fit perfectly with our strategy of occupying the last-mile in the logistics chain for e-commerce retailers, distributors and manufacturing companies that require ever-faster delivery to their B2B, wholesale and retail customers.”
CBRE national partners Darla Longo, Barbara Perrier, Rebecca Perlmutter Finkel and Michael Kendall acted as real estate brokers on the transaction.
The Colony Industrial platform manages hundreds of warehouse buildings in major US markets that have attracted a diversified tenant list that includes Amazon, Walgreens, UPS, FedEx and many B2B, wholesale and consumer businesses. This is the third light industrial warehouse acquisition announcement from Colony in the past two weeks. The other recently acquired portfolios are in San Antonio, consisting of two class-A light industrial buildings I and II at Enterprise Industrial, and in Jacksonville, FL, consisting of four class-A light industrial buildings at Westside Industrial Park.
Colony Industrial is the industrial platform of Colony NorthStar, a diversified global real estate investment firm with $43 billion of assets under management.
Ten-X projects that industrial demand looks to remain healthy throughout this year, with more than 10 million square feet of projected net absorption, which would bring 2018 slightly below the levels of the past three years. By year-end, vacancies are projected to tighten an additional 30 bps to an even 7%.