3771 Channel Drive 3771Channel Dr. is a 624,356-square-foot warehouse/distribution centeron 50 acres.

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WEST SACRAMENTO—Sacramento's industrial market is continuing toattract institutional-grade investment companies. Historically lowvacancy rates, significant rent growth, strong tenant demand andavailability of developable land have put Sacramento'sindustrial market on the map. In fact, Sacramento was named one of10 emerging industrial markets to watch in 2019 by ColliersInternational.

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An example of that intense investor demand is 3771 Channel Dr.,a 624,356-square-foot warehouse/distribution center on 50 acresthat closed last week. The buyer was LBA Logistics and the sellerwas Sacramento Foodco Investors.

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“This transaction is one of many examples of Northern Californiaor Southern California-based companies acquiring Sacramentoindustrial assets to add to their portfolios,” Bob Shanahan, seniorresearch analyst with Colliers International, tells GlobeSt.com.“Sacramento's sound industrial market fundamentals have attractedinvestors from across the state with more than $879 million in 309closed sales transactions in 2018.”

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Glen Allen, president of Newport Real Estate Services, played amajor role as asset manager for the seller. In that capacity, heorchestrated a multi-million-dollar restoration of the property aswell as providing significant assistance in the saletransaction.

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Colliers Sacramento represented both the buyer and seller. SteveCippa, senior vice president, Tommy Ponder, vice president, and theteam at Colliers International's Sacramento office, providedexpertise on land use, market conditions, future site layout andlease up forecasting during the course of the sale.

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“Investors have been active throughout the Sacramento marketover the last year because of the low vacancy, robust demand, lackof new construction and affordable developable land,” Ponder tellsGlobeSt.com. “This has resulted in a spike in speculativedevelopment in Sacramento along with a sizable number of largeinvestment sales closed, both individual value-add acquisitions andmassive portfolio sales. Sacramento could be called the lastfrontier for this type of opportunity.”

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The asset was sold 63% leased, providing the new owner a uniquevalue-add opportunity in a market experiencing double-digit annualrent growth. The 50-acre parcel also offers opportunities forexpansion and future development of up to 300,000 square feet inthe highly desirable industrial-zoned area of West Sacramento.

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“The Sacramento industrial market continues to receivewell-deserved attention from institutional developers,” Ponder saysin the Colliers report. “With Sacramento being the fastest-growingmajor city in California, we have seen an influx of new residentsas well as institutional and regional capital, and out-of-markettenants.”

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West Sacramento is the second-largest industrial submarket inthe Sacramento region with more than 19 million square feet ofexisting inventory. The area has recorded a flurry of activity inthe last 12 months, recording 1.3 million square feet of netabsorption in 2018.

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Colliers Sacramento brokered the largest Sacramento lease lastyear at 3771 Channel Dr., leasing 389,000 square feet to TKClassics. Cippa and Ponder were awarded the listing amid intensecompetition in mid-2017, then leased almost two-thirds of thebuilding.

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“Attracting yet another major national developer the caliber ofLBA Logistics is a huge win for Sacramento. We are eager tocollaborate with them as they embark on the lease-up of existingspace,” said Cippa.

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LBA Logistics owns and operates a national industrial portfoliototaling more than 43 million square feet and has an ongoinginvestment program focusing on core, core-plus, value-add anddevelopment opportunities throughout the US. LBA also acquired a155,222-square-foot West Sacramento industrial asset with a tenantin place in October 2018.

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Lisa Brown

Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.