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TRACY, CA-The San Francisco-based industrial REIT AMB Property Corp. has inked a build-to-suit agreement with a “major retailer” for a 658,000-sf regional distribution center here, 20 miles southwest of Stockton, CA. The development, to be called AMB Pescadero Distribution Center, will be located near Interstate 5, the main north-south route on the West Coast, and I-580, which connects the Central Valley to the Bay Area.

AMB, which owns 11-million sf in Northern California, released little additional information on the project and did not return a phone call seeking comment. Documents filed with the City of Tracy show AMB has acquired 44 acres at 1400 Pescadero Avenue, near the Macarthur Drive exit from I-205. The concrete tilt-up building will be 42-ft tall, according to city documents.

“Retailers are taking space, even in this current economic climate, in order to reconfigure their supply chain and gain increasingly-important operational efficiencies,” says Mark Saturno, managing director, AMB’s West Central Region. “California’s Central Valley is rapidly gaining momentum as a preferred distribution location from which customers can, in one day, reach the major population centers of the Western U.S.”

Indeed, Tracy has seen some big distribution deals inked so far this year. In April, Crate & Barrel committed to expanding its operations in Tracy by inking a 1.2-million-sf build-to-suit deal with ProLogis that will be ready for occupancy in 2009. The deal includes an option to expand the buildings by an additional 800,000 sf. Crate & Barrel will vacate existing leaseholds to consolidate operations in the larger buildings while also increasing its overall leasehold in the market.

In May, a division of PepsiCo leased 697,887 sf of a 750,000-sf distribution building 1566 N. MacArthur Dr. on a long-term basis, according to the listing brokerage, Sacramento-based Buzz Oates Group of Cos. As part of the lease deal, Quaker will have first right to expand into the rest of the building when the existing tenant vacates. Like Crate & Barrel, Quaker will vacate existing leaseholds to consolidate operations in the larger buildings while also increasing its overall leasehold in the market.

In nearby Stockton, San Joaquin County recently finalized its master developer agreement with ProLogis subsidiary Catellus Development Group for development of the 550-acre Airport East Business Park. The agreement envisions the development of some 5.5 million sf of office and industrial uses on the site, which is near the Stockton Metropolitan Airport. The 15- to 20-year development plan calls for up to 2.5 million sf of office space, 1.5-million sf of air cargo space, 1.4 million sf of distribution facilities, 91,000 sf of new retail development and 500,000 sf of open space and parks.

Industrial vacancy in the greater San Joaquin Valley market is in the high single digits, and slightly lower for big box industrial than the rest of the product, Buzz Oates chief investment officer Kevin Ramos told GlobeSt.com in May. “There’s a pretty good supply being brought forward that in the near term will exceed demand,” he says, “but there’s not much coming after it and there is still pretty good demand.”

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