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STOCKTON, CA-While many industrial markets are stagnating or suffering downturns, the northern end of California’s Central Valley seems to be successfully fighting against the tide.

“We are in a pretty good market and frankly a bright spot nationally right now,” says Blake Rasmussen, a senior vice president in the Stockton office of CB Richard Ellis. “We have significant activity here. We’ve had our share of problems on the residential side, but on the industrial side, we see large, institutional-type requirements to locate facilities here.”

According to Rasmussen, Stockton is on target to set a record of more than six million sf of absorption for 2008. “It’s looking to be our best year in the last 20 years,” he says. “We have more than 10 million sf of requirements for spaces over 100,000.”

The CBRE broker contrasts the situation with that of California’s Inland Empire, to which the much smaller Stockton market is often compared. “There’s more than 40 buildings over 300,000 sf in the Inland Empire that are vacant. We do not have the higher vacancies here,” he notes.

Don Little, senior vice president-Northern California for Opus West Corp., attributes the market’s strength to its recent emergence on the national stage. “Stockton has come of age as part of the global supply chain, not unlike the Inland Empire was 10 or 15 years ago,” he tells GlobeSt.com “That segment of the industry has clients that require very large buildings of 700,000 sf to two million sf. Stockton was a very local market, but now we see continued validation that the companies coming here are looking for million-sf distribution facilities not unlike they might already have in the Inland Empire.”

Opus launched its first project in the market this year. In July 2007, it bought a 474-acre site adjacent to a BNSF intermodal center from two local developers preparing for retirement and in April in broke ground on Opus Logistics Center–Stockton. Ultimately slated to have 8.2 million sf, it is the largest new industrial park in Northern California. The first phase includes three buildings totaling two million sf.

Finding a site was not easy, Little reports. “We have been watching the Central Valley industrial market for years trying to find a strategic way to enter the market,” he says. “The difficulty is the supply of development parcels is fairly limited and the supply of very large parcels suitable for million-sf logistics facilities is extremely scarce.”

But he acknowledges the relative shortage of development sites is a huge advantage for companies that do manage to get in because it limits competition, while Rasmussen admits that the limited supply of a land has been a major factor in preventing overbuilding and holding vacancies down to about 5%. “We have a handful of locations where a user could build or occupy in excess of 500,000 sf in the near term,” the latter says. ” There’s probably five or six business parks that could accommodate users going forward.”

Both men concede the shortage of land could create problems in the long run by making it difficult to meet the growing demand. But Little believes additional land eventually will be made available for industrial use. “We think other sites will be brought to market,” he says, “but it will be some time before that occurs, either because of land use issues like zoning or infrastructure issues like water, sewer and roads.”

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