A joint venture that plans a 575,000-square-foot speculative industrial building in Newark has selected Cassidy Turley Commercial Real Estate Services and a team of brokers including Oakland Managing Partner Jeff Starkovich to market the property.
McShane Development Co., a division of Chicago-based McShane Cos., and American Realty Advisors of Glendale, Calif., expect to start development of the 29-acre Cherry Logistics Center at the beginning of next year. The property is expected to come to market by 2013 yearend, said John Dobrott, president of the industrial division of McShane Development Co.
The seller was BlueLinx Holdings Inc., a building products distributor, which said it sold an existing 235,000 square foot distribution center on the site for approximately $17.7 million, or just more than $75 a foot.
McShane and American Realty Advisors declined to say how much they intend to invest in the property’s redevelopment. It is the second major speculative industrial development announced for the East Bay since this summer. In late June, the Goodman Group, the largest industrial property owner listed on the Australian Securities Exchange, said that it is building a 374,000-square-foot industrial building at Pardee Avenue and Swan Way in Oakland along with Los Angeles-based Birtcher Development.
In the last six months, three companies—The North Face, Whole Foods Market IP. L.P. and beer and malt-liquor distributor Horizon Beverage Co.—all have started construction on new warehousing or research and development space adding 411,000 square feet in aggregate.
Tenants for the Newark distribution facility, which could also accommodate assembly and light manufacturing, could be drawn for multiple reasons, including the infill location, which cuts transportation costs for distributors compared to the Central Valley, and the size of the development, which stands out given how difficult it is to find large land tracts suitable for development or redevelopment in the Bay Area, promoters said.
“The facility is flexible because we are trying to appeal to a variety of users,” Dobrott said.
The Bay Area economy with its rosier employment picture and more active consumer market make the 38811 Cherry St. address an obvious location for a distributor seeking to serve the Bay Area’s 7.5 million people, he said.
Distribution centers of size have largely migrated to the Central Valley, but given the chance for more than 500,000 square feet in one location a mile from the Interstate 880 corridor, he believes multiple tenants will have interest. “It’s the cost of the driver, the fuel, the wear and tear on the vehicles. It’s just more efficient for the user to be there,” he said.
“There are also tech users who bring in parts from Asia and want to have facilities where they can do their last assembly and shipment,” he said.
The third quarter has been slower than the first half in the industrial corridor from Richmond in the north to Fremont in the south, Starkovich said. It has taken longer to strike deals, and tenants are “cautious based on the economy and election.” Still, he said, they are looking, and occupancy is rising at about the same rate or faster than last year.
“There is nothing like this in the Bay Area. You have to go to the Central Valley to get a logistics building of this size and scale, and it is right at the front door of the Bay Area’s population center,” he said. Consumer demand for overnight delivery and even same-day delivery also make the infill location a compelling solution.
The Newark industrial market has been among the East Bay’s strongest. Last year, leasing strength in manufacturing and research and development space pushed occupancy up by nearly 900,000 square feet in Newark, making it and Hayward by far the strongest markets.
In the first half of this year, Newark has again led recovery with just more than 260,000 square feet of occupancy gains even though Newark’s industrial inventory at 10.6 million square feet is among the smallest in the East Bay, according to CBRE Inc.
The not quite 200 million square foot industrial market in the East Bay recorded an 8.5 percent vacancy rate midyear and a more than 11 percent availability rate, CBRE said.
Their development and that of Australia’s Goodman Group will likely compete for some of the same tenants but not all, Dobrott said. “I think we are probably seeing the market in the same way. We see them as more an airport center. It is a smaller project.”
Cassidy Turley partner Jay Hagglund, Vice President Sam Higgins and senior vice presidents Scott Borgia and Mark Dowling also are marketing the property.