By Jon Peterson
Indianapolis-based Duke Realty is growing its San Francisco Bay Area footprint with an acquisition of two buildings in Oakland located at 955 Kennedy and 1905-1991 Dennison Streets. The purchase price on these assets was $53 million, or $184 per square foot, according to sources that track the sale of industrial assets in the greater San Francisco Bay Area.
Duke Realty did not want to provide commentary on the pricing, but they did confirm the purchase.
The seller of the properties is Newport Beach-based Hagar Pacific Properties. The real estate investment firm worked with CBRE to list the properties for sale. Among those working on the sale included Rebecca Perlmutter, senior vice president, and Darla Longo, vice chairman. CBRE declined to comment when contacted for this story.
955 Kennedy totals 119,000 square feet. This property has both a retail showroom on premises as well as warehouse space on approximately 4.62 acres. The asset is 100 percent leased to Rexel, Inc., whose lease will expire in July of 2025. The seller of the property had invested $3.1 million, or $26 per square foot, into tenant improvements and property renovation. The tenant improvement upgrades included effective private office layout, a modern showroom, fully equipped break room, ADA compliant restrooms, Title 24 upgrades and HVAC System.
1905-1991 Denison totals 168,489 square feet. The office part of the property includes 6,500 square feet on the first floor and 2,987 square feet on the second floor of the building. The asset is 100 percent leased to Veronica Foods Company. This tenant has a lease that runs through December of 2024, and this company has been in the space since 1991.
Hagar Pacific had previously invested $2.9 million or $17.21 per square foot to make improvements. The work included a new TPO roof, LED lighting, office HVAC, seismic, fire & truck doors and slurrying striping of the parking area.
“Infill industrial land values have surged this economic cycle due to the combination of growing demand and significant restrictions to supply,” said Drew Hess, senior vice president of Duke Realty’s Seattle and Northern California region in a statement to The Registry. “Duke Realty continues to focus on expanding in large coastal markets, and we closely evaluate potential opportunities in the Bay Area. These strategic acquisitions in Oakland will add value to our portfolio.”
Both of the buildings are located within the I-880 corridor in Oakland, where there is a total of 203.7 million square feet of industrial space. It has a vacancy rate of 2.1 percent, according to CBRE. This makes it one of the tightest industrial markets in the country. Rent on a year-over-year basis has increased by 6 percent.
The Oakland industrial market has remained an area know for its high barriers to entry for new product. The industrial base in Oakland has only grown by 300,000 square feet over the past five years, which is primarily due to limited land availability and escalating construction costs.
Duke Realty does have a regional office in Northern California located in Oakland at 409 13th Street, according to its website. Its current exposure in the market is 9 assets covering 34 acres of land and 2.9 million square feet.