NorCal Logistics Center Manager Tom Schaal Sees Improvement in Central Valley Market Conditions for Industrial Space

Stockton, CA (March 25, 2013) –Tom Schaal of Schaal Realty Advisors LLC and the manager of NorCal Logistics Center in Stockton announced today that market conditions and demand for industrial space are improving in the Central Valley.

“Activity has certainly improved compared to the middle of last year as we are seeing several corporations with large space requirements tour the area. One of our advantages is that NorCal Logistics Center features deliverable and entitled land with infrastructure in place that is ready for build-to-suit development,” said Tom Schaal.

Schaal cited highlights from a recent Jones Lang LaSalle Central Valley industrial report, including:

  • Bulk distribution users drove demand across the Valley. 3PLs, retail distributors and food & beverage users remain most active, contributing to almost 2.2 million square feet of positive net absorption in 2012.
  • Users face fewer options for bulk distribution space; there is one available option over 500,000 square feet forcing many occupiers to renew or lease several spaces in close proximity.
  • Despite strong demand for big-box distribution product, development activity has been limited to build-to-suits.
  • Comparatively, smaller occupiers were hesitant to expand operations leaving vacancy among buildings less than 150,000 square feet at 16.1 percent.
  • Sales volume reached $114.8 million during the fourth quarter, the highest level recorded in more than six years. The rolling 12-month sales volume total was up over 110 percent by year-end, a strong indicator that investors have an appetite for high-value industrial product. The peak in year-end volume is attributed partly to anticipated capital gains tax increases, which prompted motivated sellers to press for closings prior to 2013.
  • Tightening supply in the East Bay and other gateway markets has pushed a number of distribution requirements that don’t require proximity to the Port of Oakland out to the Valley.
  • The influx of demand for bulk distribution space will place upward pressure on lease rates for existing vacancies and create demand for additional supply in core submarkets.
  • Rent growth will continue, especially for large blocks of Class A space. Smaller tenants looking for less than 50,000 square feet will have more room to negotiate.
  • Large block occupiers will remain most active in the market. Small businesses remain hesitant to expand, but as the economy continues to grow in the next 12 months, this trend should reverse.
  • The lack of available supply has jump-started the search for shovel-ready land and talks of build-to-suits are already underway; to date, there are six active requirements seeking land to accommodate build-to-suits between 750,000 and one-million square feet. Long-term supply constraints will inevitably bring a handful of phased speculative projects to the Valley over the next 12 to 24 months.

The Jones Lang LaSalle team comprised of Kevin Ahaesy (Senior Vice President, Walnut Creek), Bill Niethammer (Managing Director for the region, based in Sacramento), Bob Taylor Executive Vice President, Stockton), Jason Ovadia (Senior Vice President, Walnut Creek) and Mike Zimmerman (Vice President, Sacramento) is marketing the business park.

NorCal Logistics Center (NCLC) is a large-format industrial development of 474 acres with potential for 8.2 million square feet of logistics facilities, distribution space and multi-tenant buildings planned on a build-to-suit and speculative basis. The site is master planned to be one of the largest and most efficient industrial distribution campuses of related uses in the Western Approximately 1.8 million square feet of industrial product has been developed to date, all of which was built before the recession.

NorCal Logistics Center is located along Highway 99 off of Arch Road with convenient access to Interstate 5 (south of the City of Stockton).  The industrial development has numerous features that appeal to potential occupiers in the business park, including status as an Enterprise Zone, a Foreign Trade Zone, a Certified STAA Route (which accommodates the largest trucks serving today’s transportation market) and close proximity to rail and marine cargo distribution modules — BNSF Rail and the Port of Stockton, respectively.

Existing occupants in the park include Tesco, General Mills and Fox Motorsports.

Schaal Realty Advisors, on behalf of the owner’s sponsor, Founders Properties, manages the development of the logistics and distribution center.  Headquartered in Minneapolis, Founders Properties is a privately held company formed by two highly regarded industry veterans, Best Buy Founder Richard M. Schulze and Opus Founder Gerald Rauenhorst.

West Coast Commercial Real Estate News