Phelan Gateway Kicks off Second Round of Construction as Lathrop Industrial Market Bounces Back

Phelan Gateway, Phelan Development Company, Lathrop, Colliers International, North Tracy Commerce Center, Michaels
Image Courtesy of Phelan Development

By Meghan Hall

After a few month’s pause, one of Lathrop’s largest industrial developments is back on track after restarting construction. The first phase of Phelan Gateway—a 3.02 million square foot master-planned development—took a hiatus from construction during the spring as a result of COVID-19. But when it became apparent that the industrial market was holding steady, Newport Beach, Calif.-based Phelan Development Company quickly resumed its plans—with potential tenants in tow.

“The market went into hibernation for 30, 45 days. Capital became quite and they didn’t know what was going on either,” explained Regional Partner David Haugen. “They pulled back their ambitions and did a stop, look and listen, if you will. In early May, people started to poke their heads up and take a look at what was around. What everybody learned was that on the industrial side, activity slowed for a very, very, short period of time and then just pretty much resumed.”

That quick rebound gave Phelan Development Company the confidence it needed to pick up where it had left off on the first phase of Phelan Gateway, located along West Yosemite Avenue. Phase One of the project includes two buildings: Building One will include 382,380 square feet, while Building Two will be larger, at 609,984 square feet. Both buildings will be constructed to suit and include 36-foot clear heights, skylights and ample trailer and car parking. 

The development is within the vicinity of a number of major occupiers, including John Deere, Tesla, The Home Depot and UPS. The project will also be easily accessible via State Route 120 and Interstate 5. 

“Lathrop is as attractive of a location as Tracy,” said Haugen. “[Lathrop has had] great absorption and is benefitting from the e-commerce conversion, if you will. Food and beverage companies are also very active.”

Haugen continued, adding, “There are really two worlds in that market where you really have users that want to access up and down the valley, and then you have those that also want to access the Bay Area…[This project] allows users to do both.”

Phelan Development plans to have the entire three million square foot development built out by 2023, with Phase Two kicking off construction in 2021. Phelan Development is also currently quoting deals for its first two buildings. According to Haugen, there are two separate tenants interested in the buildings, and each tenant would elect to occupy the entirety of each. Haugen declined to comment on who specifically the tenants may be, other than they are part of the food and beverage industry.

Phelan Development Company first opened its Northern California office in the spring of 2018 and has been busy pursuing and leasing projects ever since. The firm is working to build the Fairfield Commerce Center, a three-building, nearly-500,000 square foot development, will be ready for occupancy during the first quarter of 2021. Building Three—which totals 251,615 square feet—has already been leased. Phelan Development is also nearly completion of the North Tracy Commerce Center, for which it is close to solidifying a lease for 42,000 square feet. Haugen also stated that there has been interest from full-building users, but no tenant has been formally signed. And, in a significant indication of market activity, Phelan Development recently leased 925,000 square feet to Michaels, Phase I of the North Tracy Commerce Center.

Net absorption in the San Joaquin Valley—where markets such as Tracy and Lathrop are located—totaled 2.2 million square feet at the end of the second quarter, according to a report released by Colliers International. Across the county, 4.35 million square feet of industrial space was still under construction, and despite COVID-19, Colliers also reported only a quick pause in activity. In Lathrop specifically, vacancy has held stable at 6.8 percent over the past several quarters, and the average asking lease rate comes in at $0.55 per square foot triple net.

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