By Jon Peterson
Leases are now being signed in the East Bay for industrial properties at a much higher rate. A most recent example of this is what San Diego-based Westcore Properties and JC Paper agreed to recently in Fremont.[contextly_sidebar id=”DbwDHbq9qfyX37fPEF1YplsZEMhGKCrN”]“The lease that we signed with JC Paper represents a rate 30 percent higher than the rental rate the tenant had in its previous lease,” says Don Ankeny, president of Westcore Properties. He declined to say what the actual rental rate is on the new lease.
According to a third quarter 2014 Cushman & Wakefield Silicon Valley industrial report, Fremont is the second largest industrial submarket in Silicon Valley behind San Jose. The East Bay city, however, at that time had the highest vacancy rate at 10.1 percent, but it was also the only industrial submarket with any construction under way at 1.3 million square feet. The direct weighted average net rental rate for manufacturing space in Fremont was $0.73 per square foot per month, while warehouse/distribution space went for $0.55, according to the same report.
Ankeny sees that there are several factors of why there is such a strong rental demand for industrial properties in a market like Fremont. “I think that the area in general has been successful in job creation. This is the case with both new and existing tenants. The region also has the infrastructure already in place to help the tenants move their products on a regional and/or state wide basis,” said Ankeny.
The new lease with JC Paper was necessary since the tenant had around another nine months before its current lease would expire. The lease involves 214,909 square feet of warehouse space located at 47422 Kato Road in Fremont. JC Paper will be the only tenant in the property. It will use the asset to move its products for both Northern California and northern Nevada.
The tenant will now be in the space for another 10 years. The property, which was built in 1997, has around 10 percent of office space in the asset. Westcore has owned it since it bought the property in 2012.
Westcore has one other activity going on in the East Bay. It’s now in the process of selling its 500,000 square foot manufacturing facility in Milpitas. The property has a current value of around $85 million, according to sources familiar with the property.
The actual closing on the sale of the property is probably a few months away. “One of our goals with the property was to get it re-leased, and we were able to do that. We think now is a good time to sell the asset since we have accomplished that,” said Ankeny. Westcore last July signed Flextronics International USA for a new 10-year lease on the property.
Westcore has owned the property since 2007. The collection of nine buildings is a mixture of manufacturing and light industrial space. The asset is located at 637, 677 and 727 Gibraltar Court and 777, 847, 927, 1077 and 1177 Gibraltar Drive.