In many areas that have limited options for expansion, users of
logistics real estate have to accommodate growth within their existing distribution networks. Leasing trends reflect this dynamic. A
lack of alternatives drove more early renewals, longer lease terms
and a high level of pre-leasing relative to prior cycles.
Despite the barriers, nearly half of Prologis’ portfolio is located
in coastal markets, compared to less than 25% for other logistics
REITs. The bulk of the firm’s activity is in Southern California,
specifically San Bernardino, West Inland Empire and Long Beach.
Its Pacific Northwest holdings run along Interstate 5 from Seattle
to Tacoma, WA, with Kent, WA as a major industrial outpost.
Prologis completed 16 build-to-suit projects in the first half of
2018 totaling more than 6. 2 million square feet with an expected
investment of approximately $475 million. During the same
period, the company initiated 14 build-to-suit developments, representing more than 4. 7 million square feet with an expected
investment of approximately $450 million. Consistent with first-half completions, the majority of these starts were signed with
multi-site customers and are located in urban markets that are
positioned for last-touch operations.
The largest of these, at nearly a million square feet, was for
Amazon in Mexico City. The next two largest projects were both in
the Central Valley submarkets of Tracy, CA—a 708,080-square-foot
facility for Lindt Manufacturing and a 664,000-square-foot asset for
Zinus Inc. These aren’t Prologis’ only Bay area projects; the company owns more than 30 warehouse and industrial buildings there,
totaling 15 million square feet spread over more than 1,000 acres.
Another active developer, Newport Beach, CA-based CT Realty,
purchased a 345-acre industrial site in Stockton for the 4. 4 million-square-foot NorCal Logistics Center last year. CT has now completed first-phase development, including three spec buildings that
are home to General Mills and other e-commerce fulfillment, distribution and advanced manufacturing companies. The first two
buildings in Phase 1, totaling 575,127 square feet, were recently
sold to Prologis for $47 million, or approximately $82 per foot.
“We liked the land site in Stockton entitled for industrial next
to the Burlington Northern Santa Fe intermodal facility and
near the Union Pacific intermodal yard, and we kicked off the
largest spec development in Northern California,” relates Mark
Zehner, an asset manager with CT Investors. “We sold two of the
buildings to Prologis in shell condition right after they were com-
pleted at a price we felt was good for both of us, and then we’re
rolling into a large lease on our last remaining building at the
Stockton site. That will kick off Phase 2, and we’re in the design
process on the remaining land site.”
The last to be completed is a 1. 12 million-square-foot building.
The second phase of development will begin toward the end of
2018 and include three additional buildings totaling approxi-
mately 1. 6 million square feet. The project is a joint venture
between CT Realty and Diamond Realty Investments.
The park’s location provides access to State Highways 99, 120
and 4, along with Interstates 5, 205 and 580. The Central Valley has
an established industrial base of more than 185 million square feet,
reaching a population of 10 million within a 90-minute drive.
The speed with which the first two buildings traded following completion mirrors
the strong interest in many US markets,
including several other projects CT currently has underway, says Carter Ewing, managing partner of CT. The company plans to
announce new development projects in the
next few months, further extending its
national logistics footprint.
“We are targeting certain markets in the
US, and Stockton and Grand Prairie were
certainly two that were in our wheelhouse,”
says Zehner. “We look for large distribution
sites that are in the tier-one markets where
we want to be for growth, on strategic sites
near ports, transit and intermodal that
appeal to e-commerce. Companies are looking for logistics sites where they can build on
The Port of Long Beach is an integral part of trade between the US and Asia, hosting a
mind-blowing volume of cargo exchanges each year. PHOTO: Global Freight Solutions
This Cedar Grove, NJ facility, owned by Prologis,
exemplifies of the types of assets in the firm’s
strategic acquisition portfolio.
GOT LAND?. . .Continued on page 52