1125 Market St Sold to Pacific Eagle Holdings for Development

SAN FRANCISCO–The 12,400-square-foot project site at 1125 Market St. has been sold to Pacific Eagle Holdings Corporation, which is a subsidiary of a Chinese investment group. The seller, MacFarlane Partners, was the previous owner of the site. CBRE represented MacFarlane Partners in the sale although the sale price was not disclosed. The property is zoned C-3-G, permitting both residential and commercial development.

It is the last remaining vacant lot in San Francisco’s rapidly transforming Central Market area (between 5th and 10th Streets). The neighborhood has long been a center for entertainment, arts and retail, with a renaissance taking place due to large employers such as Twitter, Dolby,Square, One King’s Lane and Zoosk flocking to the area. It is located directly in front of the Federal Building, across the street from UN Plaza and just east of The Strand Theater, a historic former movie house that the American Conservatory Theater is reviving as live-performance venue and education center.

Dirk Hallemeier, a managing director with MacFarlane Partners and president of its development affiliate, MacFarlane Development Company, tells GlobeSt.com:

“When Pacific Eagle approached us to purchase the parcel, the plan they shared for the development was very much in keeping with what we also saw in this rare available space in the Central Market.”

Pacific Eagle Holdings Corporation owns office properties and hotels primarily in New York, New Jersey, Massachusetts and California. The company was founded in 1992 and is based in San Ramon, CA. No further information from Pacific Eagle Holdings was available at deadline but if additional insight is obtained, a follow-up report will be provided.

“The timing was opportunistic for us to sell the property and continue our focus on several other projects currently in development in the Bay Area, as well as LA and Seattle,” continues Hallemeier.

Read Entire GlobeSt article here.


 

The article fails to mention the selling price, but it was sold three weeks ago for $19,800,000 which represents a price/sq foot of $1,597 on the land.  Contact us for more information.

Raising the Roof Making All the Difference in Warehouses

By ROBBIE WHELAN

Eight feet of added ceiling height may not seem like a lot, but for warehouse builders, the extra clearance can be the difference between an empty building and one that attracts a tenant such as Walmart.com or Amazon.com.

Real-estate firm Prologis Inc.’s latest project, a one-million-square-foot warehouse in Tracy, Calif., will boast a 40-foot-high ceiling, 25% taller than the typical 32 feet. The project isn’t pre-leased, making this the first speculative building of such dimension that the company has built.

Prologis executives said it is going bigger to tap into the e-commerce boom, which is changing the way industrial properties such as warehouses and fulfillment centers are built. E-commerce retailers need more space than do wholesalers that ship goods in bulk to stores, because they transport a vastly wider variety of products in much smaller batches.

“If your stapler breaks, you go online and you order a single stapler. If you’re delivering to OfficeMax, you don’t go into a warehouse and pull one stapler off the rack, you pull out a whole pallet of them,” says Scott Lamsen, president of Prologis’ northwest region.

As a result, e-commerce companies need workers to pick out and pack each product by hand. They often build multiple mezzanine levels and racking systems known as “pick modules,” which are typically about nine feet high. Ceiling heights of 40 feet, rather than the industry-standard 32 feet, allow a distributor to build three levels above the ground floor instead of two, and still leave room for light fixtures and fans.

The share of retail sales conducted online has been growing steadily since at least 2005, clocking in at 6.7% in the fourth quarter, according to the Census Bureau. The increasing sales online stimulate the need for more spaces to stock, sort and pack shipments to send to shoppers.

Most warehouse construction in recent years has been of structures with ceiling clearances of 28 to 36 feet. Since 2011, of the 554 large warehouses built in the U.S., 89% have had ceilings between 28 and 36 feet high, according to brokerage CBRE Inc. Only 52, or 9.4%, have had heights of 36 feet to 40 feet, and only 11 have had heights above 40 feet.

Consultants and executives at logistics firms say larger warehouses with taller ceilings are becoming more prevalent.

Read entire WSJ article here.

Kidder Mathews Assists in Morgan Hill Industrial Sale for $5M

Address: 700 Jarvis Drive, Morgan Hill, CA

Seller:   Pacific Resources Jarvis Inc.

Buyer:   Kotai Investments LLC

RBA SF: 43,000

Lot size:  3.02 AC (131,551 SF)

Selling price: $5,000,000 ($116.28/SF )

Type:   Industrial – Warehouse

Prologis, Norges Acquire KTR Capital for $5.9B

By Erika Morphy

Prologis and Norges Bank Investment Management have partnered to acquire the real estate assets of KTR Capital Partners for $5.9 billion. The properties will be acquired by Prologis US Logistics Venture, a 55-45 JV between it and the Norwegian government pension fund.

The two companies are acquiring a portfolio that encompasses 60 million square foot and is comprised of 322 properties. The properties are very complementary to Prologis’ existing holdings, the REIT says, enhancing in particular its footprint Southern California, New Jersey, Chicago, South Florida, Seattle and Dallas. The acquisition also includes 3.6 million square feet of development-in-progress and a land bank with a build-out potential of 6.8 million square feet.

“It is rare to have the opportunity to acquire a portfolio of such high asset quality, customer profile and market composition that is so consistent with our own,” said Hamid Moghadam, chairman and CEO of Prologis, in a prepared statement.

The transaction will deliver accretive returns to Prologis shareholders, Moghadam added. The deal also strengthens its partnership with Norges, “which will now exceed $11 billion on two continents,” he said.

The $5.9 billion transaction includes the assumption of approximately $700 million of secured mortgage debt and the issuance of up to $230 million of common limited partnership units in Prologis to KTR.

Read entire GlobeSt article here.

Follow up:  Prior to the buyout of KTR, KTR purchased a portfolio of industrial properties from Alexandria Equities in South San Francisco, CA.  The value of the portfolio was estimated at a total of $160/psf.  Contact us for a list of the properties and additional information.

Investor Sentiment Hits New High

By Paul Bubny

Spring may be just around the corner, but in the view of investors, it’s already here. Marcus & Millichap said Monday that its quarterly Investor Sentiment Survey Index has reached a new high, with the eight-point increase from the prior quarter to 187 reflecting a level of investor confidence not matched in the survey’s 10-year history.

Sixty-eight percent of respondents to MMI’s latest survey plan to increase their holdings in the coming year by an average of 15%. An additional 26% expect their investments to hold the line during 2015, while just 6% said that their real estate portfolio may decrease over the next year.

MMI attributes the positive sentiment to several different factors. First and foremost, it reflects continued performance improvement across all property types. “The trends are building momentum, especially for the property types that have lagged behind through the recovery so far,” says Hessam Nadji, chief strategy officer and director of specialty divisions at MMI. “Those sectors, particularly office and retail, are now beginning to catch up,.”

Slightly more than half the respondents, or 51%, either strongly or somewhat agree that property fundamentals will improve faster over the next 12 months. Twenty-seven percent were neutral in their views, while the remaining 22% do not believe that improving fundamentals will accelerate.

Against a backdrop of still-low interest rates, strong job growth and retail sales growth in the US,, a majority of commercial real estate investors expect the value of properties in their portfolios to increase over the next 12 months. Especially optimistic re multifamily investors, with 78% expecting values to increase this year, by an average of 5.3%.

In the industrial sector, 68% of survey respondents believe the value of their properties will increase, with an average 4.4%. Similar sentiment is expressed by retail investors: 68% expect a 5.8% in value over the next 12 months. For the hotel sector, 63% of respondents expect values will increase by an average of 5%.

Read entire GlobeSt article here.

U.S. Industrial Property Investment Enjoys Best Year Since 2007

By Michael Gerrity

According to CBRE, increased trade, industrial production, employment and consumer consumption in the U.S. combined to drive the largest full-year Industrial investment total since 2007.

Total investment volume in U.S. industrial properties totaled $54 billion in 2014, a 13 percent climb over the prior year. If industrial investment continues to rise at the pace set in 2014, the 2015 volume will reach the prior peak of $61 billion, set in 2007.

The year closed with a very active quarter for industrial property investment, in terms of sales volume. The $16.1 billion of industrial property investment in Q4 2014 reflected a 6.3 percent gain over the year-earlier quarter. The quarter’s total was also the highest sales volume since Q3 2007 and the third highest in the past 14 years.

“The U.S. industrial market is firing on all cylinders. The low cost of energy and a strong dollar are contributing towards increased business investment, production, employment and consumer consumption. These diverse sources of growth have combined with local economic factors to generate demand for industrial space not seen since before the financial crisis,” said Jeanette Rice, Head of Investment Research, Americas, CBRE.

“The industrial market recorded its 19th consecutive quarter of positive net absorption, marking the longest such streak in more than 20 years. Meanwhile, stronger output is driving demand across the supply chain, from major distribution markets like the Inland Empire and Chicago to secondary markets linked to the transportation network, such as Indianapolis and Kansas City. Expectations for rent growth are above historical averages, while cap rates and IRR’s reflect healthy competition for high-quality assets.”

The light industrial space saw the greatest gain in investment activity, largely as a result of stronger market fundamentals. Light industrial, which is composed of mostly non-bulk facilities serving smaller industrial users, saw a 24 percent increase in sales volume in 2014, while investment in warehouse space rose 9 percent.

Industrial cap rate trends also reflect the increased interest in industrial product. Warehouse cap rates fell 36 basis points (bps) to an average of 7.0 percent in 2014. Light industrial cap rates averaged 7.4 percent in Q4 2014, down 40 bps from a year earlier.

Foreign investors acquired $1.8 billion of industrial assets–only about 7 percent of the total foreign investment in the U.S in 2014. The largest foreign buyers were from Canada, the United Arab Emirates and Norway. Chicago was the largest target market.

Read entire World Property Channel article here.

Kidder Mathews San Francisco Q4 Industrial Report

Well, now that 2014 is in the rearview mirror, we’ve been busy crunching the numbers from the final quarter of the year.  Overall, it was an impressive year with leasing and sales figures reaching all-time highs.  Competition is up and therefore cap rates and leasing vacancies were down.  Here’s an excerpt from the report:

The San Francisco industrial market stumbled in the fourth quarter, with -98,896 s.f. of negative net absorption increasing vacancy to 4.2%. Despite fourth quarter negative absorption, 2014 saw 58,808 s.f. of positive net absorption. Asking rental rates surged up towards prerecession highs, breaking $15/s.f. for the first time since first quarter 2008. The larger industrial leases remain in the San Mateo County submarket, where larger tenants are accepting a decentralized location to find adequate square footage. In San Francisco this quarter, industrial leasing activity was less than a quarter of the average from the past year, with low vacancy stifling deals due to limited space options for lease.

Read entire report here:  industrial-market-research-san-francisco-2014-4q

Terreno Continues Buying Spree, Snatches up Union City Industrial Projects

Address: 33306-33580 Alvarado-Niles Rd, Union City, CA

Seller:   Westcore

Buyer:   Terreno Realty Corp

RBA SF: 170,086 (between 3 buildings)

Lot size:  10.04 AC (437,342 SF)

Selling price: $23,800,000 ($139.93/SF )

Type:   Industrial – Warehouse/retail

This is another example of the strengthening of the industrial markets on both sides of the bay.  Kidder Mathews sold this building to Westcore in April of 2012 for $13 million, which now seems like a bargain.  It is a strategic piece for Terreno however, since they are also purchasing the new development directly behind this acquisition upon completion of the new construction for a reported $37.2M.  The adjacent site was formerly a SF Chronicle paper plant.

Foster City Office Building Sells for $39.5M to DivcoWest

Address: 1065 E. Hillsdale Blvd, Foster City, CA

Seller:   Marin County Employees Retirement Association

Buyer:   DivcoWest

RBA SF: 115,511

Lot size:  5.13 AC  (223,288 SF)

Selling price: $39,500,000 ($341.95/SF )

Type:   Class B Office

4-story office building.

Industrial’s Continued Outlook: Strong Leasing

By Paul Bubny

The third quarter marked another chapter in the ongoing success story of the industrial sector across the US and Canada, and Colliers International doesn’t see the sector losing its mojo anytime soon. With a 21-basis point decline in vacancy during Q3—to 7.5% in the US and 4% in Canada—and with the quarter’s 64.8 million square feet of absorption representing the second-highest quarterly tally since the recovery began, clearly the momentum is there.

And so it will continue even as more new product comes on line, Dwight Hotchkiss, national director of industrial | USA for Seattle-based Colliers, tells GlobeSt.com. “Although the rate of construction will increase in 2015, we predict strong, positive absorption,” he says.

“The second half of 2014 has seen a visible increase in activity for product between 50,000 and 250,000 square feet and, along with anticipated demand in big box, will drive the absorption numbers,” adds Hotchkiss. Regionally, the strongest markets for absorption in both Q3 and year-to-date included Chicago, Dallas-Fort Worth, Atlanta, Los Angeles and the Inland Empire, Houston, Indianapolis and Stockton/San Joaquin County, CA.

Colliers’ Q3 industrial report notes that development activity increased last quarter in both the US and Canada to a total of 155.9 million square feet under construction, up from 142.9 million square feet in Q2. “The absorption-new supply ratio increased slightly to 1.7:1.0, from 1.4:1.0 in Q2, but has come down significantly from more than 2.0:1.0 in 2013,” the report states. “This will be a key metric to gauge the supply-demand balance as development activity increases further” in subsequent quarters.

Where that development occurs may shift slightly, but only slightly, thanks to the uptick in demand for same-day delivery by shoppers buying online. “The strongest demand and development will continue to be in the major markets, which can service the major population centers which can be delivered same day,” Hotchkiss says, adding that “some next-tier cities will see some development as more and more retailers look for sites.”

Not only development activity has been strong: investment sales have exceeded $11 billion in each of the past six quarters, the longest such streak since Q1 2008, says Colliers. The average cap rate decreased to 7.3% in Q3, the lowest since Q2 ‘08, and cap rates for the top quartile of warehouse properties are noticeably lower, averaging 5.8% during the quarter.

Read entire GlobeSt article here.

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