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June 29, 2016

Exclusive: Amazon leases 224,000-square-foot East Bay warehouse as Bay Area growth continues

San Francisco Business Times

Roland Li

Amazon.com Inc. has signed another East Bay industrial lease as it grows its warehouse space to accommodate demand from customers.

The Seattle-based ecommerce titan (NASDAQ: AMZN) has taken the entire 224,154-square-foot industrial building at 6015 Giant Road in Richmond, according to two sources familiar with the property. The building, completed in the last year without a tenant, is part of the Pinole Point complex.

Amazon's other Bay Area locations include a 110,000-square-foot building at 250 Utah Ave. in South San Francisco, the 500,000-square-foot 3811 Cherry Ave. in Newark, and last month it signed a 1 million-square-foot lease in Tracy. The company has increasingly picked warehouses closer to urban centers such as San Francisco as it offers new services, including same-day delivery.

Amazon's growth and demand from other tenants such as United Parcel Service Inc. (NYSE: UPS) and Tesla Motors Inc. have boosted the East Bay's industrial market and made construction of new spec buildings without tenants viable. Williams-Sonoma (NYSE: WSM) also leased a 252,375-square-foot building at Pinole Point next to Amazon's space in 2015, while Whole Foods Market (NASDAQ: WFM) leased a nearby 117,2000-square-foot building in 2012.

In the second quarter, the East Bay industrial market saw rents increasing 13 percent year-over-year to $10 per square foot, with 17 consecutive quarters of growth, according to brokerage Kidder Mathews. It wasn't clear what Amazon was paying in the new lease. The vacancy rate fell to 3.9 percent, down 1.5 percent year-over-year. The boom in industrial development in the East Bay is a sharp contrast to the dearth of new office projects in the area, which cost more to build.

Amazon didn't respond to requests for comment, and a spokesman for 6015 Giant Road's landlord, Prologis Inc. (NYSE: PLD), had no immediate comment.

"Demand is definitely outpacing new supply," Scott Lamson, president of the Northwest region at Prologis, previously told the Business Times. "What we're really doing is replacing that older, less functional industrial space with today's state-of-the-art space."

Brokers who specialized in industrial space continue to see a market that's "incredibly strong," according to Kevin Hatcher of Colliers International. "Everything that's getting built that's Class A is being absorbed."

Hatcher said that new Class A industrial buildings have more efficient features compared to older buildings, including more vertical space to store products, known as clear height, more loading docks per square foot and more storage for trailers. That makes them more attractive to companies than older buildings. According to marketing materials, Amazon's new building has a 32-foot clear height.

"They're much more efficient," said Hatcher.

Hatcher wasn't involved in the Amazon deal. His colleagues at Colliers International, Greig Lagomarsino and Todd Severson, were the listing brokers for the 6015 Giant Road property. Lagomarsino didn't immediately return requests for comment. It wasn't clear if Amazon had a broker.

Developer KTR Capital bought the 30-acre Pinole Point development site in 2014. Prologis Inc. (NYSE: PLD), the world's largest industrial landlord, bought KTR for $5.9 billion in April 2015 and now controls a portion of Pinole Point that includes Amazon's building.

For the full story, go to San Francisco Business Times.

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