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February 01, 2018

I-880 Pumps Up The Volume For Investors

ALM GlobeSt

Lisa Brown

FREMONT, CA-East Bay industrial landlords continued to benefit from demand during the fourth quarter of 2017, while developers and institutional buyers raced to provide high-quality distribution spaces to capitalize on the sizzling market. Despite several givebacks during the past three months, the vacancy rate was 3.5% market-wide at year's end, and virtually all submarkets were well below 5%, according to a fourth-quarter report by Kidder Mathews.

An increase in availabilities, driven in part by cycle-high construction levels, allowed for 1.6 million square feet of fourth-quarter leasing activity, with more likely to come in the first half of 2018. More than 1.6 million square feet of future industrial space was being built in the inner East Bay at the end of 2017, but the broad base of tenants in the market should keep rental rates firm against the increase in supply, says the report.

State-of-the-art spaces have realized a 20% jump in rents during the past 12 months, attracting investors from around the country to purchase, renovate and reposition industrial assets along Interstate 880, GlobeSt.com learns. Case in point is the latest acquisition of buildings within the Bayside Business Park.

BKM Capital Partners and Canyon Partners Real Estate LLC recently acquired two additional industrial buildings within the business park. This acquisition follows the purchase of 12 adjacent multi-tenant buildings in November 2017. Together, the 14 buildings total 352,280 square feet.

This is the fourth investment, creating an industrial portfolio totaling 648,174 square feet, completed by BKM through its programmatic joint venture with the Canyon Catalyst Fund, the CalPERS real estate emerging manager program managed by Canyon. The CCF/BKM partnership specifically targets multi-tenant industrial property acquisitions.

"This acquisition is a natural extension of our original portfolio within the Bayside Business Park," says Brian Malliet, CEO and co-founder of BKM Capital Partners. "The location is a key benefit of the asset, attractive to entrepreneurial and incubator-type businesses that are flocking to the region."

The two buildings are located on Fremont Boulevard, directly off the Interstate 880 freeway. The property is 15 miles north of downtown San Jose and 10 miles south of the Dumbarton Bridge. In addition, it is accessible to public transportation via the Fremont BART station, which has plans underway to expand to San Jose. The property is located 2 miles from the Tesla facility with 5.3 million square feet of manufacturing and office space.

"As Silicon Valley continues to expand north into Fremont, the industrial market is uniquely positioned for companies seeking to serve the large corporate presence while providing convenient access to nearby workforce housing communities," said Brett Turner, director of acquisitions at BKM Capital Partners.

The two buildings are currently 100% leased, with one multi-tenant building averaging 3,850 square feet per tenant. The other is occupied by BASF Corporation, a German chemical company and the largest chemical producer in the world. A capital improvement plan will include upgrades to enhance the aesthetic of the portfolio.

The Canyon Catalyst Fund is a discretionary separate account managed by Canyon Partners Real Estate on behalf of the California Public Employees' Retirement System, which facilitates investment through the identification of real estate emerging managers with niche strategies, a strong track record and potential to access unique investment opportunities. This platform is intended to cultivate the next generation of institutional real estate talent and CPRE.

For the full story, go to GlobeSt.com.

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