The announcements come close on the heels of news regarding two other developments totaling 15 million sf. In February, California Secured Investments of Campbell, CA unveiled plans for Stockton International Logistics Center, a $500 million project, also near the airport, that would have seven million sf of distribution space. In October, Minneapolis-based Opus West Corp. launched a 474-acre distribution center that will feature 8.2 million sf adjacent to Burlington Northern Santa Fe Corp.'s Stockton intermodal facility.
Last year saw close to five million sf added to the market, including IDI's second 508,800-sf speculative distribution facility at Stockton Centre Point, Panattoni Development Co.'s 443,640-sf spec distribution facility in Stockton's Airport Gateway Center and Lathrop Industrial Development LLC's 374,000-sf distribution facility at Lathrop Industrial Park in Lathrop. The figure exceeded the totals for the two preceding years combined.
Area brokers are confident the market can absorb the new product. Though statistics from Colliers International show the local vacancy rate rising last year, the brokerage says demand for high-cube space exceeds supply. It attributes any continued vacancy problems to a falloff in demand for multitenant space. According to Michael Goldstein, managing partner of the firm's Stockton office, there are a number of requirements out for buildings of 500,000 sf or greater. "The leasing activity justifies the building that is occurring. Several projects are being built on spec, but the demand is definitely there," he says.
In Goldstein's view, the San Joaquin area has a strong future due to its location relative to Interstate 5 and Interstate 99, the presence of BNSF and Union Pacific Railroad intermodal centers and proximity to the Port of Oakland. Intermodal facilities at the later allow containers to be offloaded in Oakland for train transport directly to Stockton and transfer to distribution centers there. "Logistically, we're ideally located in the center of California," the Colliers broker tells GlobeSt.com. "From here you can go anywhere."
In addition, he points out, the San Joaquin market is the closest to the high-population San Francisco Bay Area that has land for development of large distribution buildings. "Sacramento and the Tri-Valley area are largely built out, and their vacancy levels are below 5%. This is the only place to go," he says.
According to Goldstein, who has been assigned to oversee marketing for the Catellus project, land, investments and rents in his market are still very affordable relative to Southern California or the Inner Bay Area. He pegs monthly rents for Class A, high-cube space at $0.31 to $0.35 a sf and says the number of potential investors has dropped, but pricing has held firm, with cap rates stable in the 6.5% to 7% range.
Despite the rash of new projects, he sees little potential for overbuilding because the developers are savvy enough to move into construction only as the market dictates. "There may be 20 million sf planned, but it's not going to come on line all at once," he says. "We're looking at most at two to three spec buildings going up at any one time, and typically they get leased before they're finished. We expect strong growth but cautious growth."
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