California’s Industrial Players Are Targeting Arizona

CRE firms based in California are zeroing in on hot markets in Arizona to expand their industrial portfolios.

The growing list of California-based CRE players queueing up to buy existing properties and sites for new developments in the state next door include several who are planting their flag in Arizona for the first time.

CRE firms based in Southern California, one of the tightest industrial markets in the US, are leading the incursion into the Valley of the Sun region in Greater Phoenix.

Overton Moore Properties, based in Torrance, CA, recently unveiled the latest in a string of acquisitions in Arizona that it has made to expand its industrial portfolio, an historic 35.5-acre water park known as Big Surf, in Tempe, AZ.

Overton Moore paid $49M for the 50-year-old water park, home to what is believed to be the first wave pool in the US. Big Surf closed at the end of the summer in 2019 and has been shuttered throughout the pandemic.

For several months, Overton Moore has been aggressively acquiring industrial properties across the Valley of the Sun, including industrial buildings in Buckeye and Glendale.

When it acquired 303 Logistics, a speculative industrial building in Glendale, AZ, from Phoenix-based Barclay Group last fall, Overton VP Jason Hines said acquiring properties in an area of Phoenix known as the Loop 303 corridor was central to the firm’s expansion strategy.

“The Phoenix market is critical to our expansion and to West Coast markets,” Hines told the Phoenix Business Journal, adding that Overton would be acquiring sites to develop new industrial projects as well as acquiring existing industrial facilities in the Valley.

“We believe long-term in the Phoenix market, and as we expand out of California, it’s a major expansion and growth market for us.

Costa Mesa, CA-based Contour recently ramped up its portfolio expansion in Arizona with three industrial projects in the Valley totaling 3.6M SF.

In December, Contour acquired for $80M a 54-acre site in Buckeye, AZ for a 900K SF warehouse and received zoning approval from the City Council in Mesa, AZ for a 1.5M SF multi-building development on 112 acres that will be known as the Sossaman 202 Industrial Park.

In January, Contour announced it would build a second warehouse in Buckeye, a 1.5M SF facility that will be located on Apache Road.

The West Coast firms embracing Arizona for their expansion strategies aren’t limited to those with roots in Southern California.

Stos Partners, based in San Jose, planted its flag in the Phoenix market last year. Stos has made three industrial acquisitions in Greater Phoenix, most recently an all-cash deal for a 28,520 SF property.

“As the Phoenix industrial market continues to see an influx of interest and capital from businesses and investors alike, we’ve been able to secure increasingly rare opportunities for strong value creation (by) drawing upon our broker network,” CJ Stos, principal of Stos Partners, said in a statement.

The incursion of California CRE firms into the industrial market in Arizona comes at the same time that new industrial development in Southern California is creeping closer to Arizona due to the tightness of the market in the Inland Empire.

With existing industrial warehouse space filled to capacity and rents on triple-net leases rising by nearly 60% since the end of 2021 in the Inland Empire, new warehouse development is expanding in the eastern half of the region, which borders Arizona, GlobeSt reported in February.