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Transactions - OCTOBER 24, 2018

Ivanhoé Cambridge builds first U.S. logistics development for $450m

by Andrea Zander

Ivanhoé Cambridge and CapRock Partners have plans to build a $450 million logistics complex in Ontario, Calif.

Phase I of Colony Commerce Center has started construction.

Located at the northeast corner of Carpenter and Remington avenues in the Inland Empire, the nation’s premier industrial market, Colony Commerce Center Phase I will comprise 1.3 million square feet of industrial space divided in two class A state-of-the-art industrial buildings of 589,000 square feet and 700,000 square feet, respectively, both with 36-foot clear heights.

“We are bullish on the North American industrial market, and with low vacancy rates and strong rent growth in the Inland Empire, Colony Commerce Center is strongly positioned to meet tenant demand,” said Mario Morroni, executive vice president, industrial, North America, at Ivanhoé Cambridge. “This is an especially significant project for Ivanhoé Cambridge — one that enables us to establish a strong foothold in the Southern California industrial market by delivering state-of-the-art industrial facilities in a fast-growing region during a critical time of need for industrial space.”

Minutes from Ontario International Airport and highways I-15, I-10, SR-60, SR-91 and SR-71, Colony Commerce Center Phase I will have 185-foot-wide truck courts, cross-dock loading, 100 percent-concrete drive areas and excess trailer parking stalls. The logistics complex is in close proximity to corporate neighbors such as Walmart, FedEx and Amazon, and is a few miles away from major retail amenities.

“Colony Commerce Center represents one of the last infill industrial development sites in Inland Empire West,” said Patrick Daniels, CEO of CapRock Partners. “We are excited to work with Ivanhoé Cambridge on its first logistics development in the United States. With a desirable location, strong market fundamentals and growing demand for industrial space, Colony Commerce Center is set to be the crown jewel of logistics business parks for this region.”

CapRock Partners will also develop Phase II of the logistics complex for Ivanhoé Cambridge. Colony Commerce Center Phase II is directly adjacent to Phase I on the southwest corner of Archibald and Merrill avenues, and will include a 1 million-square-foot single LEED-certified building with a 40-foot clear height that anchors eight additional small-box buildings ranging from 35,000 to 140,000 square feet, for a total of approximately 1.7 million square feet. Construction is on track to commence by year end.

Following a clear path of growth in logistics and industrial across multiple continents, Ivanhoé Cambridge has invested more than $2.5 billion in the North American industrial real estate market this past year. The $450 million Colony Commerce Center marks an inaugural project for Ivanhoé Cambridge and CapRock Partners, a firm that is building more than 4 million square feet of class A industrial product in the Inland Empire in 2018.

Overall vacancy in the Inland Empire industrial market during the third quarter 2018 decreased to 3.9 percent from 4.1 percent last quarter, despite 8 million square feet of deliveries in the third quarter, a testament to the market’s unrivaled user demand, according to Cushman & Wakefield. Year-to-date total net demand of 22.7 million square feet has already broken 2015’s record of 22.4 million square feet for the year. Leasing continues its strong momentum with a year-to-date total of 32.1 million square feet, this is ahead of last year’s pace when leasing totaled 42.6 million square feet for the year (second highest total on record), yet just behind the record annual total of 43.7 million square feet set in 2015.

The Inland Empire posted 40 million square feet of gross activity through the end of third quarter, on track to break last year’s record total of 47.3 million square feet. User sales will also break the record from 2006 when the Inland Empire reached 7.92 million square feet. Currently, the Inland Empire has experienced 7.9 million square feet of user sales activity. Contributing to this record user sales activity, Ferguson Enterprises purchased 1 million square feet at Optimus Logistics Center in Perris. Currently at 2 percent, Inland Empire West’s vacancy rate remains at an all-time low and the Inland Empire East will continue to benefit from the tight market. Absorbing 11.6 million square feet year-to-date, the Inland Empire East has led the region in net demand for three consecutive years. Strong demand has kept Inland Empire warehouse rents at record highs, yet they remain at a 20 percent to 30 percent discount compared to neighboring infill markets.

The push to be better, smarter, faster and cheaper continues to drive e-commerce, ultimately fueling investment and user activity. Combined with a solid economy and record volumes at the Ports of Los Angeles and Long Beach, Cushman & Wakefield expects the Inland Empire to continue to be a top performing market in the United States. Although the Inland Empire is breaking records in construction deliveries, it is matching that development stride-for-stride with record occupancy gains.

 

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