NY, California firms pay $123M for 500K sf industrial project in Fremont

Firms from New York and El Segundo paid $123 million for about 28 acres of land in Fremont, the Bay Area’s second-largest city by land area, to build what would be the biggest industrial project in its development pipeline.

The venture between Clarion Partners and 9th St. Partners aims to build about 495,000 square feet across six Class A industrial buildings on almost a dozen parcels in southeast Fremont. Most of the land is bounded by Bayside Parkway to the south and Gateway and Lakeview boulevards to the east and north and includes some existing research facilities to the west.

The buildings would range in size from about 40,000 to 105,000 square feet, 9th Street’s Tom Ashcraft said in an email to The Real Deal, noting that its plans are still preliminary.

“The lack of developable land in Fremont coupled with strong tenant demand in this market makes this an ideal development opportunity,” he said.

The East Bay city’s industrial vacancy rate shrank by half, to 1.9 percent, from the start of 2020 to the fourth quarter of last year, according to CBRE. Average asking rents rose to $1.33 a square foot a month from $1.17, excluding expenses, CBRE data show.

The deal represents 9th St.’s first acquisition in Northern California, Ashcraft said. The Southern California industrial development firm and capital partner Clarion paid more than $4 million an acre to acquire the project site from Peery Arrillaga, the firm named after and founded by storied Silicon Valley developers Richard Peery and John Arrillaga.

Peery Arrillaga declined to comment on the transaction, recorded with the Alameda County Clerk-Recorder’s Office on Dec. 29. A CBRE team of Matt Taylor, Tom Taylor and Doug Norton represented 9th St. and Clarion in the deal, Ashcraft said.

To put the sale into context, a venture between Overton Moore Properties and Invesco acquired almost four times the amount of land for about the same price in 2017. Overton Moore and Invesco have since redeveloped almost all of that land into a 1.7-million-square-foot industrial complex named Pacific Commons South. It’s attracted tenants including e-commerce industry leader Amazon.

Clarion and 9th St., which is overseeing their project’s development, are also targeting a variety of industrial users, Ashcraft said. His firm is working with the city to refine its project plans and will receive more feedback from city planners before submitting a formal proposal.

The latest plans show a mezzanine level for office use in all six buildings and 30-32-foot minimum clear heights, Ashcraft said. Herdman Architecture + Design is the project’s architect.

Clarion and 9th St.’s Fremont vision is “highly aligned” with the city’s goal of making it the epicenter of advanced manufacturing in Silicon Valley, Donovan Lazaro, its economic development manager, said in an email.

The project, as described to the city, “really meets” the demand for the kind of advanced manufacturing companies that are attracted to Fremont, Lazaro said. The fact that it’s designed specifically with those types of tenants in mind makes it unique to the region, he said.

“We’re tremendously excited about the opportunity for this major new project in the Bayside Technology Park,” Lazaro said in a statement.