Fortinet spends $65M on HQ-adjacent industrial building

Seller flips Union City property for 374% gain

Fortinet's Ken Xie with 1551 Atlantic Street
Fortinet's Ken Xie with 1551 Atlantic Street (Loopnet, Wikipedia, Getty)

Enterprise security firm Fortinet has continued its expansion into the East Bay by acquiring a 60,000-square-foot industrial building on a 10-acre site for $65 million, according to property records. Seller DWS Group/RREEF purchased the property seven months ago for $13.7 million, yielding a 374 percent gain for the asset.

The price works out to $1,083 per square foot.

One reason for the high sum could be the unique location. The newly purchased building at 1551 Atlantic Street sits adjacent to 1200 Whipple Road, another building that Fortinet acquired in March for $65.7 million. Ownership of both buildings gives the company the potential to create a single large campus.

The Sunnyvale-based security firm began collecting properties in Union City in 2016 and has spent $167 million in the East Bay municipality, with these last two purchases accounting for more than $130 million. In December, Fortinet also acquired a 130,000-square-foot industrial building in Sunnyvale.

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Fortinet’s desire to buy industrial properties could be linked to the lack of supply on the market. Developers are not able to keep up with the demand and sites are being scooped up fast whenever they do come on the market, according to a second-quarter report by CBRE.

“Though the transition into a Covid world remains uncertain, industrial users and investors continue to navigate a fairly tight market as values rise to record-breaking levels,” the report said.

The East Bay had an industrial vacancy rate of 2.3 percent in the second quarter and the limited supply drove asking prices up 19 percent, according to the CBRE report. There are currently 2.7 million square feet of construction underway to provide more inventory in the market.

An example of a recent East Bay deal is Centerpoint Properties securing a 200,000-square-foot industrial building previously owned by a chiropractic school. Also, Blackstone subsidiary Link Logistics picked up three East Bay facilities as part of a larger Bay Area portfolio Haul that included a total eight buildings with 1 million square feet.

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