Sac Industrial Feels Pinch Of Sub-5% Vacancy

The East Sacramento market currently has an industrial occupancy of approximately 96%, which demonstrates the significant demand throughout the region.

Expo Centre is a 122,253-square-foot multi-tenant industrial business park near Cal Expo.

SACRAMENTO — If 4% vacancy doesn’t scream tight industrial space, one hasn’t been paying attention to the East Sacramento submarket. Expo Centre, a 122,253-square-foot multi-tenant industrial business park near Cal Expo and downtown, is located in one of the tightest industrial metro markets in all of Sacramento, according to Brian Malliet, CEO and co-founder of BKM Capital Partners. The property is located alongside State Route 160 at 1761-1791 Tribute Rd.

“Sacramento is one of the largest and fastest growing metros in California and the 25th fastest growing metro throughout the US,” BKM’s director of acquisitions, Brett Turner, tells GlobeSt.com. “It is characterized by strong population, job and economic growth. In fact, over the last seven years, it experienced a growth rate of 8.18%.

BKM acquired the seven-building industrial park for $10.1 million in an off-market transaction. The seller was a private syndication managed by Sperry Equities.

“This acquisition represents our entry into the Sacramento market and is located in an A-plus in-fill location in an extremely dynamic industrial submarket,” says Malliet. “The East Sacramento market currently has an industrial occupancy of approximately 96%. This is demonstrative of the significant demand throughout the region, which will allow us to strategically position the asset for long-term growth and garner interest from quality tenants over the next several years.”

Located less than 4 miles from downtown Sacramento with access to Business 80, 160 and Interstate 5, the location is considered the center of Sacramento. Expo Centre is currently 81% leased with in-place rental rates at approximately 18% below market value.

BKM Capital Partners plans to implement a series of capital improvements. This will reposition the property in terms of functionality and aesthetic, according to Turner.

“Our ability to acquire this asset in a rapidly expanding market and at a 45% discount to its replacement is demonstrative of the success of our niche approach,” Turner tells GlobeSt.com. “Because of this, we will be able to upgrade the asset, quickly create value and deliver strong risk-adjusted returns to investors.”

Planned improvements include cosmetic improvements such as roofing, HVAC, parking lot, landscaping, upgraded monument signage and standardized tenant signage, GlobeSt.com learns.

“We always look for properties where there are opportunities for significant value creation,” says Turner. “This is a quality asset in a prime location, but is lacking in terms of needed cosmetic improvements and modernization. These capital upgrades will enhance the overall value of the asset, as well as maximize returns to investors and rent appreciation over time.”

Palmer Capital represented the seller in the transaction.

“Through our integrated property management approach, we will be able to share resources with our newly acquired property in Fremont and quickly lease remaining vacant space, bring rents up to market value, and improve operational inefficiencies,” explains Malliet. “This will quickly increase NOI and cash flow for the asset. The diverse portfolio of 32 different tenants across a variety of industries currently at the property also provides limited tenant rollover exposure.”

BKM is an institutional fund manager with a niche focus on value-add, multi-tenant light industrial investments.