SOUTH BAY BUSINESS CENTER

PROJECT SUMMARY

DATE ACQUIRED

Dec. 2018

LOCATION

Fremont, CA

SIZE

221,651 SF

TENANTS

14

YEAR BUILT

1995-96

OPPORTUNITY

The asset was delivered to the market in 1995 and 1996, and has attracted local, regional, and nationally recognized tenants. It consists of 14 rentable units between 4,800 and 42,500 square feet, with one building fully leased to Cintas, a BBB+ credit tenant on a 10-year lease expiring in 2028.

The portfolio is comprised of clear heights ranging from 13ft to 21ft, providing the flexibility to accommodate tenants of all sizes. Generous loading areas and an office finish of approximately 59% provides excellent consolidated and devisable layouts to conform to single or multi-tenant users. The 59% office finish is overweighted as DePuy Synthes has invested over $14 million in capital to build out 33ksf of high-end lab space. Without this unit, the project is 47% built out office. 

With a diversified rent roll of 13 local, regional, and nationally recognized tenants, the Stockbridge portfolio is well situated to achieve reliable cash flows and continue to attract strong, credited tenants.  No single tenant accounts for more than 20% of the square footage, and 50% of the leaseable area is scheduled to roll in the first three years.  Large spreads between contracted and market rates, low capital requirements on releasing, and market fundamentals provide a strong base to achieve market rates.

PROJECT PHOTOS
MARKET
REGION - FREMONT

Fremont has rapidly grown into the fourth largest city in the Bay Area, offering residents a central Bay Area location with excellent access to the key transportation corridors including the I-880, I-680, and the Dumbarton Bridge. The city is home to 232,000 residents, 49% of which have a Bachelor’s degree or higher, boasting an average household income of $114,000 (www.fremont.gov). As of August 2018, the unemployment rate is 3.1% (Bureau of Labor Statistics). The city currently has 6,218 residential units that are either under construction or approved for development, including from nationally prominent developers such as Toll Brothers, Lennar, and KB Homes. Being located along the I-680 provides convenient access to the large skilled-labor pool residing in the housing communities of Pleasanton and Livermore. As a result, Fremont has become a strategic geographic location for the emerging R&D industry, which includes automotive, advanced manufacturing, clean technology and life sciences.

 

Fremont is also home to several large corporate headquarters including Tesla, Western Digital, Seagate, Lam Research, Solar City and Thermo Fisher. The large corporate presence creates a ‘halo effect’ resulting in the demand for industrial and R&D space driven by tenants looking to position themselves as key inputs to the supply chain in close proximity to the major market participants. 

 
INNOVATION DISTRICT

Fremont adopted the “Innovation District” plan in 2014, designed to attract more technology and R&D companies to the municipality, spurring demand for skilled workers. The 2,500-acre district is home to hundreds of Fremont’s most innovative companies who are researching and creating many of the products that comprise the “Internet of Things.” Fremont has long served as the hardware side of the bay area, and in doing so, has honed its advanced manufacturing capabilities and accompanying supply chain. Many growing companies have invested significantly in the Fremont Innovation District. The number and diversity of the businesses creates an opportunity to network with other businesses and share ideas, which continues to draw new start-ups as well as established companies to the area. 

 

The district has reached a critical mass of businesses, real estate, and a talent pool. The creation of “Innovation Way” has encouraged density in the area, and unlike other parts of Silicon Valley, has no height restrictions. This will keep Fremont on the path of continued growth as the density spills over from San Jose and other parts of Silicon Valley. Newsweek named Fremont the second-best city in the U.S. for innovation and Wall Street 24/7 named Fremont the fifth best run city in the nation (the only Bay Area city in the top 10) in recognition of the city’s continued dedication to improve the quality of its tenant base, availability of skilled jobs, and growth of local transportation infrastructure.

STRATEGIC LOCATION 

The Property is strategically located directly off the I-880, the major north-south transportation corridor connecting San Jose to Oakland. The property is 15-miles north of Downtown San Jose, and 17-miles from the heart of Silicon Valley, and 10 miles south of the Dumbarton Bridge. The Fremont industrial market is uniquely positioned to service the large corporate presence in Silicon Valley, while providing convenient access to the workforce housing communities of Pleasanton and Livermore to the east

STRONG MARKET FUNDAMENTALS

The Fremont/Newark industrial/R&D market is comprised of 56MM SF of inventory, currently 96.6% occupied after posting 16-straight quarters of positive net absorption. The submarket contains 32MM SF of industrial/warehouse inventory and 24MM SF of R&D inventory, currently 97.1% and 96.0% occupied respectively.

GROWING CORPORATE PRESENCE

Many of the Bay Area’s large corporations have evolved from tech-startups that now are consolidating their fragmented operations by expanding into corporate campuses offered in the East Bay market. Fremont is one of the most integrated markets in the East Bay, providing excellent access to workforce housing while being in close proximity to the entire Silicon Valley, resulting in a disproportionate level of tenant demand.

As the Silicon Valley continues to expand north through Fremont, the real estate development pipeline has demonstrated an increasingly narrowed focus on multifamily residential to support the maturing economy, build-to-suites for large corporate users, and retail amenities. The supply outlook for small-bay industrial/R&D remains restricted by the high construction costs associated with dividing down into small units. Further, the competitive inventory has been decreasing over time as multi-tenant industrial projects are demolished by developers, repurposing the land for higher-and-better uses including office and multifamily residential. 

SITE PLAN
BKM CAPITAL PARTNERS

 

Headquartered in Newport Beach, California, BKM Capital Partners is a real estate fund manager specializing in the acquisition and improvement of value-add multi-tenant industrial properties in metro areas across the Western U.S. Combining a deep knowledge of this niche industrial product type with in-house capabilities including on-site property management, asset management, and leasing to reposition and institutionalize light industrial assets, the firm continues to build on its proven track record, generating strong results with high levels of transparency and engagement for investors. 

Learn more about BKM Capital Partners »

BKM MANAGEMENT COMPANY

 

BKM Management Company manages a portfolio of 8.2 million square feet of multi-tenant industrial properties for BKM Capital Partner’s private and institutional investors. With a focus on “boots on the ground” execution at the property level, BKM has in-house capabilities for both property management and leasing. The teams at the property level are focused on ensuring the tenants thrive and that the properties managed in the most efficient way.

 

 

 

Learn more about BKM Management Company »

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