Big Fremont Industrial Project Lands Apple, Furniture Companies as Tenants

Thursday, October 2nd 2014

SAN JOSE, CA – Well, that didn’t take long.

Seven months after starting construction on spec, Overton Moore Properties has leased up most of the Crossings @ 880, a 700,000-square-foot industrial/warehouse development in Fremont that is not yet completed.

In recent weeks, OMP has signed three tenants for about 585,000 square feet of space, or more than 80 percent of the development, according to industry sources outside the deal familiar with the transactions. The deals include a 311,000 square foot lease with furniture company Living Spaces, a 174,500 lease with Apple Inc. and a 102,000 square foot lease with Pivot Interiors.

“This is a really nice step into the future for us,” said Ken Baugh, president of Pivot Interiors, an office furniture outfitter whose history goes back 40 years.

Brokers with the San Jose office of CBRE, which represents Overton Moore, declined to comment for this story. Timur Tecimer, Overton’s CEO, didn’t return a message seeking comment.

But the deals are proof positive that the much-ballyhooed industrial demand I’ve written about in several recent stories is real, especially in Fremont. Earlier last month, Panattoni Development Co. announced it had leased the Milmont Commerce Center, a 173,000-square-foot distribution center it started on spec, to Japan Foods Corp. I’m even hearing rumblings that 901 Page Ave., the 500,000-square-foot manufacturing building left empty by the Solyndra collapse and Fremont’s largest vacancy, may be close to a lease.

“Fremont is the new field of dreams: Overton Moore and Panattoni Development began building, and the tenants did come,” said Sethena Leiker, a senior analyst with Cushman & Wakefield in San Jose.

Her research shows vacancy for Silicon Valley warehouse space at 5.1 percent in the third quarter, down from 6.5 percent a year ago. In Fremont, where Tesla Motors Inc. is spinning off demand, that number is just 1.5 percent, down from 7.1 percent a year prior.

Asking rents are also on the upswing — up 13.5 percent Valley-wide in the last year, to 59 cents a square foot for warehouse. Manufacturing space is also seeing vacancies tighten and rates rise, according to Cushman.

“With no additional industrial supply under construction, immediate tenant requirements for industrial space will be forced to navigate extremely tight market conditions, assuming steep market increases or look outside Silicon Valley’s core,” she said.

At Crossing @ 880, the deals are notable for bringing some high-profile tenants to the city. Overton Moore paid developer King & Lyons $8.15 million for the 40.5-acre site, located at Interstate 880 and Dixon Landing Road.

In Apple’s case, it’s actually a return. The Cupertino-based company had one of its early Macintosh factories located at 48233 Warm Springs Blvd. (currently a data center), but Mac manufacturing later moved out of state. I’m told Apple’s new lease — long rumored among market sources — is for run-of-the-mill storage space, not anything exotic. Still, the arrival is likely to be welcomed by city leaders because any real estate activity by the tech giant could lead to more deals down the line.

A clear score is Living Spaces, a major Southern California-based furniture retailer with 12 locations in the south state and Arizona. About 120,000 square feet will be a showroom, while the rest of the space will be a warehouse, according to a conditional use permit filed with the city. That could suggest that Living Spaces is eyeing additional dots on the map in Northern California. Furniture/Today, a trade magazine, estimates that the company generated $235 million in sales in 2013 from 10 stores. I didn’t get a call back from the company on Wednesday.

The Pivot Interiors lease for about 100,000 square feet will consolidate three different warehouses that the company has in Milpitas, Baugh said. The space will primarily be a distribution center and operations.

“It’s a little more efficient for us,” Baugh said, adding that he hopes to be in the space by February of 2015. “The location is great, with good freeway access.”

Pivot, which has seven locations in California, helps corporate, government, health care and education clients outfit their work spaces with everything from whiteboards to desks to chairs. It’s also a Herman Miller Certified dealer.

“Business is good, we’re having a lot of growth,” Baugh said. “This is a larger space, so it will accommodate some future growth.”