Amazon.com has quietly signed a lease for an industrial building not far from John Wayne Airport that appears poised to be a linchpin in the online retailer’s growing base of same-day delivery services in the area.
The Seattle-based company recently snapped up nearly half of Irvine Crossings, a 395,673-square-foot data center and industrial property on Von Karman Avenue next to the Intersect office campus that’s under renovation at Main Street.
The lease is for the industrial portion of the facility, which includes roughly 170,000 square feet that will be used for distribution services, according to multiple real estate sources familiar with the transaction.
It’s the first known industrial facility in Orange County for Amazon—one of the country’s top users of industrial space, with a worldwide base of leased properties approaching 120 million square feet.
“We’ve been waiting to see where Amazon would land—this puts them right in the heart of the airport area,” said Louis Tomaselli, senior managing director of the Irvine office of brokerage JLL.
Bigger Stuff
The deal isn’t a particularly large one by Amazon standards. The e-commerce company with a market value of about $370 billion occupies a number of facilities in the Inland Empire that dwarf the Irvine location in size. A majority of its packages delivered to customers in OC pass through those locations.
The company is still growing its base of large-scale logistics space in the Inland Empire, based on recent announcements.
Irvine-based Goodman Birtcher said a few months ago that Amazon had signed a long-term lease for 1 million square feet at a new distribution and logistics center the industrial developer is building in Eastvale, a city in northwestern Riverside County.
The Irvine location appears likely to help Amazon in its push to improve the rollout of same-day delivery services in high-density urban areas, including OC.
The company is in the midst of growing its Amazon Prime Now business, which calls for the company to deliver more than 10,000 of its most popular items within two hours.
Amazon has kept details of the rollout close to the vest, but Chief Financial Officer Brian Olsavsky said in July that the offering was “now in more than 40 metro areas worldwide.”
The warehouses used for the growing program typically run 50,000 to 60,000 square feet and are fed by 86 much-larger fulfillment centers, according to a March report in Quartz, an online business publication.
The company recently signed a roughly 60,000-square-foot lease at an above-market rate for a location near the Los Angeles ports, according to JLL’s Tomaselli.
Most of the smaller locations are unmarked and “amount to Amazon’s equivalent of having retail stores,” the Quartz report said.
“It is a very hard service to deliver and make money on, but we know customers love it, and we’re in a great position to do this because of our long-term approach,” Olsavsky said in July during Amazon’s last quarterly earnings call with analysts.
Along with Amazon Prime Now, the larger Irvine location is expected to be used for the Amazon Fresh business line, which offers a same-day doorstep food service to users, sources said. That program rolled out in certain OC cities about two years ago.
Prime Now “is a little bit easier to build up from scratch (than Amazon Fresh),” which the company began testing in Seattle nearly seven years ago, Olsavsky said. “It has a different purpose, although some of the products overlap.”
Terms of the Irvine lease have not been disclosed. Brokers representing the property’s landlord did not return calls for comment.
Property Re-Fi
Word of the lease came shortly after the owner of Irvine Crossings completed a new financing deal for the facility.
Brokers representing Palo Alto-based real estate investor Menlo Equities LLC said this month that it had completed a $62.5 million refinancing for the property, which Menlo bought in 2011 for a reported $47 million.
The new loan is a five-year, full-term interest only, fixed-rate financing with Deutsche Bank, according to HFF LP, whose Kevin MacKenzie and Jamie Kline worked on the deal.
Irvine Crossings is one block north of the intersection of Von Karman Avenue and Main Street and less than a mile from John Wayne Airport.
Amazon’s lease wasn’t specifically addressed in the financing announcement. HFF LP said in a news release that a “datacenter operator and an internet technology company” combine to “occupy the entire facility.”
The site holds one of seven data centers in that area of Irvine, making it home to one of the largest clusters of data centers in Southern California behind downtown Los Angeles and El Segundo, the brokerage said.
