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Irvine Amazon Facility Trades for $180.8M

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Amazon’s primary Irvine distribution facility has traded hands, in an industrial transaction that's tops in Orange County in over a year.

An investment affiliate of Los Angeles-based brokerage giant CBRE Group Inc. paid $180.8 million for Irvine Crossings, a nearly 396,000-square-foot data center and industrial property on Von Karman Avenue that’s been home to Amazon since 2016.

Palo Alto-based real estate investor Menlo Equities LLC sold the property for $457 per square foot.

The sale marks the largest local deal to date for an area building or development site involving Amazon (Nasdaq: AMZN), which has been among the most active real estate movers in OC over the past three years.

It’s the third building or land deal in OC involving Amazon to trade for more than $100 million since November 2020.

Top Dollar Deal

Property records indicate the buyer is CPUS Irvine Crossings LP, a unit of CBRE Global Investors.

The buyer bills itself as one of the world’s leading real estate investment managers, with $124.5 billion in assets under management.

Other buildings in OC its affiliates have owned in recent years include the Irvine Marriott, the city’s second-largest hotel by room count. It sold that hotel, located about a mile from Irvine Crossings, in 2019.

The price CBRE Global Investors paid for Irvine Crossings is nearly four times the amount that Menlo Equities paid in 2011, when it bought the property for a reported $47 million.

The high premium comes as the industrial sector continues to enjoy its heyday, a growth trend that was only bolstered amid e-commerce buying trends during the pandemic.

Low inventory continues to drive industrial prices to record highs, particularly for logistics properties with strong tenancy, like that of Amazon.

OC’s base of industrial buildings totals some 230 million square feet; vacancy rates here run just 2.5%, according to data from Newport Beach’s Voit Real Estate Services.

Base rents in Orange County are up nearly 17% year over year, the fifth largest increase in the country, according to data from CBRE.

In terms of area industrial space, “in order to satisfy consumer demand, companies need these high-functioning buildings that tend to lease at a premium. Yet supply won’t be able to keep up, especially as construction costs have been through the roof,” said Ben Seybold, executive vice president at CBRE’s Newport Beach office, in a recent research report.

“If you’re looking for e-commerce space in infill locations in Greater LA and Orange County, you are looking for unicorns.”

First Hub

Irvine Crossings is Amazon’s first larger-sized industrial facility in Orange County.

The company inked a nearly 170,000-square-foot lease in 2016 to occupy half of the Irvine facility, located at 17871 Von Karman Ave. in the Irvine Business Complex.

The firm now occupies closer to 202,505 square feet in a lease that expires in 2027, as well as a majority of the truck and employee parking that exits on Gillette Avenue, sources tell the Business Journal.

It uses the building for distribution, including same day and other Amazon Prime deliveries.

Sources indicate the firm is paying below market rents for the space, and in theory could relocate to a different local hub when its lease expires in six years; Amazon owns land elsewhere in Irvine where a new facility is planned.

Amazon could also choose to stay on as a tenant due to the property’s rare location, close to John Wayne Airport.

The remainder of the building—a two-story data center near Main Street counting some 193,168 square feet—is currently leased to IT service tech firm Cyxtera through 2029.

Local Deals 

Amazon, which has a market valuation of nearly $1.8 trillion, has been on a local leasing and buying spree in the years since leasing Irvine Crossings.

Amazon’s collection of existing and in-development sites it either owns or leases in the county is approaching 3 million square feet; as of two years ago, it occupied less than 500,000 square feet of industrial space in OC.

The firm recently inked a 260,000-square-foot lease for the first phase of Huntington Gateway Park, an under-construction project led by Newport Beach’s Sares Regis Group.

Sources speculate that Amazon could ultimately expand its space at the industrial complex, where a second phase of development at the intersection of Bolsa Chica Street and Bolsa Avenue could add north of 1 million square feet.

On the investment side, the firm made its largest local buy to date at the end of 2020 when it closed on a 31-acre site in Irvine, formerly belonging to the motion and control division of aerospace firm Parker-Hannifin.

Amazon paid $112.5 million for the vacant site, property records indicate.

That site is expected to serve as the third planned ground-up industrial facility built specifically for Amazon in the county, along sites in Santa Ana and Cypress.

Another nearby Amazon hub, a nearly 374,000-square-foot facility it leases in Santa Ana at 515 E. Dyer Road, sold at the end of 2020 for $114 million to San Diego’s Realty Income Corp.

It was OC’s priciest industrial deal of 2020. 

Kimberly-Clark 

The Irvine Crossings sale is the priciest industrial transaction in OC since September 2019, when Goodman Group spent $202 million for the former Kimberly-Clark tissue paper manufacturing site in Fullerton.  

That deal works out to about $155 per square foot, about one-third of the price for the recent Irvine transaction.

Australia-based Goodman, a $26 billion-valued industrial investor and developer that operates its North American operations out of Irvine, broke ground earlier this year on a speculative, 1.5 million-square-foot logistics campus at the Fullerton site.

The roughly 65-acre property will include four buildings, with leasing requirements ranging from 173,825 square feet to 1.5 million square feet.

Construction is expected to be completed by spring 2022.

No tenants have been announced.

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