Lincoln Property, Crow Holdings Sell New Distribution Center

Runway Distribution Center. Image courtesy of JLL

An Ares Management real estate fund has purchased a newly built 199,997-square-foot distribution facility in Otay Mesa, Calif., from Lincoln Property Co. and a real estate fund advised by Crow Holdings Capital. The sale was announced on Wednesday by JLL Capital Markets, which had arranged the forward sale/purchase.

Runway Distribution Center consists of two newly completed Class A distribution facilities on a 11.91-acre parcel. The buildings feature 32- and 36-foot clear heights, 53 dock-high doors, six grade-level doors and 16 trailer parking stalls. JLL called the development “the most functional industrial project to be built in San Diego in recent years.”

The Otay Mesa submarket is adjacent to the U.S./Mexico border, an area that has experienced significant growth over the last several years because of its upgraded infrastructure, abundant labor supply on both sides of the border and increased demand caused by nearshoring.

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Runway Distribution Center is less than 25 miles from San Diego International Airport and less than a mile from the U.S./Mexico Port of Entry. The nearby Otay Mesa Land Port of Entry is the largest commercial land port of entry, with more than $46 billion in annual trade, and offers pedestrian crossing into the Tijuana International Airport via Cross Border Xpress.

The JLL Capital Markets Investment Sales and Advisory team was led by Senior Director Ryan Spradling, Senior Managing Director Mark Detmer, Managing Director Ryan Sitov and Associate Makenna Peter, and the Markets team was led by Andy Irwin and Greg Lewis.

Action at the border

After experiencing historically tight conditions over the past few years, the metro San Diego industrial space market has seen upward bumps in both vacancy and availability, year over year, according to a second-quarter report from Kidder Mathews. In parallel with that, leasing activity decreased to about 1.4 million square feet, a 15-year low, and sublease availability reached a level not seen in more than a decade.

Looking ahead, Kidder Mathews expects the market to experience continued softening, although a limited development pipeline should help keep things “well positioned for the near future.” The report notes that about half of what construction is taking place is in Otay Mesa. The submarket has a 5 percent total vacancy and 1.7 million square feet under way, on an inventory of 23 million square feet.

In April, Kearny Real Estate Co. was preparing to break ground on the $90 million, 26-acre final phase at the 311-acre Otay Crossings Commerce Park in Otay Mesa. This phase will consist of four buildings ranging from 45,000 to 205,500 square feet, with completion scheduled for early next year.

Almost simultaneously, Rexford Industrial Realty Inc. purchased for $200 million two adjacent buildings — one a 100,000-square-foot and the other a 55,000-square-foot industrial facility — in San Diego itself. The buyer reportedly plans to redevelop both properties into a distribution hub.