Cold Storage Investment Continues to Dominate Industrial Strategy
Industrial investor demand continues at a fever pitch for not only Sacramento but cold storage facilities in general. Local developer Buzz Oates Companies recently capitalized on this widespread trend by purchasing a 135,885-square-foot facility for $20.8 million at a 4.91% cap rate.
The facility located at 3925 Seaport Blvd. is fully leased to one of the grocery stores owned by privately held Raley’s. Buzz Oates’ knowledge of both Raley’s and the asset were drivers in the purchase.
Ben Prater, Associate Director at Stan Johnson Company, represented the Emeryville-based private seller, Libitzky Properties Companies. Both parties were involved in 1031 exchanges.
“We brought the deal to market just as the pandemic hit, which created a few challenges, but due to the high quality and cold storage nature of the property, the asset quickly became highly sought-after,” said Prater. “We were able to achieve above-market pricing through an aggressive marketing campaign and our buyer ended up being a local developer who was familiar with the asset and the tenant.”
The property includes a large percentage of refrigeration and freezer storage which is crucial for Raley’s and helped distinguish the asset from competing properties. The building serves as a production bakery and distribution center for the tenant and is strategically located, serving approximately 150 stores. Raley’s has locations in both California and Nevada.
“The Sacramento industrial market, like the national industrial market, has seen an extreme uptick in both investor and tenant demand,” Prater tells GlobeSt.com. “While there are several new spec projects underway in the Sacramento market, the low availability has accelerated both the value and rental rates for the sector. The sector has definitely benefited from the so-called perfect storm.”
Fourth quarter sales volume of $90.74 million from 27 transactions is less than a third of the five-year trailing quarterly average, according to a fourth quarter report from Colliers International. The quiet end to the year brings 2020 annual sales volume to $868 million, the lowest annual total since 2015. Average pricing in 2020 recorded a 5% decline year-over-year on an annualized basis.