Amazon has agreed to one of the largest industrial property deals in the San Francisco Bay Area this decade, a sign of the e-commerce giant’s willingness to invest in strategic growth after scaling back investment in its real estate expansion.
The Seattle-based retailer and cloud computing company signed a deal to acquire the entirety of a 1.23 million-square-foot warehouse at the Midway Commerce Center in Vacaville, California, an Amazon spokesperson confirmed to CoStar News. The building, which is currently under construction, is the largest of three industrial properties being developed in the North Bay business park, which will eventually total more than 1.5 million square feet.
The lease is not only the largest ever signed for the greater Vacaville market, according to CoStar data, but also one of the largest industrial deals for the entire Bay Area in the past decade.
The deal with landlord Ridgeline Property Group for the building at 920 Eubanks Drive was signed earlier this month. Amazon declined to provide details about its plans for the space, but according to CoStar data, the company is expected to move in before the end of the year.
“Plans are in the very early stages and we’ll share more details in the future,” the spokesperson said.
Room to grow
After a pandemic run of sprawling logistics leases – many of which were signed by Amazon – tenants across the United States have pulled back on expanding their industrial portfolios as they adjust to slowing sales, a shift back to normalised supply chains and mounting economic concerns.
For those companies still looking for space, average deal sizes have shrunk considerably, with leases of more than half a million square feet becoming increasingly rare over the past year.
Amazon has been rapidly expanding its industrial property portfolio since the start of the pandemic, and has been on a hiring spree that has increased its workforce, adding around 270,000 employees in the second half of 2021 alone. By the end of last year, the company had leased more than 370 million square feet of industrial space, almost double the amount it had committed to in 2019, according to CoStar data.
In 2021, Amazon signed 17 industrial deals across the United States, each for more than 1 million square feet, according to CoStar data. So far this year, Amazon has signed just five.
The Vacaville deal, which expands Amazon’s footprint in the greater Bay Area, comes as the company said it would dramatically slow its previously unbridled growth. The company last year announced plans to cancel or delay the opening of about 50 distribution centres across the country, a move that collectively pulled the plug on more than 50 million square feet of industrial space, according to Montreal-based supply chain and logistics consultant MWPVL International.
Amazon’s willingness to invest in strategically filling out its distribution network is a boon for Ridgeline, which broke ground earlier this year on the speculative Midway Commerce Center with the help of equity partner USAA Real Estate.
The logistics park is a short drive from two other Amazon facilities in the Vacaville area, which has become a desirable industrial hub with direct access to major ports, thoroughfares and affluent demographics. That desirability has helped push rents up about 22% over the past three years, according to CoStar data.
