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Colliers negotiates record lease for OnTrac Logistics as online buyers spur explosive demand for just-in-time delivery sites in urban areas

Firm leases state-of-the-art project in San Fernando Valley one year before completion

SUN VALLEY, CA – July 20, 2017– As the explosion in online purchasing continues to skyrocket, pushing developers to build new, mammoth, state-of-the-art warehousing and distribution facilities in locations far from major population centers, a sea-change reversing that trend is now taking place as logistics companies in increasing numbers are promising ever-faster delivery times.

Variously known as “just in time,” “same-day,” and “next-day” deliveries, it has become the No. 1 objective of many logistics companies to find suitable distribution facilities closer to densely populated urban areas so they can meet the demands of an increasing number of consumers asking that their online-ordered products be delivered to their doorsteps or workplaces within hours, a day, or, at the latest, the next day. 

Nowhere is that more evident than in the densely populated San Fernando Valley, where a team of Colliers International brokers has just completed a landmark lease transaction for the larger of two buildings at the Sun Valley Business Center now under construction. Upon completion next July, the center’s two buildings will be the newest, largest, and most state-of-the-art logistics facilities ever constructed in the San Fernando Valley.

Led by Senior Executive Vice President John DeGrinis, SIOR,, the team of Senior Vice President Patrick DuRoss, SIOR, and Vice President Jeff Abraham, SIOR, all based in Colliers’ Los Angeles North office in Encino, California, represented OnTrac Shipping, long a national leader in overnight delivery and now one of fastest growing logistics firms to enter the Internet-fueled era of same-day, “just in time” deliveries being offered by Internet retailers. Colliers brokers John Kovaleski and David Buchholz, from the brokerage firm’s Silicon Valley office, also partnered with Team DeGrinis in representing OnTrac.
The Colliers team, along with George Stavaris and Colette Ramirez, both partners in Triniti Commercial Real Estate of Los Angeles, also represented Dallas-based developer Xebec Realty Partners and Barings in locating one of the few remaining vacant and developable parcels of land in the 265-square-mile San Fernando Valley.

These buildings are the first-ever state-of-the-art logistics facilities to be built in the San Fernando Valley, the City of Los Angeles’s largest and most-densely populated suburban region with a population of 1.8 million. If it were its own city, it would rank as the sixth largest in the U.S., according to the most recent U.S. Census Bureau data.

“That’s why it was so important to OnTrac, and is important to so many other logistics firms, to find buildings that can house their operations close enough to such a dense and urban population center in order to get products to the front doors of customers in just hours or overnight,” said DeGrinis. “We looked at sites and buildings in areas like Valencia, just 10 or so miles away from the site they chose, and they said those 10 miles could make the difference in on-time deliveries due to its distance from Interstate 5, the state’s major north-south highway that intersects with every other major interstate, state highway and dozens of freeways that serve Greater Los Angeles.”

OnTrac’s new facility will be the first to include cross-dock loading, 32-foot minimum height clearances, 36 dock-high loading platforms, a power platform to provide heavy electricity use, robotized distribution systems that all logistics firms depend on to sort, schedule and move products in the most efficient manner possible The building also will include a modern, secured truck and large truck court designed to meet the vast changes in transportation technology that provides the same efficiencies like those that keep jetliners in the air almost constantly, or move railways with a timeliness and precision never seen before, and that are all designed to keep products moving around the clock.

“With so many structures that have been operated profitably as just old-fashioned warehouses for 30 years or more in this once suburban valley, there’s been no real motivation for owners to either sell or renovate what to them are like ATM machines spewing out rental dollars from tenants on a consistent basis every month,” said DuRoss. “With e-commerce evolving so rapidly, the landscape for these landlords has changed. We are now challenging them to look at different ways to accommodate these type of uses. If they raze old warehouses and develop these new, state-of-the art logistics facilities, there may be more value for them in doing so. There are also opportunities for them to sell at a time when the market is at a peak in demand. There are virtually zero vacant sites remaining on which to build new structures in the San Fernando Valley.”

OnTrac is a national third-party logistics company that provides every type of delivery service and handles every type of product from small packages for clients like Amazon, to major, palletized products weighing hundreds of pounds to several tons. Its fleet of vehicles includes the latest in alternative fuel vans and light trucks to semi-trailer trucks, all of which can be serviced, loaded and dispatched from the new facility to meet the needs of its variety of small and large clients.

But the most important issue to OnTrac at this particular site, in addition to the state-of-the-art building features, was its location adjacent to one of Southern California’s major surface transit routes – Interstate 5 – that links the project’s location not only to the northern part of the state, but, more importantly, to the densely populated Greater Los Angeles area with the largest population base in the nation and to its vast network of intersecting freeways, state highways and other interstates.
“When we were searching for sites for OnTrac, not even Valencia, just 10 miles northwest of the project, nor Ventura County, west of the project, would satisfy the time requirements needed to deliver products to customers because they were too far away from I-5,” said DeGrinis. “That’s why it was so eager to lock up this site despite the fact that it won’t be finished for a year.”

Interestingly, and demonstrating the lack of available land upon which to build such facilities in the valley and elsewhere, and the lengths developers are going to meet this demand, Sun Valley Business Park is being built upon land at 11063 Pendleton Street that was once considered undevelopable. Prior to construction of the new project, it had been used only as a storage lot for semi-trailer trucks.

However, advances in construction technology, and after the evaluation of a team of geologists and construction experts, the project was green-lighted by the city despite the silt and sand composition of the ground. It was then that the value of the land skyrocketed, setting another record for the San Fernando Valley in the process. The project site was sold for an undisclosed record, per-square-foot price. Likewise, when it came time to lease the project, rental costs also set a new benchmark for industrial property in the valley.

“This project, which we are so enthused about and which we hope will be the beginning of a new wave of such projects, has set new benchmarks for land prices, lease rates, construction methods, cross-dock loading, clear heights and so much more,” DeGrinis said. “It is a pioneering project that can and will be used to measure all other such projects against.”

After solving the riddle of how to build a stable, earthquake-resistant, state-of-the art logistics building on such unstable ground was completed, its first stage of construction looks more like something being built near the Pacific Ocean coastline, where pillars have to be driven into the sand to build homes or commercial structures.

At Sun Valley Business Park, towering pile drivers are pounding pilings into the ground to a depth of 100 feet in some cases. These will support the foundation’s bulwark of thick concrete construction. How many other projects could be built in the valley with similar circumstances isn’t known, but Sun Valley Business Center has pioneered the effort and construction on it is well underway.

“This project is state-of-the-art in every way possible way and should pave the way for other much-needed logistics projects in this heavily constrained, densely populated, and potentially target-rich environment,” Abraham said. “It’s simply a question of how do we locate and then convince current owners of aging, 30-year-old warehouses, to either sell their properties to our clients, or joint-venture with our developer-clients, to build new and more profitable state-of-the-art buildings. We hope Sun Valley Business Center sets the example.”

According to DeGrinis and his team, the demand factor for these large, urban infill buildings in densely populated areas is only going to grow.

“There is a growing wave of demand for much-needed land to build on and that wave is turning into a tsunami, one that the commercial real estate industry is continuing to swim over, under or around and face with increasing intensity on a daily basis,” DeGrinis added, “This is especially true as more logistics firms look for urban infill locations near major surface transportation arteries to service the growing need for ‘just-in-time” deliveries.”

About Colliers International Group
Colliers International Group Inc. (NASDAQ and TSX: CIGI) is an industry-leading global real estate services company with 15,000 skilled professionals operating in 68 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting.

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