The Old Costco Building Sold Again for $81 Million

Torrance Industrial Building Sells for $81 Million By Hannah Madans Monday, October 5, 2020 Share Former Costco site is one of the priciest square-foot industrial sales in a decade. Former Costco site is one of the priciest square-foot industrial sales in a decade. Photo by Ringo Chiu. Ringo Chiu | Staff | Los Angeles Business Journal A Torrance building under renovation for use by Amazon.com Inc. has been sold for $81 million, making it one of the priciest industrial deals in a decade, based on price per square foot, according to CoStar Group Inc. The transaction price of $548.33 per square foot is the twice the average rate for the area, according to CoStar. The former Costco Wholesale Corp. warehouse store is being updated for use as an Amazon Hub warehouse space, with a small consumer operation. At the time Costco said that it was too small. It has opened a new, larger Torrance location. The site is located at 2751 Skypark Drive. Realterm US Inc. purchased the site from Bridge Development Partners. Neither company returned requests for comment. Newmark Knight Frank brokered the deal. Bridge Development Partners purchased the site from Merlone Geier Management in November for $41.3 million. The company planned to redevelop the site, which has been vacant since 2017. The city of Torrance had approved Bridge Development Partners’ plan to demolish the building and construct new properties at the location. The company pivoted when Amazon signed on for the property, which is now being updated. Roughly 118,000 square feet will be used for warehouse space and 12,500 will be set aside as an office and reception area. Chase MacLeod of Stream Realty Partners, who was not involved with the sale, said having a big tenant like Amazon attached to a property can drastically increase the sales price. “The value of the property explodes exponentially,” he said, adding that Amazon leases can be in excess of 15 years, making them highly desirable to building owners. MacLeod said Amazon is looking at signing leases for 1,000 locations over the next several years and is seeking smaller sites closer to densely populated areas. The key factor for many of these properties will be parking. “That deal is an example of a close to irreplaceable location … and it has the ability to be converted to a functional hub and has parking. That’s where the focus is and continues to be with these industrial sites: parking and location,” MacLeod said. Part of the excess land would likely be used to store trucks and same-day delivery vans, he added. Industrial space is in demand in the South Bay. During the second quarter asking rates in the area were $1.04 a square foot on a triple-net basis, up 5 cents over the previous year, according to data from Jones Lang LaSalle Inc. During the same period 2 million square feet of industrial real estate sold or leased, according to the brokerage. The third quarter was even stronger, according to industrial brokers. The growth of ecommerce is expected to increase demand for industrial space by 2 billion square feet over the next decade, according to CBRE Group Inc. “Even from the onset of Covid, our reliance on ecommerce has only increased,” MacLeod said. He added that the Torrance sale was likely the first of many underutilized big-box retail properties that could be used as industrial space especially as so many have parking and dock-high loading already