Recently, Silicon Valley Business Journal announced that Apple has signed a new lease for nearly 314,000 square feet of industrial manufacturing space at McCarthy Creekside in Milpitas. It’s rumored that the tech giant will be paying roughly $0.90 per square foot in this new agreement.
Interestingly, this 10-year lease with project developer McCarthy Ranch comes at a time when industrial warehouse vacancy rates are rapidly shrinking in Silicon Valley. Prior to Apple signing the lease, in fact, Silicon Valley’s overall warehouse vacancy rate was a shocking 1.5%. Now, however, that rate is even smaller, at just 0.7%, according to research manager for Colliers International, Lena Tutko.
Tutko was quoted in the article, saying, “The shortage of available warehouse space is restricting tenant mobility… Warehouse users are often left with two options: renewing their lease, as seen by the top four or five deals of the third quarter, or relocate outside of the Valley.”
Owner and principal of McCarthy Ranch, Joey McCarthy, had confirmed to the Business Journal that the company’s newest industrial building in the development was no longer available on the market, but did not name or confirm the tenant. Apple, too, has yet to respond.
Though the City of Milpitas has not seen any documentation or applications related to the suspected lease, it welcomed the news, with City Manager Julie Edmonds Mares saying, “…It is always exciting to welcome a tenant to our great city.”
Apple’s latest lease is for one of two industrial buildings located between Interstate 880 and Coyote Creek, currently under development by McCarthy Ranch. Ultimately, the total project will include more than 800,000 square feet of industrial space in four buildings alongside 6,000 square feet of retail space.
McCarthy Ranch has already begun construction on another 350,000 square foot industrial building on the same site, which will eventually be the third building in the campus. This marks the second phase of development for the project, which is expected to be completed within the next 10 to 11 months.
Interestingly, Apple’s lease in Milpitas is part of an ongoing trend in which tech giants are beginning to claim more industrial space in the South Bay. (Remember how Google spent over $117 million last year on three North San Jose industrial buildings?) Additionally, Micron Technology Inc signed a lease over the summer for more than 600,000 square feet at the former Brocade Communications campus in North San Jose.
Joey McCarthy explained that McCarthy Ranch first noticed signs of the limited industrial and warehouse market several years ago, and shifted its McCarthy Creekside development in order to keep up with demand. He went on to say, “It was probably four years ago when we decided we were going to change from a more of an office=type building on the property to an industrial, R&D, manufacturing building…. the market was getting better and better for these types of buildings at the time, but it has kind of exceeded expectations.”
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