CapRock Partners Seizes Industrial Opportunities in Western Region
Newport Beach, Calif.-based CapRock Partners was busy before the pandemic, but shows no signs of slowing down even as brick-and-mortar retail reopens. The industrial investor, developer and asset manager’s newest venture is also its biggest: a 183-acre infill project in Phoenix where it plans to build an eight-building industrial complex that totals more than 3.4 million square feet.
“Several years prior to the pandemic, we recognized the ecommerce trends along with the demand for larger logistics facilities and subsequently made investments in buildings and land positions in order to capture a segment of that demand,” says Bob O’Neill, CapRock’s senior vice president of acquisitions. “In the 16 months since the onset of the pandemic, our growth has accelerated.”
Phoenix’s Industrial Market Rises
CapRock has added about 4.8 million square feet of Phoenix-area industrial product to its portfolio since the pandemic’s onset. Its total pipeline in the Valley is now close to 6 million square feet, with its Phoenix-area acquisition closing in 2017.
Aside from CapRock, Cushman & Wakefield also appears to be bullish on Phoenix’s industrial market. The firm projects Phoenix’s preliminary industrial absorption to be about 12 million square feet for the first half of 2021. This compares to 13 million square feet of absorption for all of 2020, which was the previous annual record.
“We are thrilled with the quality and scale of the portfolio we are building in Phoenix,” O’Neill continues. “The region has experienced phenomenal population and job growth, and we are continuing to evaluate compelling industrial acquisitions and ground-up development projects in various submarkets throughout the Valley.”
CapRock West 202 Logistics, the firm’s newest project, is set to break ground later this year near the southeast quadrant of the I-10 Freeway and Loop 202. It will be developed in two phases, with Phase I scheduled to deliver in the third quarter of 2022. The asset’s eight buildings will range from 228,000 to more than 1 million square feet, with clear heights between 32 and 40 feet. All buildings will feature dock-high and ground-level loading with secured concrete truck courts. Each of the buildings have been designed with varying building depths and are divisible to accommodate multiple tenants.
The project’s close proximity to the on/off ramps of two major freeways enables single-day deliveries to Southern California, Dallas, Denver and Salt Lake City. Other nearby logistics and distribution facilities include Amazon, Kroger, CVS, Target, Home Depot, Costco, Staples, PetSmart and Kellogg’s.
“CapRock West 202 Logistics will be developed on one of the largest remaining undeveloped infill sites in Phoenix,” says Jon Pharris, co-founder and president of CapRock. “Its prime location at the intersection of two major freeways, coupled with strong industrial demand drivers in the market make it a perfect fit for our development strategy focused on large-scale logistics solutions across top Western U.S. markets.”
The West Continues to Look Attractive
Including its newest project, CapRock will be under construction on six individual industrial buildings in the Southwestern U.S. that contain more than 1 million square feet throughout 2021 and 2022.
“In most industrial markets out West, the industrial vacancy rate for 1-million-square-foot buildings ranges from zero to less than 1 percent,” O’Neil says. “Tenant demand for these larger facilities is currently outpacing supply. Our goal is to stay ahead of that demand. We have worked diligently over the past several years to secure infill locations for the development of buildings in excess of 1 million square feet. Large infill land sites suitable for the development of these expansive logistics buildings are challenging to find.”
Outside of Phoenix and its home state of California, CapRock has also developed a sizeable portfolio in Las Vegas. The firm acquired a 10-parcel land assemblage totaling 20.7 acres in North Las Vegas this past August. The land parcels were acquired from nine individual sellers.
The site will soon be home to CapRock Tropical Logistics Phase II, an industrial complex that will sit adjacent to CapRock Tropical Logistics, a two-building, 1.1-million-square-foot industrial complex. The first phase of CapRock Tropical Logistics is fully pre-leased and scheduled for completion in the third quarter of 2021. A groundbreaking for Phase II is planned for first-quarter 2022. Completion is slated for the fourth quarter of 2022.
“In the last few years, the North Las Vegas submarket has quickly evolved to be one of the most sought-after industrial markets in the Southwest U.S., evidenced by the recent developments, major leases and record-breaking investment sales,” says Taylor Arnett, first vice president of acquisitions at CapRock. “The demand for warehouse space has been largely fueled by consumer online shopping preferences, and the magnitude of this project reflects our confidence in both this market and our project team’s ability to deliver a Class A product that attracts high-quality tenants.”
CapRock is also seeking opportunities in Seattle, Salt Lake City, Denver and Portland, Ore.
“CapRock has a strategic approach to making investment decisions and is very deliberate about site locations, building layouts, sizes and building features to ensure we’re providing real estate facilities tailored to meet the needs of tenants who seek space in those submarkets,” O’Neill adds.
The firm believes ecommerce will continue to take an increasingly larger share of retail sales, causing CapRock to focus on the development of large-scale logistics facilities, last-mile ecommerce buildings, multi-tenant industrial business parks, and buildings that can be utilized by distribution companies or manufacturers. CapRock has also been working on build to suits for Fortune 500-caliber companies.
“Several years ago, we anticipated that Fortune 500-caliber companies were going to consolidate multiple facilities into a single, larger building, so we strategically positioned our investment strategy to capture this fundamental shift in the marketplace,” O’Neill continues.
Even with a vaccine and a return to normalcy – or, at least, a new normal – on the horizon, CapRock remains steadfast in its approach to aggressive investment, development and management out West. The firm will continue to take the pulse of this region’s robust industrial markets as it determines what users are likely to need both now and in the future.
— Nellie Day
This article originally appeared in the September 2021 issue of Western Real Estate Business magazine.