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National Stores vacating Otay Mesa building

National Stores Inc. is leaving its 600,000-square-foot regional distribution center in Otay Mesa to move into a new, comparably sized building developed by Sares-Regis (SRG) Commercial Development in Perris.

“[National Stores is] a family-owned Southern California success story, and we welcome them as a tenant,” said Larry Lukanish, senior vice president of SRG Commercial, in a statement.

Officials from the Gardena-based National Stores could not be reached for comment by press time.

The industrial building on 31.32 acres at 2020 Piper Ranch Road in Otay Mesa was originally developed as a build-to-suit for Factory 2-U in 2003. That San Diego-based firm filed for Chapter 11 bankruptcy protection less than a year later.

National Stores then acquired Factory 2-U and its 172 stores, before Factory 2-U was liquidated in August 2004. That resulted in a $28.5 million payment to a liquidating liability company headed by National, which has fully occupied the building ever since.

Sunroad Enterprises was the original developer of the building, known as the Sunroad Corporate Center. Sunroad, which is also developing retail on the mesa, has a 20.13-acre industrial parcel remaining for future development in the vicinity at the intersection of Lone Star Road and Harvest Road.

While the Factory 2-U company was liquidated, National has retained the Factory 2-U brand here and across the country. Local Factory 2-U stores are heavily concentrated in the South Bay with two in Chula Vista, one in National City, one in Imperial Beach, and one in San Ysidro as well as a Lemon Grove location.

National Stores Inc. is leaving its 600,000-square-foot regional distribution center in Otay Mesa to move into a new, comparably sized building developed by Sares-Regis Commercial Development in Perris. Courtesy photo

Rob Hixson, a CBRE senior vice president, explained that National Stores’ lease on the building expires on July 31. He also said the building’s ownership, a San Francisco-based partnership controlled by Morgan Stanley, would ideally like to lease the building, but might be willing to sell for the right price. Hixson is marketing the property along with Richard Kwasny, also of CBRE.

Divisible down to 121,000 square feet, Hixson said the building could be divided into as many as four quadrants, if not occupied by a single tenant.

Hixson said while it is difficult to market a building for lease while the outgoing tenant is still inside, the cavernous space has attracted wide interest.

“There just aren’t that many large buildings,” Hixson said.

Features in the industrial building include 15,000 square feet of ground floor office space, which includes a break room, meeting areas, and shipping and receiving areas.

The building has a 68,213-square-foot removable mezzanine working platform (not included in the square footage) and 32-foot clear height doors and knock-out concrete panels for 80 additional dock-high doors. The building is served by about 600 parking spaces.

Additional amenities include a guardhouse with full perimeter fencing and video cameras.

Hixson also likes the fact the property is adjacent to state Route 905 and is only one mile from the Cross-Border Terminal that is slated to be operational before the end of the year.

“The San Diego-Baja bi-national region encompasses more than $25 billion in annual trade and 6 million residents,” a newly published CBRE brochure on the property states.

Hixson said Otay Mesa’s current vacancy is less than 10 percent, with about 1.5 million square feet of available space, though this will temporarily climb to about 2.1 million square feet and push the vacancy back above the 10 percent mark. Hixon doesn’t expect the space, though large, to be vacant long, however.

SRG indicated that National Stores is leaving Otay Mesa for Perris because it is a more central location. In addition, not only is National getting a new space, the 579,708-square-foot development is LEED-certified with 12,600 square feet set aside for office space.

National Stores has signed a $26 million, 10-year lease to go into the new Perris building at 3900 Indian Ave. The facility will have 109 dock-high doors and secured parking for 138 trailers.

Founded in downtown Los Angeles in 1962 by Joseph Fallas, National Stores operates 325 stores in 22 states and Puerto Rico as Fallas Paredes, Fallas Discount Stores, Fallas Kid Stores and Factory 2-U. The merchandiser sells brand-name and private-label clothing, along with shoes and home décor.

SRG was represented by Tom Taylor and Steve Bellitti at Colliers International’s office in Ontario, Calif. Tres Reid and Rich Rizika in the El Segundo office of CBRE represented National Stores.

Irvine-based SRG has developed or acquired approximately 40 million square feet of industrial/commercial properties worth $3 billion since 1994, primarily in California. The firm manages approximately 20 million square feet of commercial properties for its partners and investor clients. SRG is also California’s leading privately held developer of LEED-certified buildings.

As evidenced by what it has done in San Diego County, SRG is not only a major developer, but a major investor as well. In August 2014, an SRG-controlled partnership paid $23.8 million to acquire the 102-unit Alta Vista apartment complex in Escondido. The firm is a major developer of the 132-acre Bressi Ranch development in Carlsbad as well.

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