Home Depot Pre-Leases 127K sf San Jose Industrial Project

UPDATED: Nov. 22, 2022, 11:35 a.m.: Home Depot, on a warehouse leasing tear in Southern California this year, has expanded its industrial footprint farther north in the Bay Area.

The nation’s largest home improvement retailer has pre-leased Overton Moore Properties’ nearly 127,000-square-foot warehouse project in San Jose, a Home Depot spokesperson confirmed in a statement. Atlanta-based Home Depot plans to use the project at 1953 Concourse Drive as a delivery center and open it in 2024, the spokesperson said. Employees there will receive and inspect appliances before loading them for delivery, adding another link to the company’s supply chain network for delivering devices and pieces of equipment to customers in the area.

Home Depot declined to comment on the deal’s financial terms and headcount-related questions. The company signed earlier this month, according to two people familiar with the transaction; they declined to share the exact length of the lease due to privacy concerns but described it as long-term.

Overton Moore representatives didn’t respond to a request for comment. Newmark’s Joe Kelly, the project’s listing broker, declined to comment.

The deal underscores Home Depot’s status as the new belle of the ball for industrial developers as it adjusts its supply chain and aims to have more goods in storage near customers. Its sales spiked during the pandemic as people spent more time at home and took on do-it-yourself projects and contractors saw an uptick in renovations. Sales rose more than 14 percent last year compared to 2020 to reach $151 billion, according to financial filings. Home Depot increased its warehouse portfolio by 16 percent during that time, to around 88.5 million square feet, the filings show.

Unlike Amazon.com, which takes a “lease some, buy some” approach to real estate, Home Depot prefers to rent than own its industrial space: It leases 95 percent of its distribution centers, financial filings show.

In Los Angeles and Southern California’s Inland Empire area, Home Depot has signed more than 4.5 million square feet worth of industrial leases so far this year, according to public property records reviewed by The Real Deal. Its planned San Jose delivery center is the only large warehouse development under construction on the city’s north side and one of only a handful now being built citywide. It’s three miles east of a nearly 103,000-square-foot warehouse Home Depot uses as a distribution center, according to online job postings. The company is renting that warehouse through 2024, according to the property records website CompStak.

Home Depot’s pre-lease validates Overton Moore’s decision to enter San Jose with the $13.5 million acquisition of the 7-acre site at 1953-1965 Concourse Drive. The property was occupied by a roughly 110,000-square-foot office and research building that was 10 percent leased when the developer purchased it in 2020. It’s located in the city’s International Business Park, a nearly 1.3-million-square-foot industrial submarket near North San Jose and two BART stations with a 1-percent vacancy rate at the end of last quarter, according to data from commercial brokerage Newmark.

The site also is two miles south of a Home Depot store in neighboring Milpitas. The company has five stores in San Jose, although the closest one to the project is about six miles away, according to its online store directory.

A month after Overton Moore’s purchase, the Torrance, California-based developer submitted preliminary plans with the city proposing to demolish the 1980s-era office and research structure and construct a one-story warehouse totaling nearly 119,000 square feet with an attached two-level office containing 8,000 square feet. San Jose’s deputy planning director approved the project in April, and Overton Moore began razing the development site’s existing building last quarter, according to city records and data from commercial brokerage JLL.

This article has been updated with excerpts from a statement from a Home Depot spokesperson.