Amazon has purchased a 215.6K SF San Bruno warehouse for $96.35M in a rare turn to the San Francisco Peninsula industrial market, San Mateo County public documents show.

Retailers covet the area because it is outside of the gridlock of the Central Bay Area and can accommodate consumers in the South Bay and Silicon Valley much more quickly than facilities in places like Oakland or San Francisco.

The acquisition represents a break of sorts for the e-commerce giant. Amazon has been reliably active in the South Bay and deeper East Bay, with deals like its 610K SF lease in Livermore. But e-commerce companies have a harder time with the more constrained but similarly coveted Peninsula market, experts say.

"It's more last-mile," Altus Group Senior Director Pauline Hale said. "That's a pretty dense area, and there's not a lot you can build there."

At 1000 San Mateo Ave., which was sold by Gcp San Bruno LLC, Amazon's new property sits about 10 miles away from downtown San Francisco and just 2 miles from San Francisco International Airport. The warehouse was built in 1948, according to property site Reonomy, and it had been serving as an indoor airport parking garage.

A relative dearth of available industrial sites makes Peninsula markets like San Bruno different from the ones in the East and South Bays that Amazon has been buying and leasing.

E-commerce companies wanting to serve customers through Peninsula distribution hubs have had difficulty, because sites have tended to go from industrial to office or R&D over the years, making the Peninsula "a very constrained market from the industrial standpoint," according to Colliers International Executive Vice President Edward Hofer.

"You've seen this march toward higher and better uses because of where [Peninsula industrial sites] are located," Hofer said. "In the East Bay, we haven't seen industrial being turned into office and R&D as much. In the case of the Peninsula, too, a lot of these properties are smaller. You don't have a lot of 500K SF industrial buildings."

The amount of inventory in upper San Mateo County pales in comparison to just Oakland's supply alone. The combined South San Francisco, Brisbane, Daly City, San Bruno and Millbrae area holds about 21.3M SF of industrial space, short of the 34.1M SF found in the Oakland market, according to a Q2 report from Colliers.

Amazon declined to comment on its plans for the San Bruno property, which sits along the 380 freeway and east of Highway 101.

“We are constantly exploring new locations and weighing a variety of factors when deciding where to develop sites to best serve customers, however, we don’t provide information on our future road map,” Amazon spokesperson Brittany Parmley said in a statement.

For San Mateo County as a whole, Amazon's purchase follows a near pause in sale activity; the purchase of a 15.5K SF office and warehouse building at 500-514 South Airport Blvd. was one of the few if not only industrial properties in the county to sell in Q2, Colliers' report shows.

San Mateo County has had a flurry of leasing activity, seeing 416K SF of positive gross absorption last quarter (besting the 328K SF seen in Q2 2019), Colliers finds.

Industrial real estate's resilient performance in the face of the coronavirus pandemic has not been limited to the Peninsula or greater Bay Area. Though occupancy growth isn't quite what it was a year ago in the sector, industrial absorption is still positive, coming in at 89.8M SF through the first half of the year, according to Cushman & Wakefield.

Amazon's purchase comes as the Wall Street Journal reports Amazon is in talks with Simon Property Group, the country's largest mall owner, about leasing some of its mall space for Amazon distribution hubs.

In the Bay Area, other big deals this year include leases for a combined 1.2M SF in Hayward and Richmond, as well as leases for a combined 436K SF in San Jose for two new delivery stations, the Silicon Valley Business Journal reports.