An industrial building loaded with the latest energy efficiency technologies has attracted Home Depot to lease more than a half-million square feet 17 miles east of downtown L.A. during a summer that has seen electricity costs rise steeply.
The Atlanta-based retailer leased the roughly 529,000-square-foot building at 13131 Los Angeles St. in Irwindale, according to CoStar data. Duke Realty completed construction of the facility, billed as its first "smart" building, earlier this month, paving the way for Home Depot to move in after signing one of the largest industrial leases in Los Angeles County since the start of 2021.
Duke has been building LEED-certified industrial buildings for the past two years but said this project goes further than the others in its efficiency goals. The building is expected to save the equivalent of the amount of electricity used annually in 156 homes compared to a traditional industrial building, according to a statement from the developer and a conversion calculator used by the Environmental Protection Agency.
Duke's project taps into a growing market for highly energy-efficient smart buildings, which is expected to increase to $105 billion in 2025 in development costs from $66 billion in 2020, according to real estate investment firm KBS. The technology is seen as a win-win for both tenants and landlords because it saves money and limits a building's carbon footprint, Nancy Shultz, Duke's West region president, said in a statement about the smart building's construction. Roughly 30% of a commercial building's waste is due to the energy it consumes, according to the Connected Cities Privacy Summit, a conference held in 2019 in Washington, D.C.
Energy-saving features are particularly important in Southern California, where Los Angeles-area households paid 47% more than the national average for electricity in July 2022, according to the U.S. Bureau of Labor Statistics. Electric rates also have risen nationally due to costs associated with upgrading grids, increasing demand due to climate change and higher natural gas prices as a result of the war in Ukraine, among other causes, according to The New York Times.
Duke's Irwindale building includes a smart automation system, smart metering system, solar panels and high-efficiency air conditioning units, according to the Duke statement. In addition, the building's LED lighting can adjust for brightness depending on the amount of daylight. The building's insulation and airflow features are designed to improve air quality and reduce the need for cooling and heating.
Roughly $2 million of the construction costs were allocated to the building's smart features, according to a Duke presentation in February. Construction and demolition started around December 2020.
The Home Depot lease is the fourth-largest industrial lease signed in greater Los Angeles since January 2021, according to CoStar data. The home improvement retailer has been active leasing space across Southern California, including a lease in May 2022 for around 180,000 square feet at Dominguez Technology Center in Carson and a lease in the second-quarter 2022 for 418,500 square feet at 11625 Venture Drive in Jurupa Valley.
The upper San Gabriel Valley industrial market, which includes Irwindale, has a 3.8% vacancy rate, higher than the greater L.A. average of 2.1%, according to CoStar data. The market's average rent is $17.83 per square foot, higher than the greater L.A. average of $17.48 per square foot.
A Home Depot representative did not respond to a request to comment from CoStar News.