Two projects in Lathrop, a small San Joaquin County city roughly 25 miles south of Downtown Sacramento along the Highway 120 Bypass, together account for nearly 8 million square feet of new industrial space. Lathrop Gateway Business Park is planned at approximately 3 million square feet across 10 buildings on 171 acres, with its site plan already approved by the Lathrop City Council. South Lathrop Commerce Center is building out to nearly 5 million square feet, anchored by a Wayfair distribution facility of more than 1.1 million square feet that is reportedly set to open later this summer. For anyone underwriting industrial property or considering a 1031 exchange in the broader Sacramento region, a supply wave this size just south of the metro is worth understanding, not ignoring.
What exactly is being built in Lathrop?
Lathrop Gateway Business Park is a light-industrial and warehouse business park planned across 10 buildings totaling approximately 3 million square feet on 171 acres along the Highway 120 Bypass, with Phase 1 accounting for roughly 990,000 square feet. The Lathrop City Council has approved the site plan review, according to the Manteca Bulletin, though a specific construction start date was not stated in available reporting.
South Lathrop Commerce Center is the larger of the two projects at build-out, nearly 5 million square feet of warehouse and light-industrial property, currently under construction and lease-up. Its anchor tenant is a Wayfair distribution facility exceeding 1.1 million square feet, reportedly set to open later in summer 2026.
How big is 8 million square feet, in context?
Eight million square feet of combined industrial space is a substantial addition to the broader Sacramento-San Joaquin logistics corridor, roughly comparable in scale to the entire industrial base of a mid-sized submarket. To put it in regional terms, Greater Sacramento’s industrial market showed negative net absorption of about 406,000 square feet in Q1 2026 per Kidder Mathews, meaning the region gave back more space than it leased. A single anchor tenant like Wayfair taking over 1.1 million square feet in one move is roughly two and a half times that entire quarterly absorption swing, which is a reminder that large single-tenant industrial deals can move a corridor’s numbers more than months of smaller lease activity.
Why does Wayfair anchoring South Lathrop Commerce Center matter?
A confirmed national e-commerce tenant of this size taking over 1.1 million square feet is a meaningful validation signal for a corridor, because large logistics users conduct extensive site selection before committing, weighing highway access, labor pool, and proximity to population centers. Lathrop sits at the intersection of Highway 120, Interstate 5, and Highway 99, giving it direct access to both the Bay Area and Central Valley distribution networks, which is likely a significant part of the site-selection logic. For smaller businesses and investors, a large anchor tenant like this often precedes additional demand from suppliers, logistics partners, and service businesses that want to be near it, a pattern seen in other logistics corridors around the country.
How does Lathrop’s growth compare to Greater Sacramento’s industrial trend?
Greater Sacramento’s own industrial vacancy reached 6.7% in Q1 2026 per Kidder Mathews, a 10-year high, even as average asking rent held at $0.82 per square foot NNN, up 1.2% year over year. Within the region, submarket vacancy varies widely: Elk Grove at 0.8%, Davis/Woodland at 5.5%, Placer County at 7.2%, West Sacramento at 11.5%, and Metro Air Park at 19.8%, all per Cushman & Wakefield for Q1 2026.
Lathrop sits just outside this regional dataset, in a separate reporting geography sometimes grouped with the South Central Valley or Stockton market. That means the 8 million square feet coming online there is not directly counted in Greater Sacramento’s vacancy figures, but it is close enough geographically to compete for some of the same regional and national tenants, particularly large-format logistics users who care more about highway access than city limits.
How does the broader Stockton and San Joaquin County industrial market look right now?
CBRE’s Q1 2026 figures for what it describes as the South Central Valley, a geography whose overlap with Stockton and San Joaquin County was not fully confirmed in available sourcing, showed 12.7% vacancy, negative net absorption of about 224,000 square feet, and average asking rent of $0.74 per square foot NNN, treat this as directional. Separately, Rotner Real Estate’s market update described the Stockton area specifically as tightening to approximately 8.2% vacancy in early 2026, with about 869,000 square feet of positive net absorption in a single quarter, and asking rents climbing to roughly $0.77 per square foot by the end of 2025 from about $0.55 per square foot in 2020, also a directional, secondary-source figure.
Those two readings do not agree closely, which is common for a market with fewer institutional brokerage reports than the Sacramento core. What both signal directionally, though, is a market that has moved meaningfully in the past few years, with rents up roughly 40% from 2020 levels per the Rotner figure, even as new supply like the Lathrop projects is actively being absorbed.
What does new supply at this scale typically do to rents and cap rates nearby?
New industrial supply at the scale of the two Lathrop projects typically does two things in the near term: it gives large tenants more negotiating leverage on lease terms in the immediate submarket while lease-up is underway, and it can pull some large-format demand away from tighter, more expensive submarkets closer to the Sacramento core. Over a longer horizon, if the space leases up as planned, an established logistics corridor with a track record of successful large-tenant deals tends to support values for surrounding land and smaller industrial and flex buildings, because it validates the location for future users.
Neither effect is guaranteed, and this is not a projection specific to Lathrop. It is simply the pattern seen in other logistics corridors that have absorbed a similar scale of new supply.
Should a Sacramento-area 1031 investor look at industrial outside the immediate metro?
For an investor selling a Sacramento-area property and exchanging into industrial, expanding the search radius to include corridors like Lathrop can offer a different entry point than competing for the tightest Sacramento-core submarkets, such as Elk Grove’s 0.8% vacancy. The tradeoff is added distance from day-to-day oversight and a market with fewer, less consistent brokerage reports to underwrite against, which means more due diligence on your part or your broker’s part before committing. It is not a fit for every investor, but it is a legitimate option worth evaluating alongside in-region choices.
Sacramento region and San Joaquin corridor industrial comparison, 2026
| Location | Vacancy | Net absorption | Average asking rent | Source / period |
|---|---|---|---|---|
| Greater Sacramento (regional) | 6.7% to 7.0% | -406,123 SF (Kidder) to -1.6M SF YTD (C\&W) | $0.80 to $0.82/SF NNN | Kidder Mathews, C\&W, Q1 2026 |
| Elk Grove | 0.8% | -4.8K SF | $1.00/SF | Cushman & Wakefield, Q1 2026 |
| West Sacramento | 11.5% | -1.58M SF | $0.80/SF | Cushman & Wakefield, Q1 2026 |
| Metro Air Park | 19.8% | +30.7K SF | $0.85/SF | Cushman & Wakefield, Q1 2026 |
| South Central Valley (near Stockton, boundary unconfirmed) | 12.7% | -224K SF | $0.74/SF NNN | CBRE, Q1 2026, directional |
| Stockton area | approx. 8.2% | approx. +869K SF (single quarter) | approx. $0.77/SF (up from $0.55/SF in 2020) | Rotner Real Estate, early 2026, directional |
| Lathrop (new supply) | n/a, in lease-up | Wayfair 1.1M+ SF anchor lease | not reported | Manteca Bulletin, 2026 |
The 1031 exchange page covers exchange timing if you are considering a trade into industrial,the investment sales page covers how CLL evaluates an acquisition outside the immediate metro,and the all markets page is a starting point for comparing submarkets across the wider region.
FAQ
How much new industrial space is coming to Lathrop?
Two projects, Lathrop Gateway Business Park at approximately 3 million square feet and South Lathrop Commerce Center at nearly 5 million square feet at build-out, together account for close to 8 million square feet of new industrial space.
Who is the anchor tenant at South Lathrop Commerce Center?
Wayfair, with a distribution facility exceeding 1.1 million square feet reportedly set to open later in summer 2026.
Is Lathrop part of the Greater Sacramento industrial market?
Not directly in most brokerage reporting. Lathrop and San Joaquin County are typically tracked separately, sometimes grouped with Stockton or a broader South Central Valley geography, though the corridor competes for some of the same large-format tenants as the Sacramento region.
How does Stockton-area industrial vacancy compare to Greater Sacramento?
Estimates for the Stockton area put vacancy around 8.2% in early 2026, a directional secondary-source figure, compared to 6.7% to 7.0% for Greater Sacramento per Kidder Mathews and Cushman & Wakefield, both for Q1 2026. The two markets are close but not identical.
Is industrial real estate outside the Sacramento core a reasonable 1031 exchange option?
It can be, particularly for investors comfortable with a market that has fewer consistent brokerage reports and more distance from day-to-day oversight. It is not the right fit for every investor and depends on your goals, timeline, and comfort managing an out-of-core asset. This is not tax or legal advice; confirm exchange eligibility and timing with your CPA and qualified intermediary.
What typically happens to industrial rents when a large amount of new supply comes online at once?
New supply generally gives large tenants more negotiating leverage during lease-up, though a logistics corridor with successful large-tenant deals, such as a confirmed anchor like Wayfair, often supports values for surrounding property over a longer horizon if the space leases up as planned. This is a general pattern, not a specific projection for Lathrop.
If you are exchanging out of a Sacramento-area property and want to see how an out-of-core industrial option like the Lathrop corridor compares to staying within the metro, that comparison is worth running before your exchange clock starts. Call or text Matt at 916-513-0217, or book a 15-minute consultation at calendly.com/bingamanrealty/15-min-consultation.