Construction of large warehouses has reached unprecedented levels in Solano and Napa counties, with millions of square feet under construction and millions more ready to come out of the ground and options for already available space evaporate, according to new research.
Demand continues to outpace new supply in Solano and Napa counties, and that’s fueling the 1.36 million square feet currently being built there, according to Colliers International’s second-quarter market report, released July 27.
“From large warehouse investment sales to new speculative buildings being quickly leased, there are many indications of a strong and active market in Solano and Napa counties,” wrote Phil Garrett, executive managing director in Colliers’ Fairfield office.
The industrial vacancy rate for Solano and Napa counties declined in the second quarter to 6.2 percent of 49.5 million square feet, down from 6.6 percent in the first quarter, according to Colliers. Average asking monthly rental rates increased by 3 cents a square foot to 53 per square foot, on a triple-net basis.
Based on 61.5 million square feet JLL tracks in Solano, Napa, Sonoma and Marin counties, the second-quarter industrial vacancy rate is estimated to be 2.6 percent, after 2.9 million more square feet came off the market in the first half of this year than came on.
Developer confidence in North Bay industrial real estate has bounced back from the economic recession, when the vacancy rate for such product types peaked at 12.5 percent in 2009, according to JLL. The brokerage’s North Bay team is based in San Rafael and led by Glen Dowling and Matt Bracco. Nearly 3 million square feet of warehouses and distribution centers are planned for southern Napa Valley, which has the highest concentration of any North Bay submarket, and 3.7 million square feet of projects, the report said.
Up to 1.49 million square feet is under construction in Solano, Napa and Sonoma counties, according to JLL and Colliers. Key projects are Panattoni Development Company’s million-square-foot Gateway80 Business Park in Fairfield, Orchard Partners-Devco’s 218-acre Napa Logistics Park in American Canyon, Buzz Oates Group of Companies projects in Vacaville and soon American Canyon, and Cader Corporate Center in Petaluma. So far this year, 646,000 square feet of new warehouse space has been completed, located in American Canyon, JLL said.
“The food and beverage industry continues to dominate industrial activity in Napa Valley, while recent reshoring trends and lower oil prices have resulted in related spinoff industries, i.e., glass and cork factories, also are popping up in the area,” the JLL report said. And wine is the key beverage pumping through the veins of the economies of Napa and Sonoma counties, though many industry suppliers are concentrated in Solano County too.
Logistics and distribution companies are actively scouting the North Bay for 5.03 million square feet of industrial space, according to JLL. That’s the most active of any part of the 43 million-square-foot Northern California industrial real estate market, the report said.
“As vacancy rates compress, institutional buyers are increasingly taking notice of the area, pushing many preleased build-to-suit developments” JLL’s report said.
A highlight for such a purchase was the million-square-foot Fairfield warehouse sold to an Arizona-based investor recently for $60.5 million. JLL brokered that deal.
Combine that with rising warehouse rents in the East Bay making the North Bay price-competitive, and North Bay industrial real estate is no longer primarily local-serving, the report said.
North Bay industrial real estate research
Colliers International: Solano–Napa industrial and office market reports
