North Santa Rosa corridor office-industrial: Looking for clarity in 2010

Monday, March 15, 2010, 2:06 am

By Shawn Johnson, Managing Partner, Keegan & Coppin, sjohnson@keegancoppin.com

Shawn Johnson

Over 2009 the Santa Rosa north corridor real estate market saw an increase in both the office and industrial vacancy for the region.

Office vacancy rates rose significantly from 14.1 percent in the fourth quarter of 2008 to 16.0 percent in the fourth quarter of 2009. Industrial vacancy rates saw a more significant increase, rising from 12.1 percent in the fourth quarter of 2008 to 14.9 percent in the fourth quarter of 2009. With the downturn in the economy and continued uncertainty, the forecast for 2010 is unpromising.

Office rates continue to be depressed with Class A rates ranging from $1.85 to $1.95 per square foot, full service, and Class B rates ranging from $1.55 to $1.75 per square foot, full service. Most sectors are seeing little to no demand. Industrial activity is down overall, and the lease rates are much more competitive at $0.55 to $0.65 per square foot, triple net, for new facilities, and as low as $0.40 per square foot, triple net, for older/larger warehouse space.

A bright spot in the market was the sale of a 21,120-square-foot office building at 437 Aviation Blvd. to Lytton Rancheria of California, which will make the building its new office headquarters. In addition several small office condominiums were sold to small companies looking to own their own property.

Several leases and renewals were completed in the area. Companies signing new leases included NeilMed Pharmaceuticals in 14,300 square feet at 5621 Skylane Blvd.; NAK Engineering, 11,240 square feet at 3414 Regional Parkway.; and TastingRoom, 9,133 square feet at 3681 Laughlin Road. A large recent renewal was State Water Resources Control Board in 35,607 square feet at 5550 Skylane Blvd.

Based on the lack of activity, most owners aren’t expecting the market to stabilize over 2010. It is uncertain as to when it will.