Yet vacancy rates, net absorption barely change
The North Bay’s largest county had a number of large commercial property sales and leases in the past 12 months.
Despite some significant company expansions amid those deals, Sonoma County’s office and industrial vacancy rates barely changed from high levels of a year before — 22.2 percent of 13.8 million square feet of office space and 13.3 percent of 24.2 million square feet of industrial space in the third quarter of this year, according to Keegan & Coppin/ONCOR International.
That’s little changed from rates of 21.8 percent and 13.9 percent, respectively, at the beginning of 2009. Net absorption in the past 12 months was just 56,000 square feet of office space and negative 60,700 square feet of industrial space.
Three major sales of commercial real estate in 2012 alone totaled 1.74 million square feet. Napa-based PB&J Acquisitions and Investcorp International Inc. of New York on Feb. 17 purchased RNM Properties’ North Bay portfolio of existing buildings — 14 office and retail buildings with 842,000 square feet in Petaluma and Rohnert Park — for $65 million-plus.
It was the largest North Bay sale of commercial space in more than six years and PB&J’s second in Petaluma. That continued a trend since late 2009 of more than 2 million square feet in Petaluma commercial properties that have changed ownership and subsequently enjoyed a surge in leasing. The sale price per square foot was higher than the $40 to $60 range of recent large purchases in Petaluma in the past three years by Cornerstone Properties, Basin Street Properties and even PB&J.
Reno, Nev.-based Basin Street Properties on Oct. 3 regained its position as the largest owner of commercial real estate in Sonoma County with the repurchase of 17 Santa Rosa office buildings in six Santa Rosa locations for about half the price it sold them in 2005, or roughly $65 million. Basin Street acquired or built them a decade ago then sold them to Chicago-based Equity Office in mid-2005 as part of a 1.43 million-square-foot, 44-building, $263 million sale in Sonoma and Marin counties.
Basin Street plans to spend $6 million over five years in facility maintenance and upgrades on the new Santa Rosa properties.
Novato-based Biosearch Technologies Inc., an early pioneer in developing life science tools, plans to expand to Petaluma in early 2013 to provide room for continued growth. In late July, Biosearch purchased a lender-owned 120,000-square-foot office and industrial building at 2199-2201 S. McDowell Blvd. in Oakmead Northbay Business Park. It had been built to accommodate Tegal Corp.’s growth in the 1980s.
Thanks to about three dozen commercial condominiums at the 14-acre Town Green Village mixed-use development in Windsor coming on the market for sale in the first half of 2012, tenants as well as investors are buying up the condos at a fraction of original prices. After the bankruptcy court approved a reorganization plan for lead developer Orrin Thiessen, four banks took ownership of the retail and office condos and have been selling them for $100 to $200 a square foot.
Significant leases in the past year have been 126,000 square feet of office space in October to Medtronic for one building it currently occupies on Airport Boulevard north of Santa Rosa and an adjacent twin it moved out of a few years ago, a 63,500-square-feet vacant Mervyn’s store to Safeway for an expanded new store in Petaluma and 58,000 square feet of office and warehouse space for outdoors clothier Marmot in former Next Level Communications space in Rohnert Park.
Two major commercial space projects well under way in the county are Regency Centers’ 380,000-square-foot East Washington Place regional mall in Petaluma and 215,000-square-foot The Barlow industrial and retail center in Sebastopol. Retail vacancy countywide fell from the high 8 percent range in 2009 to 5.5 percent in the third quarter, according to Keegan & Coppin.
As construction progresses toward July 2013 completion of the first part of the 380,000 square feet of retail and commercial space at the East Washington Place regional shopping center at the southwest intersection of East Washington Street and Highway 101, developer Regency Centers has signed a number of shop and junior-anchor leases. Target Corp. earlier this year purchased 10 acres for its 140,000-square-foot anchor store there.
New larger retailers to the North Bay will be Pittsburgh-based Dick’s Sporting Goods, leasing 50,000 square feet, Phoenix-based grocer Sprouts Farmers Market in 25,000 square feet and Illinois-based Ulta Beauty in 10,000 square feet. Sprouts currently has five Bay Area stores and has been exploring a location in Santa Rosa. TJ Maxx, which has a store in Santa Rosa, plans to put a 46,000-square-foot Homegoods store in the mall.
Developer Barney Aldridge secured a $23.5 million construction loan from Wells Fargo in December to start an overhaul of the 12.5-acre former Barlow apple processing plant at the northwest corner of Highway 12 and Morris Street in Sebastopol into 17 modern corrugated metal-skinned, concrete-and-steel framed buildings tailored for artisan wine, beer and food producers. The goal is to finish the project by year-end. Among the 25 planned tenants are 40,000 square feet for Kosta Brown Winery for production as well as MacPhail Family Wines, coffee roaster Taylor Maid Farms plus bakeries and a glass blower.
Other major retail projects on the horizon are Target Corp.’s planned replacement of the vacant Gottschalks store building at Coddingtown Mall in Santa Rosa with a 144,000-square-foot store and 77,600 square feet of retail space at Bell Village in Windsor to be anchored by an Oliver’s Market grocery store.
Also in the works is 346,000-square-foot retail and office development Deer Creek Village, anchored by a Friedman’s Home Improvement store. In September, developer Merlone Geier Partners of San Francisco reached a settlement with Petaluma Neighborhood Association to drop its legal fight against the project for $191,000 in direct payment to opponents and legal fees.
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