Large Napa warehouses break ground

Southern Napa Valley is in the midst of another wine warehouse building boom to accommodate rebounded sales of North Coast wine and ample recent winegrape harvests.

More than 500,000 square feet of space in three buildings is under construction, and another 646,000 square feet is poised to come out of the ground in coming weeks. It's been nearly a decade and a half since the valley had that much new space available for lease at once, not counting the 744,000-square-foot American Canyon warehouse built in 2011 for Biagi Bros. Transportation and Warehousing as a logistics center for Jackson Family Wines. The surge in warehouse projects back then was in response to double-digit sales growth for high-end wine in the latter half of the 1990s.

Grading began at the beginning of this month for a 226,044-square-foot first building at the roughly $20 million, 19.4-acre Greenwood Business Park project on Airport Road at Devlin Road in south Napa. Completion of the 11.5-acre first phase is anticipated in April, and the developers are seeking building permits for a 90,000-square-foot warehouse on the remainder. Colliers International is marketing the project.

"Conditions of the market are very tight with respect to warehouse availability, and we felt that the construction of a new state-of-the-art class A warehouse building will be received very well," said Ross Berry, senior director for New York Life Real Estate Investors.

A year ago, the company and San Francisco-based McMorgan & Company, which finds investments for pension funds, orchestrated the purchase of the property and its fully entitled project, formerly called Greenwood Commerce Center, for MNCVAD-Ind Greenwood CA, led by Northern California construction trade union pension funds.

The fund started with $91 million and is planned to grow to $150 million, with leveraged investment power of $250 million to $400 million, according to Mr. Berry. So far, the fund has purchased and has been renovating warehouses in San Jose and San Ramon, bringing the portfolio so far, with the development project, to 500,000 square feet.

The first Napa building will feature 30-foot clear height, insulation for wine storage, 27 truck dock doors and sizing to accommodate up to three tenants of at least 80,000 square feet. Devcon Construction is the general contractor, and RMW Architecture & Interiors designed it. Northern California carpenter, painter, glazier and other trade unions that participate in the fund are working on the project.

Southern Napa Valley's industrial vacancy rate increased to 7.6 percent in the second quarter from 6.4 percent in the first, as limited leasing activity combined with two sizable new warehouses coming on the market, according to Robert Gerard of Colliers. Yet wine warehousing space remains tight in Napa County, as most of the availabilities are in smaller light-industrial spaces with less than 50,000 square feet.

In March, ICC/Stravinski Development Group and Hess Development broke ground on the $25 million, 287,000-square-foot Lombard Crossing Industrial Park at the north end of Lombard Road in American Canyon. The two buildings are set to be done by early next year.

After developing and entitling Greenwood as well as 34-acre Napa Commerce Center at the southwest corner of the intersection of Airport Road, Highway 29 and Jameson Canyon Road, Sacramento-based The Pigman Companies purchased the latter project back from the lender. About two and a half years ago, Pigman handed the "keys" to the properties back to lenders, but in June as manager of Napa One, LLC, purchased the Napa Commerce Center site and project from US Bank for an undisclosed amount.

"My interest in the site and in Napa and confidence in the marketplace did not wane," said principal Kris Pigman.

The project is approved for about 490,000 square feet in seven buildings, including a service station site. There are three office or flex-type buildings of up to 45,000 square feet and three warehouses with 81,000--155,000 square feet.

Cushman & Wakefield is marketing the project.

Another large project set to come out of the ground is Napa Logistics Park, a 218-acre property south of Devlin Road at South Kelly Road in American Canyon. It was planned for up to 2 million square feet of commercial space in buildings. A 646,000-square-foot warehouse planned for the first phase was put on hold in 2010 because of the economy, but that building could start coming out of the ground this month or next.

The city annexed the property in January 2011.

On Feb. 18, the city council approved the sale of the property to Orchard Partners, a real estate developer with Lafayette and Mountain View offices, and DivcoWest, a developer with offices in San Francisco and Boston, according to city documents and agents involved. That approval was needed under the development agreement the city made with the current owner, a venture between Headwaters Development Co. and Deutsche Bank's RREEF group.

Colliers is marketing the project.

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