[caption id="attachment_19369" align="alignright" width="125" caption="Chris Neeb"][/caption]
[caption id="attachment_19270" align="alignright" width="135" caption="Glen Dowling"][/caption]
[caption id="attachment_19273" align="alignright" width="135" caption="Matt Bracco"][/caption]
The industrial markets of Napa and Solano counties are seeing a modest amount of demand as we head into 2010.
Most of the current activity can be attributed to a “flight to quality” for local companies to improve their facilities and reduce their occupancy costs, especially for industrial space under 20,000 square feet. Smaller tenants are taking advantage of the excellent lease terms being offered by various landlords with most of the recent deals being signed with shorter lease terms of one to three years and generous rental concessions.
Throughout 2009, a significant percentage of the industrial transactions in Napa and Solano were primarily leases with only a few building sales completed. We expect building sales to remain scarce going into the first and second quarters as companies will remain conservative in their capital expenditures while the financial markets hopefully begin to improve.
We do not expect any significant new “speculative” construction in 2010 as financing is not available nor do market conditions justify the construction of any new product. We expect vacancy rates to flatten or even begin to drop slightly as leasing activity is likely to increase as we get further into 2010 and the U.S. economy stabilizes.
At year-end 2009, the overall vacancy rate for industrial space in Solano and Napa increased to 12.5 percent compared with 7.6 percent at the end of 2008.
But even though a few larger blocks of warehouse space became available in 2009, resulting in a rapid incline in vacancy, vacancy rates seem to be stabilizing in both Solano and Napa counties going into 2010.
The Solano County region, which includes Vallejo, Benicia, Fairfield, Cordelia, Vacaville and Dixon, continues to benefit from its central location between Sacramento and the Central Bay Area. Another positive note to mention, there is currently a trend of decreasing vacancy rates in both Solano and Napa counties. The overall vacancy rate in Solano decreased to 13.9 percent, down from 14.6 percent in the third quarter 2009. In Napa County, the fourth quarter 2009 vacancy rate is at 8 percent, down from 8.4 percent at the end of the third quarter.
The most notable lease and sale transactions occurring in 2009 in Napa and Solano feature the following transactions: La Tavola Linen Co. leased 61,000 square feet of manufacturing and warehouse space at 2655 Napa Valley Corporate Drive in Napa; WineBev Repack Services purchased a 42,500-square-foot light industrial building located at 500-514 Technology Way in American Canyon; and Jackson Family Wines and Biagi Bros. Transportation & Warehousing completed their 650,000-square-foot wine storage building.
In Solano County, Crystal Geyser leased 71,550 square feet at 5001 Fermi Drive in Fairfield; Cable Com LLC leased 45,054 square feet at 825 Chadbourne Road in Fairfield; and Meyer Corp. leased 200,000 square feet for a year at 299 Beck Ave. The only significant industrial construction that took place in Solano County during 2009 was Meyer Corp.’s 164,000-square-foot new “state of the art” automated storage and retrieval building, which also features a towering height of over 100 feet.