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While the Santa Rosa north corridor real estate market saw an increase in vacancy rates in 2009, during 2010 there was a decrease in the industrial vacancy for the region and office vacancy remained flat.
The north corridor stretches from business parks around Charles M. Schulz--Sonoma County Airport north through Windsor to Healdsburg. Industrial and office vacancy rates there are starting to decrease. With no speculative construction expected for the foreseeable future, rents should start to rebound.
The fourth-quarter office vacancy rate in the corridor, increased slightly to 16.3 percent from 16 percent at year-end 2009.
Office rents are slowly recuperating. Full-service rates for class A space ranges from $1.85 per square foot to $2.15, and for class B, $1.55 to $1.65.
[caption id="attachment_30893" align="alignright" width="300" caption="Click to enlarge (courtesy of Keegan & Coppin)"][/caption]
Industrial vacancy decreased to 14.9 percent at the end of last year from 16 percent a year before. Industrial triple-net rents range from 65 to 75 cents per square foot for new facilities. Gross rates go as low as 50 cents per square foot for older or larger warehouses.
The north corridor welcomed a few large office users. Lytton Rancheria of California purchased a 21,120-square-foot office building at 437 Aviation Blvd. for their new office headquarters. One of the largest office leases in the corridor was with Dry Creek Rancheria Band of Pomo Indians, which leased 18,810 square feet at 3750 Westwind Blvd. Also of note is L-3 Sonoma EO's renewal-expansion in 14,807 square feet at 420 Aviation in Santa Rosa.
Although industrial activity is sluggish, the wine industry is carrying the north corridor industrial market. A high point was Alexander Valley Cellars' sublease of 169,027 square feet of warehouse space at 1010 Shiloh Road in Windsor. NeilMed Pharmaceuticals expanded into a 120,000-square-foot adjacent building at 551 Aviation. Sonoma County Vintners Co-op expanded with 35,000 square feet of warehouse space at 33 Healdsburg Ave. in Healdsburg.
[caption id="attachment_30892" align="alignleft" width="300" caption="Click to enlarge (courtesy of Keegan & Coppin)"][/caption]
With the economy showing signs of a slow recovery, the forecast for 2011 is cautious. Although interest rates are relatively low, other economic factors are affecting the local economy. The Sonoma County unemployment rate has leveled off around 10.5 percent, which is lower than the state average at 12.4 percent.
Job growth is our next obstacle. Year-over-year county job growth was barely in positive territory in December 2007 and then went negative until November 2010. Annual growth was 0.6 percent in November, 1.6 percent in December and 1.9 percent in January 2011. The county lost a net of 21,700 jobs those three years.
Though we experienced a larger negative growth, 7.9 percent between 2008 and 2009, improvement is required before local real estate will rebound.