[caption id="attachment_53513" align="alignright" width="389" caption="Clockwise from top left: Al Coppin, Bill Kampton, Steve Crocker, Haden Ongaro, Steven Leonard"][/caption]

Businesses are out in greater numbers shopping for real estate to buy and lease, but local commercial property experts are quick to note that it's not the surge of activity seen in recent months in other parts of the Bay Area.

Office space vacancy in Sonoma County has been steadily high for the past two years, ranging between 22 percent and 24 percent, according to commercial real estate brokerage Keegan & Coppin. In the first quarter, 23.5 percent of the county's 13.8 million total square feet was estimated to be available for lease.

A key reason for that has been significant reductions in rent for the top-quality (class A) space, creating vacancies in class B space, according to Al Coppin, president of the brokerage. Financial services and health-related companies were big benefactors in the past few years.

There was 168,000 more square feet available for lease in the first quarter than there were a year before, despite small but positive 59,000 square feet of net absorption of office space in Petaluma, according to Keegan & Coppin.Top commercial real estate deals and the people who made them happen

April 30, 2012

The “Top Deals and the People who Made them Happen” represent the top leases and sales for each Marin, Napa, Solano and Sonoma counties. They are based on submissions from the largest brokerages and Business Journal research. [read more]

"We don't see a resurgence of everyone looking for space, but we're not seeing retrenchment," Mr. Coppin said. "It's kind of just bubbling along. That's not unusual for Sonoma County."

However, sales of commercial property are at a pace that's double what it was a year ago, as lenders increasingly look to fund good deals and property values remain below the cost of constructing a new building, Mr. Coppin said.

Different from the rock-bottom pricing of Petaluma of two years ago, owners are bringing properties to market with more sensitivity to what market demands are. For example, some of the buildings Basin Street Properties repurchased in Petaluma last year were resold to investors, some of whom have sold them again at even higher values, according to Mr. Coppin.

Industrial space vacancy in the county hit a recent bottom at 12.2 percent in mid-2011 and rose to 15 percent through the first quarter of this year, which is higher than it was two years ago.

Sonoma County retail space vacancy, however, has been steadily falling after peaking in 2009 during the rapid economic slowdown. The vacancy rate was 5.5 percent in the first quarter, down from 7.7 percent a year before and nearly 9 percent in early 2010.

Vigorous leasing activity in the South Bay, on the Peninsula and in San Francisco in recent months is encouraging for the North Bay but more for the future, he said. Wealth created there  has migrated over the years to the North Bay because of the better lifestyle, resulting in ventures here.

Year-over-year job growth in Sonoma County has been trending upward since late 2009, according to Employment Development Department figures. After falling in the second and third quarters of last year, annual job growth resumed the upward trend in November, finishing March at negative 0.4 percent.

Marin County office space vacancy dropped rapidly -- more than five percentage points -- in the fourth quarter of 2011 and first quarter of this year, according to Keegan & Coppin figures. The vacancy rate was a still-high 20.3 percent of 7.23 million square feet in the county, but that was down sharply from 25.7 percent in the third quarter and 23.3 percent in the fourth quarter.

Marin continues to have the lowest unemployment rate in the state -- 7 percent in March. But the direction of the job market won't be clearly seen until the state releases industry employment figures for the county.

Haden Ongaro, who oversees Cornish & Carey Commercial Newmark Knight Frank's two North Bay brokerage offices, said two key reasons for improvement in the Marin office market were the 120,000-square-foot lease in January by Novato-based BioMarin Pharmeceutical at San Rafael Corporate Center in San Rafael and the purchase of a 328,000-square-foot office building at Marin Commons in north San Rafael also in December by the county of Marin for more than 100,000 square feet for county offices.

"We're seeing a fair amount of activity, especially in the last three weeks," Mr. Ongaro said. "Some requirements have popped up in the 20,000- to-40,000-square-foot range."

Other large amounts of office space have been leased up, including expansions by Willis Lease Finance and TravelSmith in Fireman's Fund Insurance Co.'s surplus third building at the headquarters campus in Novato.

At the south end of that city, Barker Pacific Group has been filling up vacant spaces at the Hamilton Landing commercial redevelopment. The departure of Disney's ImageMovers Digital computer animation studio from 120,000 square feet in two renovated hangars left a big vacancy in jobs, although the space is still leased until January 2014, according to Michael Barker, managing partner.

Yet in the past few months, several prospective tenants have been considering significant portions of the ImageMovers hangars and existing tenants are expanding, he said.

"We've seen recently good pickup in inquiries for space," Mr. Barker said. "They're mostly from Marin companies looking for more space. Three years ago, it was the other way around."

For example, Marin Individual Practice Associates is doubling its footprint at Hamilton Landing, recently signing a seven-year lease for 19,000 more square feet, located in a large part of former Smith & Hawken offices. Another undisclosed existing tenant is planning a 15,000- to 25,000-square-foot expansion.

Only 15 percent of the 465,000-square-foot development is not under lease.

Continued activity could further stabilization of office rents in Marin, according to Mr. Ongaro. There has been some increases in effective rents in central and southern Marin and indications of stabilization of northern Marin rents by year-end.

"The increases won't be dramatic," he predicted. "There will be compression between asking rates and where deals are made, but we're still a ways before we'll see rent growth."

Napa County's commercial real estate market is driven by the valley's main economic drivers, the wine industry and tourism. After dramatic restructuring of wine inventories in 2009 and 2010, local vintners and their logistics and supply partners have been on the move in the past year.

In south Napa County where many of the large wine warehouses and distribution hubs are located, there's been a noticeable increase in demand for 15,000- to 25,000-square-foot air-conditioned wine storage spaces, according to Bill Kampton and Steve Crocker of Colliers International.

They pointed to three recent leases in that size range in south Napa County: 16,125 square feet by Amedeo Wines, 26,600 square feet by Benchmark Wines and 22,540 square feet by Anu Wines.

Despite those deals, Colliers estimates industrial space vacancy in that area increased slightly from 9.20 percent at the end of the fourth quarter 2011 to 9.91 percent at the end of first quarter. Available warehouse space now totals 1.04 million square feet.

"Overall, interest in industrial properties has increased as both calls and tours are on the rise," Mr. Crocker said. "Office continues to be challenged and will likely remain so until hiring increases."

Colliers estimates office space vacancy in south Napa Valley remained steady over the last quarter though still very high at 22.16 percent, or 265,000 square feet.

But economic indicators hint at a change coming for office space in Napa Valley. While the total number of industry jobs has been declining in Napa County since 2002, year-over-year job growth has been trending upward since hitting bottom in mid-2009, according to the latest figures from the state Employment Development Department. Average job growth for the first quarter of this year was slightly positive at 0.2 percent, compared with the beginning of 2011, and broke into positive growth territory for the first time since 2007, according to the data.