While the market for office space in Solano County continues to be soft, deals for industrial and retail space -- including a large sale of Benicia warehouses -- are whittling away at high vacancy rates.

One of the biggest recent Solano County commercial real estate deals is the acquisition of 1.3 million square feet of industrial space in Benicia. Those 19 buildings and 9.9 acres of yard space -- in Benicia Commerce Center I and II on Stone and Getty roads and in Benicia Industrial Park on Industrial Court and Industrial Way -- were part of a 23.3 million-square-foot industrial portfolio Walton Street Capital purchased in California, Washington, Oregon and Texas in 2007 from CalWest Industrial Holdings.

IndCor Properties, a Chicago-based subsidiary of investment giant The Blackstone Group, LP (NYSE: BX), announced in late June it acquired a West Coast portfolio of that size and now lists those Benicia properties in its portfolio. Chicago-based Walton Street Capital turned the portfolio over to a special servicer in early June as $2.45 billion in debt on it came due and was talking with Blackstone about acquiring the properties, according to the Wall Street Journal and commercial mortgage information service Trepp.

[caption id="attachment_59638" align="alignright" width="450" caption="This 63,000-square-foot distribution warehouse at 6500 Goodyear Rd. in Benicia was part of a 23 million-square-foot industrial portfolio acquired by IndCor Properties in June. (credit: Colliers International)"][/caption]

Built in 1952, the Benicia warehouse property on Industrial Court and Industrial Way was the largest in the portfolio, at 1.09 million square feet, and had the second-highest secured loan balance, $8.87 million, or 4.3 percent of the $206.2 million total balance of the secured loans, according to Trepp. Phases 1 and 2 of Benicia Commerce Center were built in 1989 and 1999, respectively.

Colliers International has been managing and marketing the 4.8 million square feet of Walton industrial properties in the Bay Area.

Solano's industrial real estate market is on track for its strongest occupancy growth in more than five years, but the number of square feet involved in deals is has been lower, according to Garrick Brown, research director for Cassidy Turley. In the first half of this year, 430,000-plus more square feet were leased than put back on the market. Leases totaled 390,000 square feet in the second quarter of this year. That's way down from 978,000 square feet of deals a year before, yet total occupancy actually fell by 346,000 square feet at that time.  

"The big difference is that leasing activity at that time was dominated by space user consolidations, tenant renewals and relocations," Mr. Brown said. "This quarter’s leasing activity was dominated by expanding space users who were actively backfilling previously vacant space, as opposed to tenants shuffling from one building to the next or vacating large blocks of space."

Industrial vacancy dipped to 19.7 percent for Solano in the second quarter from 20.4 percent in the first quarter, according to Cassidy Turley. 

In the first half of this year, there have been several sizable industrial deals in Solano.

Bebe Studio Realty, the real estate arm for the Bebe store chain, purchased 240,000 square feet of distribution space at 4901-4995 Industrial Way in Benicia in May, according to Colliers.

Fresh from its relocation from Benicia to 126,200 square feet in Fairfield early this year, TricorBraun WinePak has expanded again. The wine division of St. Louis-based packaging supplier TricorBraun recently leased nearly 93,000 square feet at 5200 Watt Ct. in Fairfield, according to the Dowling-Bracco team of Cushman & Wakefield, who brokered the deal.

Another large second-quarter lease came from another wine-related company. QX Warehouse leased 92,000 square feet at 2320 Cordelia Rd. in Fairfield.

Those two deals brought Fairfield area's industrial vacancy rate below 15 percent for the first time in two years, reaching 14.1 percent of 9.8 million square feet in the second quarter, according to Mr. Brown.

Another big wine deal came in the first quarter, when bottle supplier Encore Glass' leased 80,000 square feet at 577 and 589 Indiana St. in Benicia.

Air cargo logistics provider Nippon Express USA leased 44,280 square feet of warehouse space at 801 Chadbourne Rd. in Fairfield in June.

Also in Benicia, OnTrac, CI Actuation and S&S Supplies & Solutions, leased tens of thousands of square feet each.

"The pricing matrix has changed," said Chris Petrini of Colliers. "While the market still is slow and moving, the sentiment has changed, where the tenant no longer is able to overplay its hand and there has been positive absorption."