Two hot markets for North Bay commercial real estate in mid-2014 are industrial space in Sonoma, Napa and Solano counties and office space in central and southern Marin County.
Industrial space vacancy in Sonoma County dropped to 8.3 percent of 24.2 million square feet in the second quarter of this year from 10.1 percent in the first quarter and 10.6 percent a year before, according to Keegan & Coppin Co., Inc./ONCOR International.
Net absorption of space -- how much came off the market vs. became available -- totaled nearly 662,000 square feet over those 12 months. Most of that absorption -- 630,000 square feet -- was in Santa Rosa and the business parks near Charles M. Schulz--Sonoma County Airport, Windsor and Healdsburg.
Industry vacancy plummeted to 3.2 percent of 5.7 million square feet near and north of the airport, down from 5.0 percent in the first quarter and 7.0 percent a year before. The rate in Santa Rosa dropped to 9.3 percent of 10.1 million square feet from 11.3 percent the previous quarter and 12.1 percent a year before.
"There certainly has not been any new product built in a very long time," said Shawn Johnson, Keegan & Coppin managing partner, about the tightening industrial market.
While leasing in the Santa Rosa-area office space market in has been slow but steady, there is growing interest to buy land for building industrial and office buildings, he said. For example, American AgCredit bought land for its 120,000-square-foot headquarters offices under construction near the airport. Kaiser Permanente has been considering purchasing land in southwest Santa Rosa for a medical office building.
Real estate sources say there is serious interest in building industrial space in southern Sonoma County.
In Napa and Solano counties, though, land purchases have been happening, and industrial projects are lining up.
"Bay Area-wide, industrial vacancies are falling," said Glen Dowling, who leads Cushman & Wakefield's North Bay team.
With vacancy rates for larger-sized warehouses in south Napa and American Canyon between 3 percent and 4 percent, projects by Stravinski Development Group, Panattoni Development, Orchard Partners, New York Life/McMorgan & Company and The Pigman Cos. have several hundred thousand square feet warehouse space planned to be under construction this year, or already underway, in Stravinski's case.
A few requirements for 750,000 to 2 million square feet are being shopped at projects in Napa and Solano counties as well as in the Central Valley and East Bay, Mr. Dowling said.
"Napa has never had the product type to absorb that kind of requirement until now," he said.
In Marin County, local businesses seem to be doing well, as seen by an increased appetite for office space, according to Whitney Strotz, managing director of Cassidy Turley's San Rafael office.
"There's a limited supply of quality space and increasing pricing for quality spaces," he said.
Rents for class A office space in central Marin County have been increasing at double-digit rates for the past few years, according to a Cassidy Turley analysis of transactions. From just 1 percent growth in the 12 months ending in mid-2011, average effective rents in deals jumped 9 percent by mid-2012, 12 percent by mid-2013 and 15 percent by the mid-way point this year.
[caption id="attachment_95225" align="alignright" width="405"] Rental rates in lease deals in Larkspur, Greenbrae and Corte Madera have soared by about double digits per year since 2011. (credit: Cassidy Turley)[/caption]