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Napa and Solano counties have been enjoying a string of large industrial real estate deals in recent months, and a number of projects are moving into construction as space options dwindle.

Companies are shopping for 3.25 million square feet of industrial space in North Bay counties, mainly Napa and Solano, according to tracking by The Dowling-Bracco Team of JLL. That includes firms that have toured prospective properties, plan to or have done so in the past few months but put plans on hold.

“There is a fair amount of activity in the market, but I would say, it’s slightly less than it was a year ago,” said agent Matt Bracco.

At that time, space requirements totaled roughly 4 million square feet.

The decrease is partly because there’s not many options to browse, Bracco said. About 1.5 percent of the roughly 17 million square feet of significantly sized industrial spaces in Napa County are available for lease.

Industrial vacancy plummeted in the county from 5.2 percent at the mid-year point in one deal. This fall, Dutch furniture company Ikea leased the newly completed 646,000-square-foot first building at DivcoWest’s and Orchard Partners’s 218-acre Napa Logistics Park development at 1 Middleton Way in American Canyon, according to real estate sources. Ikea and the property’s agents with Cushman & Wakefield declined to comment.

“There are a few planned products, which will probably break ground in the spring, and there’s activity on them right now,” Bracco said.

One Napa Valley project could be the second phase to Napa Logistics Park, which is planned for 2.9 million square feet in five buildings when done. The 372,000-square-foot Building 5 would have warehouse clear height — how high inventory can be stacked before reaching the roof — of 32 feet, 120 truck docks and four to eight grade-level doors.

The Pigman Companies of Sacramento plans to speculatively build the first of seven buildings in its Napa Commerce Centre project on Airport Boulevard at the intersection of Highways 12 and 29. The 83,000-square-foot building may be preleased by the time construction begins, Bracco said.

Indianapolis-based Scannell Properties, which built a 650,000-square-foot distribution center for Biagi Bros. and Jackson Family Wines in American Canyon a few years ago, plans to build a 90,000-square-foot warehouse in Napa Valley Gateway Business Park speculatively in spring.

Sacramento-based Buzz Oates Group of Companies, an active industrial-space building in Solano, has a 120,080-square-foot cross-loading distribution center coming out of the ground at 10 Jim Oswalt Way in American Canyon.

Innova Development of Los Angeles is building an 82,000-square-foot new wine-bottle-decoration plant for Bergin Glass Impressions at 451 Technology Way in south Napa. The 28-year-old company is expanding from 40,000 square feet nearby.

Innova also plans to build a 70,000-square-foot speculative warehouse.

Oakland-based Channel Properties, which built the landmark The Riverfront mixed-use complex in downtown Napa, is looking to prelease part of an over 100,000-square-foot warehouse in Napa Valley Gateway Business Park in south Napa before starting construction.

“As you can see, very low vacancy in south Napa Valley and product coming to market in middle to late 2018, and that should probably fare well,” Bracco said. “There are enough wine industry requirements that should satisfy a good portion of that new product coming to market.”

Another sign of activity in the Napa–Solano commercial property market is construction equipment finally rolling at the 154-acre Napa Pipe plant redevelopment project after 12 years of preparation. Excavation of about 122,000 cubic yards of contaminated soil started this year to build the first of 10–15 years of phases to the project, located at 1025 Kaiser Road near the intersections of Highways 29 and 221 south of Napa.

First to be built will be a Costco Wholesale store, set for completion in 2019, according to Keith Rogal of Napa Redevelopment Partners. It bought the property in 2005 and secured three years ago development agreements from the county of Napa development agreements and an annexation green light from Napa city voters.

Other phases will be 700 to 945 homes, built 70 to 100 a year, plus a school, parks and space for stores and other businesses.

While long-term, large-scale commercial development options are decreasing in southern Napa Valley and Fairfield, outside of annexation options some years down the road, the potential for millions of new square feet is solidifying in Vacaville and Vallejo.

The city of Vacaville recently approved money to upgrade the water system in Interchange Business Park, an area of the city bordered by Interstate 505, Vaca Valley Parkway and Midway Road. That will make construction on 258 more acres in 24 parcels feasible.

“We expect this will open up land for the possibility of 4.5 million square feet of industrial space,” said Barton Brierley, city community development director.

One project in that area is two 124,000-square-foot warehouses on Eubanks Drive by Buzz Oates Companies. The Sacramento-based builder-developer this summer inked a lease with Amazon for a newly completed 321,000-square-foot distribution center at 300 Crocker Drive in the same business park.

And speaking of Amazon, the city of Vallejo is waiting to hear the outcome of its proposal this fall to house a base of operations for the Seattle-based e-tailing giant. If accepted, it would go on 153 acres at the north end of the Mare Island Naval Shipyard redevelopment, which already has 110 businesses with 2,500-plus full-time employees in about 3.6 million square feet of occupied space, according to Ed Moser, spokesman for developer Lennar Mare Island.

But Vallejo isn’t just betting on Amazon. The city in early November plans to put out a request for qualifications of developers interested in building the projected 1.2 million square feet of office, industrial and commercial space in the north Mare Island area, according to Ron Gerber, economic development manager.

There have been a string of sizable new tenants and expansions on the island this year, with some improvements still underway. Factory_OS took over the quarter-million-square-foot modular-construction plant space BluHomes occupied in Building 680 and has 1,200 homes in the pipeline. Film Mare Island expanded by 125,000-plus square feet. Cinelease leased 28,000 square feet of new space. In addition to Mare Island Brewing, another libation maker — Savage and Cooke — is rehabbing 39,000 square feet in two of the island’s oldest buildings for a distillery. Water Emergency Transportation Authority finished its $20 million ferry terminal in March, and strong ridership has prompted commissioning of another vessel.

Lennar Mare Island is prepping 154,000 square feet in three buildings (223, 221 and 527) for prospective tenants and proposed upgrades to two more with 50,000 square feet of industrial space (Building 106) and 40,000 square feet of offices (Building 273).

The historic shipyard coal sheds on the waterfront are being revamped for tenants, providing 5,000 square feet in three units and another 32,000 square feet in the second phase.

One reason for a differential in rental rates between warehouses in Solano and Napa counties — 45 to 53 cents a square foot monthly on a triple-net basis in Solano versus 50 to 60 cents in Napa Valley — is the level of improvements that go into storage for wine in bottle, barrel or tank, Bracco said.

A “wine package” for tenant improvements on warehouses often includes rigid insulation in the walls, batts in the ceiling, automatic louvers to allow in cool night air and supplemental chilling for the few weeks a year that night air just isn’t enough, Bracco said. Ten years ago, that cost $10 a square foot, and now it’s $16–$18, compared with $7 to $9 a square foot to ready a conventional warehouse for a new tenant, he said.

Another reason for the higher Napa Valley rents owners are asking for is a significant amount of space that is available is new, and the rising cost of construction is calling for higher rents to justify building, Bracco said.

But Solano rents have been rising rapidly in the past 18 to 24 months, particularly in Fairfield with the completion of several large new warehouses, he said. New space there and in Benicia and Vacaville is shifting the benchmark for first-generation space, with 32- to 36-foot clear height and more pavement for truck maneuvering and trailer parking, versus 22- to 24-foot heights of new buildings five years ago.

“There are second- and third-generation buildings on the market that are causing rents to lag a little bit,” Bracco said.

Though Solano’s industrial vacancy was 4.15 percent in the second quarter — well below the 10 percent level often considered a balanced market — the half-dozen spaces in the county larger than 100,000 square feet tend to be older space, Bracco said.

Jeff Quackenbush (jquackenbush@busjrnl.com, 707-521-4256) covers the wine business and commercial construction and real estate.