Warehouse space is being built at a brisk pace in Solano County to meet demand from companies needing to store and move a large amount of North Coast wine and other goods coming into and going out of the San Francisco Bay area.
“We’re having, universally, the best market ever,” said Brooks Pedder, whose Cushman & Wakefield team brokers industrial and office deals in Solano and Napa counties.
One reason is the natural recovery of the economy and shrinking warehouse inventory along the Interstate 80 corridor in the East Bay as properties are redeveloped into higher-value residential properties, he said.
But driving growth for industrial real estate will be e-commerce, which has been a driving factor in a half-million square feet of Bay Area deals recently, according to Cushman & Wakefield. A large such deal is pending in Fairfield.
Key Solano projects are Panattoni Development Company’s million-square-foot Gateway80 Business Park in Fairfield and projects in Vacaville by Sacramento-based Buzz Oates Group of Companies.
Panattoni in April started site work for the 1.04 million-square-foot speculative Gateway80 Business Park project on 52.4 acres at 1 Cordelia Rd. In Fairfield, just east of the towering Anheuser-Busch brewery windmills along Interstate 80.
The three-warehouse development is the largest of 1.5 million square feet of industrial real estate projects set for construction in Solano this year, and the project is scheduled for completion and occupancy by year-end.
The corridor between the San Francisco Bay Area and Sacramento is “in desperate need of efficient, modern industrial buildings, such as the ones we will deliver here in Fairfield,” said Tim Schaedler, the Northern California partner for Newport Beach-based Panattoni Development.
The Gateway80 project will have two 430,500-square-foot buildings and one with 178,000 square feet. They all are being built to LEED standards. The warehouses will have 32- to 36-foot clear heights and 54- to 55-foot column spacing. The larger buildings will have 84 dock-high loading positions, and the smaller building 25 dock-high doors. The property will have 202 trailer parking spaces and 533 car spaces. Each building will have a 2,000-amp power supply, skylights and fire-suppression systems.
“This project is going up at the perfect time because we’re running out of product,” said Eric Dakin, senior project manager for Fairfield’s economic development division.
The vacancy rate for warehouse space in Fairfield is 1.5 percent, or 3 percent, when light-industrial and flex space is added, said Dakin, formerly a commercial real estate agent for Colliers International in the city.
Buzz Oates also broke ground last fall on a 92,568-square-foot production plant at 770 Chadbourne Rd. for Critelli, better known as The Olive Oil Factory. It makes wholesale olive oils and vinegars.
Craft beer maker Heretic Brewery bought the 24,000-square-foot building at 1052 Horizon Dr. it partly occupied and plans to expand into the rest of it. The addition also is set to have an expanded taproom serving food. Nearby, cheesemaker Formaggi Di Ferrante purchased an industrial condominium and plans to expand into organic products, add a tasting room and open a restaurant with a wood-fired oven.
“Our big incentive is how relatively business-friendly our city is,” Dakin said.
North Bay industrial real estate vacancy rates have been declining for several years, while demand is rising from distribution and manufacturing companies in the Bay Area, Sacramento and the Wine Country, according to the Gateway80 development and marketing team.
JOB GROWTH TOPS 2%
The county added 2,900 nonfarm jobs over 12 months, up 2.2 percent to 135,700.
Job-gaining industries over 12 months were educational and health services, up 900 jobs, or 3.6 percent, to 26,000; construction, up 700 jobs, or 7.8 percent, to 9,700; leisure and hospitality, up 600, or 4 percent, to 15,500; and manufacturing, up 3.3 percent, or 400 jobs, to 12,500.
The unemployment rate in Solano County was 5.7 percent in August, about equal to the 6.0 percent rate from the July revised estimate and the one for August 2015, according to the state Employment Development Department.
VACANCY REACHES LOW LEVELS
The industrial vacancy rate for Solano and Napa counties declined in the second quarter to 6.2 percent of 49.5 million square feet, down from 6.6 percent in the first quarter, according to Colliers. Average asking monthly rental rates increased by 3 cents a square foot to 53 per square foot, on a triple-net basis.
The industrial vacancy was 17.1 percent at the close of 2010, according to Colliers.
LOOKING FOR LAND TO DEVELOP
“We have pockets of land that can be developed, but large projects with space for 1 million square feet, there are only a handful of sites to accommodate that,” Dakin said. “We’re looking at what we can move around to accommodate demand.”
The Gateway80 distribution warehouses underway there are designed to “appeal to a wide range of manufacturing, distribution and other industrial users,” said Matt Bracco, a managing director for JLL. Bracco, Glen Dowling and Chris Neeb of JLL are marketing the property for lease. “This strategic location on I-80 is exceptional and provides users quick and easy access to the entire Bay Area as well as the Central Valley, wine country, Sacramento, Port of Oakland and far beyond.”
Solano County has been garnering the attention of companies and commercial real estate developers for years because it’s within an hour by road of the ports of Benicia, Oakland and Stockton plus three international airports — Oakland, Sacramento and San Francisco, according to the Gateway80 team.
COURTING FOOD AND BEVERAGE PRODUCERS
And Fairfield, in particular, has been active in courting new companies with its two state-of-the-art water and sewer treatment plants.
“We’re playing to our strengths as a food and beverage manufacturing hub,” Dakin said. “We have distribution lanes, water and wastewater processing.”
The food and beverage hub led by Jelly Belly, Calbee Foods, Anheuser-Busch and Guittard is attracting similar companies to Fairfield. Saxco International took much of the large Solano Logistics Center warehouse project finished across Cordelia Road from the Gateway80 site last year. Just Desserts last May expanded to a 75,000-square-foot plant built by Buzz Oates Group of Companies on seven acres at 5000 Fulton Dr. Colliers brokered the lease.
VACAVILLE ABSORBS SPACE, GETS BACK MUCH MORE
In Vacaville at the north end of the county, Buzz Oates earlier this year built 2060 Cessna Dr., a 128,758-square-foot warehouse in Vacaville Business Park. Buzz Oates has been building in the park for years and has remaining land. Vacaville-based Automatic Bar Controls, Inc., doing business as Wunder-Bar, moved into 81,225 square feet of the building.
The remaining 47,000 square feet in the building just were leased to Los Angeles-based Acorn Paper Products Company (acorn-paper.com), which had a sales office and distribution center at 118 Dodd Ct. in American Canyon.
In early 2015, Buzz Oates completed a $35 million, 600,000-square-foot warehouse next door to Wunder-Bar’s new plant, leasing all of it to Pacific Cycle.
“From large warehouse investment sales to new speculative buildings being quickly leased, there are many indications of a strong and active market in Solano and Napa counties,” said Phil Garrett, executive managing director in Colliers’ Fairfield office.
HUGE SPACE RETURNS TO THE MARKET
As all that space is being built, the North Bay’s distribution juggernaut has just had upwards of 1 million square feet suddenly become available.
In Vacaville at Solano County’s north end, the 843,000-square-foot Save Mart Supermarkets distribution center is looking for a tenant.
“That’s a big property,” said Pedder, who is marketing the property.
In June, the company said it would be closing the distribution center at 700 Crocker Dr., trimming 323 jobs there and moving goods to a Lathrop warehouse. Save Mart acquired the Vacaville warehouse and one in Roseville on buying Albertsons in 2007.
Jeff Quackenbush (firstname.lastname@example.org, 707-521-4256) covers commercial real estate, wine and construction.