Firms looking for production, distribution and storage space in Sonoma County are having to take a number because hot demand and limited supply in its two biggest population centers. Artisanal food and beverage companies are snapping up available buildings in Petaluma, and the emerging legal cannabis industry is driving pricing higher for Santa Rosa buildings, the North Bay’s most welcoming city for the herb.
“There is a fantastic renaissance of foods and beverages that have coalesced in Petaluma, with breweries and Sonoma Portworks and ice cream like Three Twins and Straus, food makers like Miyoko’s Kitchen, and dairy like Cowgirl Creamery and Clover,” said Matthew Brown of Meridian Commercial. The brokerage has Marin County origins going back decades, but it opened a Petaluma office earlier this year because of the activity there.
The dairy and eggs connection between Petaluma and western Sonoma and Marin counties that stretches back a century was upstaged in the late 1990s by the rise of a cluster of telecommunications-hardware makers that came to be called Telecom Valley.
“It’s really new again,” Brown said of the artisan-food renaissance in Petaluma. “Demand for those types of companies is pretty robust right now.”
Such interest led to the construction of a 260,000-square-foot warehouse complex in Petaluma, and the three-building project was fully preleased to four local agricultural products companies before completion last fall. Cader Corporate Center is now home to Scott Laboratories in 87,000 square feet, Hydrofarm in 80,000, and Clover Sonoma and Tomales Bay Foods (dba Cowgirl Creamery) in 94,000.
“Warehouse vacancy is very low, and plenty of people are out there looking for space,” said James Manley, an agent in the Petaluma office of Keegan & Coppin Co. Inc./Oncor International.
The vacancy rate for industrial space in the city was 5.0 percent of 5.44 million square feet in the middle of this year, according to Keegan & Coppin. That’s tightened from 5.4 percent a year before, even with the completion of Cader since then, and 5.7 percent in mid-2015. The final tally on the third quarter was getting finalized at press time, but an early look appears to show a slight uptick in Petaluma industrial vacancy, Manley said.
“Some are perhaps giving up on (finding space), because there is so little inventory out there,” he said.
Cannabis businesses already take up roughly 3 percent of Santa Rosa’s available industrial space, according to a city report. Santa Rosa has 10.3 million square feet of industrial space, and only 5.3 percent was available for lease in the middle of this year, according to Keegan & Coppin. That’s about half the proportion of space that’s often considered to be a healthy for a local economy, providing options for companies.
It’s projected that the cannabis business could officially account for 8 percent of Santa Rosa’s industrial space, if 33 more businesses are successful in getting the city green light, the Press Democrat reported. Demand for the dwindling number of available industrial spaces has been causing sale prices in certain Santa Rosa areas to jump. Asking prices for warehouses being bought for cannabis that usually sell for $120 per square foot are going for $240, said Al Coppin, president of Keegan & Coppin, to the Press Democrat.
“The cannabis industry is driving up prices elsewhere,” said Manly, also of Keegan & Coppin. “My guess is that Rohnert Park will come out the winner, because there is so much generation-B space over there.”