2010 Midyear Report -- Industrial: Industrial market shows signs of rebound

Sebastopol-based General Hydroponics purchases 166,200sf

[caption id="attachment_23159" align="alignright" width="360" caption="The founders of General Hydroponics purchased this 166,000-square-foot building in Santa Rosa in June for possible expansion. (photo courtesy of Brad Yust)"][/caption]

The purchase of a never-occupied 166,200-square-foot southwest Santa Rosa building by the founders of a growing Sebastopol-based hydroponics equipment supplier may be part of swelling industrial real estate activity not seen for two years.

General Hydroponics founder Lawrence Brooke and four family members acquired 2789-2877 Giffen Ave. from the Derryberry family for an undisclosed sum, according to public records.

"It's a big deal in the second quarter," said Haden Ongaro, who manages Cornish & Carey Commercial's two North Bay offices.

While they were agents with Orion Partners, he and Brad Yust represented the Derryberrys in the purchase of the mostly unused building in 2005 from JDS Uniphase and marketed the building for a while. JDS built the building in 2001 for Optical Coating Laboratory Inc. expansion.

Mr. Yust of Brad Yust Commercial in Santa Rosa represented the Brooke family in the June 11 deal. Damian Friary of Damian Friary Real Estate in Novato represented the Derryberry family.

General Hydroponics still is formulating facility plans, including keeping the current 45,000-square-foot testing operation in Sebastopol and occupying a significant portion of the newly acquired building, according to a spokesperson.

That's arguably the largest North Bay industrial property to be purchased in many months, but the second quarter of this year saw more serious activity from larger industrial space users, according to Keegan & Coppin partner Mike Flitner. A number of deals are pending for leases and sales in the 10,000 to 25,000 square feet range.

"There's not only more activity, but also there are deals where companies are talking about three- to five-year lease terms," Mr. Flitner said.

For the past two years, smaller tenants and one- to two-year leases dominated the market, he said.

"Landlords are coming to the point where they would rather have tenants than wait it out and think the market is going to turn quickly," Mr. Flitner said.

Recent deals in that size range include Sebastopol-based Corenco, a maker of industrial food-processing equipment. It acquired the nearly 12,000-square-foot former Cokas Diko furniture warehouse in west Santa Rosa.

Brokerage estimates for second-quarter activity in North Bay industrial submarkets are pending but are expected to be the same or less than first-quarter figures, according to Keegan & Coppin and Colliers International.

In the first quarter, 15.6 percent of the 24.1 million-square-foot Sonoma County industrial market was available for lease, according to Keegan & Coppin.

If deals in progress are completed, it could bring down the third-quarter vacancy rate and indicate a change in the local economy, according to Mr. Flitner.

For 38.2 million square feet of industrial properties in Napa and Solano counties, the second-quarter vacancy rate was about 13 percent, or about the same as the 13.2 percent at the end of 2009 and 13.8 percent in the first quarter, according to Colliers research analyst Robert Gerard.

That includes improvement in Napa County from 365,000 square feet of wine warehouse deals in recent months to Zephyr Express and Trinchero Family Estates [see "Commercial Real Estate: South Napa wine warehouse deals push down vacancy," July 5].

"One trend we are seeing is potential deals that fell apart in 2009 are beginning to come back to life now," Mr. Gerard said.

CORRECTION, Sept. 17, 2010: Damian Friary of Damian Friary Real Estate in Novato represented the Derryberry family in the June 11 sale of 2789-2877 Giffen Ave. to Lawrence Brooke four family members, founders of General Hydroponics in Sebastopol. The Brookes were represented by Brad Yust of Santa Rosa. Haden Ongaro and Mr. Yust brokered the Derryberrys' 2005 purchase of the building and marketing of the building for a time afterward. Mr. Ongaro was not involved in the recent sale.

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