North Sonoma County industrial real estate market active amid scant vacancy

North Bay commercial real estate market reports

Each year, the Business Journal asks experts to write about major transactions, projects and trends in their markets. Read more analysis from the March 21 issue.

The north Santa Rosa corridor real estate office market improved slightly over 2021 with a slight decrease in office vacancy down to 5.3% in fourth quarter 2021 from 6.4% in the fourth quarter of 2020.

Industrial real estate in the corridor enjoys a 2.1% historic low vacancy rates, which continues to drive rental rates higher for existing space.

COVID-19 continued to cause uncertainty in the office market throughout the year, while companies evaluated if remote office workers are the future or a temporary necessity as well as how office configurations will need to be handled.

Most office leasing was either renewals or space sizes under 5,000 square feet. Many transactions were terms of three years or less with rents ranging from $1.80 to $2 per square foot monthly on a full-service basis. With the lack of activity from larger tenants over 5,000 square feet, it leads you to think that larger businesses may be more challenged in determining what the future trends will be for workers.

Will the trend for employees be going back to a more heavily private office plan with minimal open workstation cubicles or open cubicles that are much larger than in the past or possibly a hybrid of working from home and office?

The significant office leases in the Sonoma County airport area in 2021 were to Pipeline Technologies for 14,324 square feet at 3636 Laughlin Blvd., Madison Support Services Inc. for 5,500 square feet at 3841 Brickway Blvd., Innovein Inc. for 5,208 square feet at 1745 Copperhill Lane, Rombauer Vineyards for 4,161 square feet at 3725 Westwind Blvd., Magnolia Bank for 3,665 square feet at 451 Aviation Blvd., and Fidelity National Title for 3,391 square feet at 800 Edgewood Place in Windsor.

It continues to be very challenging to develop new industrial projects due to the cost of new construction, which is increasing due to shortages in construction material, increased labor costs and extremely long time periods to process plans through Permit Sonoma.

Construction wrapped on 70,000 square feet of speculative industrial space in the third building at Billa Landing, a five-building project planned to accommodate about 376,000 square feet. Rental rates range from a low of $1.15 per square foot gross, and there is no real way to determine the ceiling since rental rates are based on many factors such as size, age of building and product type.

Industrial build-to-suit projects are still an option, but they are difficult with the increased pricing in construction costs as well as the increased value in land due to the lack of existing inventory. Airport Business Center has a 5-acre parcel that is zoned for a mix of industrial uses and is poised for build-to-suit development of up to about 100,000 square feet.

Industrial deal activity was extremely active. Significant leases completed in 2021 include 36,086 square feet to Soletrac Inc. at 5600 Earhart Court, Windsor; 24,178 square feet to Consolidated Electric Distributors at 3490 Regional Parkway, Santa Rosa; 35,000 square feet to Levity Entertainment LLC at 1200 Kittyhawk Blvd., Windsor; and 9,025 square feet to Pacific Carpet Cleaning & Restoration at 5347 Skylane Blvd., Santa Rosa.

Other industrial transactions included the sale of 1688 Almar Parkway about 3.8 acres with 7,400 square feet of office and shop buildings to Sigal Electric, and MicroVu Corporation purchased a 31,440 square feet warehouse building previously owned by Foley Family Farms and a 21,200-square-foot office-warehouse building at 5813 Skylane Blvd. for its own use.

In other news, Amazon continues to process a large warehouse distribution facility in the airport area. The two hotels planned to be built in the Sonoma County Airport area include Hyatt Place, a six-story, 166-room luxury hotel, and Tru by Hilton, a four-story, 101-room hotel. Both were planned to be completed in 2021, but so far neither have broken ground and delays could easily be blamed on COVID-19 as well as increased construction costs.

One important government action taking place in the Sonoma County Airport district is the Sonoma County Airport Area Specific Plan update which has been delayed but expected to resume processing later this year. The update is well underway and property owners are advised to be part of the process, otherwise it is possible their properties could have important zoning changes which could have negative effects on their current property use as well as long term property values.

Shawn Johnson, SIOR, (707-528-1400) is managing partner of Keegan & Coppin Co. Inc.

North Bay commercial real estate market reports

Each year, the Business Journal asks experts to write about major transactions, projects and trends in their markets. Read more analysis from the March 21 issue.

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