Signs bode well for North Bay commercial property market
The Sonoma County commercial real estate market ebbed in the first two quarters of 2021 but picked up substantially in the last two quarters. We felt the ups and downs of COVID in 2021 repeating some of the high infection rates and hospitalizations of 2020.
The local economy fluctuation mirrored the COVID effects on the national economy.
The stock market was bolstered by high corporate earnings, low interest rates, and the market romance with Big Tech. Hence, the momentum bolstered us through another tough year.
The leasing rate of commercial buildings accelerated in 2021 over 2020 throughout the North Bay. The leasing rate reflects business confidence and, to some degree, the local economy.
In our local North Bay market we experienced a 12% increase in leasing rate from 1,158,000 square feet in 2020 to 1.3 million square feet in 2021. We saw an acceleration of leasing in the last two quarters of 2021, reflecting the national GDP rate of 6.9% for the fourth quarter of 2021.
In 2022, we think the local economy will continue to accelerate its recovery as there is solid business confidence as exhibited by the strength of venture capital funding in the Bay Area. What happens in the broader Bay Area has a positive impact on this area as well.
Investment in commercial property in the North Bay is another indication of business confidence for future growth of the economy. With bonds and real estate always an alternative to the stock market, commercial real estate in particular has been good in 2021 and has been refreshed locally as well. Occupiers wishing to own stepped up as well as strong demand from investors in the local market. There is a very high confidence and demand for local industrial, office, and retail properties in that order.
In 2021, we saw a record 92 buildings sold, almost 1 million square feet, representing a value of over $237 million by our professionals. This is double the volume we sold in 2020.
While hospitality and tourism may be slowed in the North Bay due to COVID, the economic base industries and main street economy are poised to accelerate in 2022.
Investment capital is seeking existing business infrastructure – commercial buildings and development opportunities for expansion of local economy. Being part of the Bay Area is a major asset of the North Bay.
Whatever happens south in the rest of the Bay Area affects this area on a lagged basis. Venture capital funding in the Bay Area set records in 2021. The San Francisco metropolitan area attracted $93.1 billion in venture funding last year, ranked No. 1. Compare this with New York’s $51.9 billion, ranking No. 2. The U.S. added a recovered 467,000 new jobs in January 2022 with a 4.0% unemployment rate.
So what bodes well for Sonoma County is its solid economic base, and that should continue to support an expansion of the industry clusters that create the broad base of jobs in the North Bay: pharmaceutical and bioscience, medical science, agriculture business, electricians, software, social media, health care, machine tooling, transportation, exporting, manufacturing, alternative energy.
Overall, the prospects for a strong Main Street economy are all apparent. California is still the best place to start and grow a business, and that is the driver for the North Bay as well with all its natural beauty and resources. People love to live here and thrive.
Al Coppin is founder and president of Keegan & Coppin Co. Inc. Based in Santa Rosa, the commercial real estate brokerage (707-528-1400) has offices in Sonoma, Marin and Napa counties.