2.7Msf of industrial construction underway in Napa, Solano counties; 210,000sf of Solano office absorption

Commercial real estate snapshots

Chris Neeb, Matt Bracco, and Glen Dowling are part of the Dowling-Bracco Team at JLL (dbrea.com).

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other analyses of North Bay submarkets in this report.

Editor's note: This story appeared in the March 16 print edition and reflects economic conditions before the lockdowns of a number of local businesses to slow the new coronavirus.

Industrial real estate continues to be the driving force for commercial property markets in Solano and Napa counties.

Industrial vacancy in Napa County has remained consistently low, at just 2.4% in the fourth quarter, jup from just under 2% in the final quarter of 2018. Industrial vacancy for Solano increased slightly due to deliveries of new construction, to 6.4% at year-end from 4.1% a year before.

Over 2.7 million square feet in new industrial developments are underway in Napa and Solano. With the ongoing tenant and owner-user demand, we expect the supply of industrial product for both markets to stay limited throughout 2020.

With the rising costs of construction, limited supply and consistent demand, rental rates owners are asking for Napa and Solano warehouse, production, and light industrial space have been steadily increasing at a healthy pace. On a triple-net basis, they range from 52–65 cents per square foot monthly for Solano class A large warehouses to 75–85 cents for Napa Valley air-conditioned wine storage under 50,000 square feet to 85 cents–$1.10 for light-industrial spaces with 5,000–30,000 square feet.

Deal velocity slowed over the summer months in Napa and American Canyon in 2019, but industrial tenant and owner-user activity picked up considerably at year-end and has been strong out of the gate in 2020. Most requirements range from 35,000 to 150,000 square feet along, and a handful of companies are seeking 250,000 to 600,000 square feet. Activity seems to be increasing for requirements ranging from 10,000 to 50,000 square feet from new tenants coming into the market area and from local organic growth.

In the office market, downtown Napa remains tight for space. The year-end vacancy rate was 6.8%, the same as a year before. But the submarket was a little choppy at mid-year, with minimal demand for space, but activity picked up again in the fourth quarter with a few notable deals such as Regus. Contributing factors to the inconsistent mid-year office space demand resulted from tenants being more cautious with high rental rates in downtown Napa, limited space options and mixed national and global economic news.

With no planned office development projects in the pipeline for 2020, the south of Napa office submarket (Napa County Airport and Napa Valley Commons area) will remain limited for both class A and B product.

The Solano office market experienced a significant amount of leasing activity in 2019, with over 210,000 square feet of net absorption. For comparison, net absorption was negative 21,000 square feet for 2018.

The most active Solano office submarket has been the Green Valley and Solano business parks areas in Fairfield. Tenant demand has come from a culmination of local tenants expanding and new regional office requirements that strategically selected Fairfield/Solano due to its central location between Sacramento and San Francisco Bay Area, abundant labor pool and affordable housing for employees.

Class A office asking monthly per-square-foot rental rates are $3.25–$4 on a triple-net basis for downtown Napa and $2.40–$3.30 on a full-service gross basis for Solano.

The appetite for office investment sales remains strong for all products types.

Notable office deals in Napa and Solano counties in 2019

Key industrial deals in the two counties in 2019

Regus leased 10,000 square feet in downtown Napa at 1300 First Street

Free Flow Wines leased 6,845 square feet at 860 Napa Valley Corporate Way in south Napa

Intercoast College leased 19,600 square feet at 5253 Business Center Drive in Green Valley in Fairfield

Workforce Development Board of Solano County leased 16,401 square feet at 500 Chadbourne Road, Solano Business Park in Fairfield

KB Homes leased 10,475 square feet at 4830 Business Center Drive, Green Valley in Fairfield.

Edward Pike Company acquired a 2-building 1-story office-flex project totaling 67,775 square feet at 860 and 870 Napa Valley Corporate Way

David Dediachvili purchased a 2-story 57,278 square feet class A office building at 4830 Business Center Drive in Fairfield

24-Seven Enterprises lease of 404,950 square-foot section of the former Savemart distribution building totaling 843,000 square feet at 700 Crocker Drive in Vacaville

Haier America's build-to-suit lease of 501,000 square feet at E Dorsett Drive in Dixon

Santa Clara Warehouses leased 100,400 square feet at 2345 South Watney Way in Fairfield

Western Wines leased 120,080 square feet at 100 Jim Oswalt Way in American Canyon

Biagi Bros. leased 336,900 square feet at 400 Boone Drive in American Canyon, now under construction

Reynolds & Brown acquired a 101,242 square foot multi-tenant warehouse at 4901 Park Road in Benicia

Cole Investments purchase of 2750 Maxwell Way, an 88,868 square foot warehouse building in Fairfield

Blackstone / Link Industrial's acquired a large portfolio of properties that included 15 warehouse buildings in Benicia totaling 1,892,901 square feet

Lowenberg Corporation purchased a multitenant 31,880 square foot industrial building located at 830 Latour Court in Napa

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Commercial real estate snapshots

Chris Neeb, Matt Bracco, and Glen Dowling are part of the Dowling-Bracco Team at JLL (dbrea.com).

Read

other analyses of North Bay submarkets in this report.

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