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Amazon, Saverglass warehouse deals suggest North Bay industrial real estate is hardly ’idle’

Retail and office real estate markets have been reeling from uncertainty over closures of restaurants, gyms, theaters and workplaces under public health orders related to the coronavirus.

But interest in industrial property is picking back up, some driven by a surge in e-commerce business during the lockdown.

In Sonoma County, there are few newer industrial buildings available for companies that need larger spaces, according to Dave Peterson of Keegan & Coppin Co. Inc./Oncor International.

“There is very little inventory over 20,000 square feet,” he said.

Industrial vacancy for Sonoma County was 4.7% at the end of last year, and in the industrial parks near Charles M. Schulz–Sonoma County Airport north of Santa Rosa remains under 2%, Peterson said.

He’s marketing one of the two sizable industrial projects in the county under construction or about to be so. A 70,000-square-foot warehouse, called Hangar J, is set for completion in September at Billa Landing, a 360,000-square-foot, five-building complex at the corner of North Laughlin Road and Copperhill Parkway just east of the airport.

The two remaining buildings, with 70,000 and 144,000 square feet each, would take 18 months to build. No specific lease deals are in play but interest has come from local and East Coast companies, Peterson said.

The other Sonoma County industrial project with permits ready for construction is at 201 Business Park Drive, located behind The Press Democrat printing plant in Rohnert Park.

Demody Properties, a Reno, Nevada-based major developer of industrial buildings, made its entry to the county on May 1 with the purchase of land with approvals for a 70,000-square-foot light-industrial building designed for 10 truck docks, multiple tenants and outside storage, according to Trevor Buck, one of the Cushman & Wakefield agents who brokered the deal. Dermody has undertaken projects in Napa and Solano counties in recent years.

“There is more demand from companies that need more vehicle parking for customers to pick product up or for last-mile delivery,” Buck said.

Sonoma County doesn’t have the population density to warrant a number of large e-commerce logistics facilities (well over 100,000 square feet) like those in the Richmond-Oakland, South San Francisco or Silicon Valley areas, but there is more interest from companies looking for 15,000–50,000 square feet for such logistics.

A key exception to that is Amazon’s reported lease deal this spring for all the 260,000-square-foot Victory Station warehouse near Sonoma, located on the Highway 12 thoroughfare across southern Solano, Napa and Sonoma counties. Buck also was involved in that lease.

Are North Bay industrial property markets ’idle’?

A recent comparison of Northern California industrial real estate markets by JLL concluded that all the North Bay markets were “idle” on its industrial momentum index, meaning they are “generally characterized by smaller industrial operations and a built-out environment that constrains future growth.”

Markets were evaluated for community demand for services, talent base and real estate supply. San Jose, Sacramento and Fremont were among the “superstar” industrial markets. North Bay markets scored lower on access to talent, according to the report.

“We’ve heard that from medical tech and high-tech manufacturing companies,” Peterson said. “We’ve not heard that about general manufacturing jobs. We’re seeing demand from wine and beverage companies, food manufacturers and general goods makers.”

Chris Neeb, part of The Dowling-Bracco Team of JLL agents who work the North Bay, said the industrial markets in Napa and Solano are hardly idle.

“There is a lot of money out there chasing (local) industrial investment real estate, and there are sizable signed deals,” Neeb said.

Big vacant Fairfield space attracts Napa wine supplier

He pointed to this key example: France-based wine bottle supplier Saverglass, which has Napa facilities, in the past 30 days subleased the vacant 430,000-square-foot building at Invesco’s Gateway80 project in Fairfield. Meals-by-mail company Blue Apron secured that building but barely occupied it before pulling back to its East Bay facilities.

The glass company plans to occupy 330,000 square feet initially then expand into the rest over the next three years.

“It’s a little easier to recruit employees in Solano because it’s on the Interstate 80 corridor close to the East Bay and between the major universities at Berkeley and Davis,” Neeb said.

Large Napa projects under construction get tenants

In Napa Valley, an undisclosed wine storage company leased 40,000 square feet of the 500 Devlin Road building, the first in The Pigman Companies’ Napa Commerce Center project, Neeb said. Bounty Hunter already leased 22,500 square feet of the nearly 82,000-square-foot building.

A 152,000-square-foot warehouse at 504 Devlin in the project is under construction and is set to be completed by the end of summer.

Industrial real estate in Napa and Solano counties has benefited from growth of the wine and food businesses, Neeb said.

And the labor pool in Napa-Solano has helped attract industrial property users with e-commerce needs, according to Brooks Pedder of Cushman & Wakefield. He pointed to Vacaville, Richmond and Sonoma deals for Amazon hubs, 24Seven/Wineshipping’s and Serena & Lilly’s roughly 400,000-square-foot deals at LDK Ventures’ NorthBay Logistics Center in Vacaville, and particularly the 644,000-square-foot Ikea hub at Devco/Orchard Partners’ Napa Logistics Park in American Canyon.

Amazon in late June secured approval from the American Canyon Planning Commission for a 201,950-square-foot “last mile” delivery station at Napa Logistic Park’s 300 Boone Road warehouse. That building was originally designed to have 1 million square feet building on 58 acres of the 171-acre business park. Construction is set to begin this summer and be complete in late summer 2021.

A 702,000-square-foot distribution warehouse in the business park is set for completion next month at 400 Boone. It’s half-leased to Napa-based wine logistics firm Biagi Bros. A fourth and final warehouse in the development, 362,000-square-foot 500 Boone, is set to start construction shortly, according to Pedder.

More sizable Napa–Solano projects coming

A second phase at NorthBay Logistics Center recently received entitlements for construction of three more buildings totaling 745,000 square feet.

Also in the offing is Midway Commerce Center, an 1.67 million-square-foot, five-building distribution warehouse project planned on 87.6 acres on Eubanks Drive at Midway Road proposed by Ridgeline Property Group and USAA in Vacaville’s Interchange Business Park, according to city documents. The project only needed staff-level approval, which was granted June 29, and now is going through the plan-check process before building permits are issued, according to city planner Peyman Behvand.

“E-commerce deals are keeping the local market propped up,” Pedder said.

Jeff Quackenbush (jquackenbush@busjrnl.com, 707-521-4256) covers wine, construction and real estate.

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