Large warehouses roll into Napa, Solano counties

Construction hums along on 1.5 million square feet of warehouse space in Napa and Solano counties to meet demand from companies needing to store and move a large amount of North Coast wine and other goods coming into and going out from the San Francisco Bay area.

At the same time, the North Bay's distribution juggernaut has just had upwards of 1 million square feet suddenly become available.

The second phase of the Greenwood Business Park warehouse project at the corner of Airport Boulevard and Devlin Road near Napa County Airport started construction last month, according to Brooks Pedder, whose Cushman & Wakefield team is marketing the project. The concrete slab has been poured on what is designed to be an 80,000-square-foot warehouse.

San Diego-based IDS Real Estate Group purchased the 19.4-acre property earlier this summer reportedly for about $30 million. It is said to be the group's first Northern California acquisition, coming soon after opening an investment office in San Francisco. IDS purchased the site from McMorgan Northern California Value Add Development Fund (MNCVAD-IND Greenwood CA), an investment fund comprised of Northern California trade union pension funds and led by New York Life Real Estate Investors and San Francisco-based McMorgan & Company.

The fund had acquired the full-entitled project in 2013 and spent about $20 million constructing a 226,000-square-foot warehouse last year. It was leased during construction to Windsor-based Vynapse LLC, part of Adams Wine Group and better known as the wine order fulfillment house Pack n' Ship Direct.

Also last month, the hulking 644,000-square-foot first warehouse of Orchard Partners-Devco's 218-acre Napa Logistics Park in American Canyon got the official occupancy go-ahead, Pedder said. For the past eight months, the whole building had been set to be leased to a fulfillment house, but that deal ultimately didn't materialize recently, said Pedder, whose team also is marketing that project.

The second phase of the 218-acre industrial project is entitled and awaiting a go-ahead.

In Vacaville at Solano County's north end, the 843,000-square-foot Save Mart Supermarkets distribution center is looking for a tenant.

'That's a big property,' said Pedder, who is marketing the property.

In June, the company said it would be closing the distribution center at 700 Crocker Dr., trimming 323 jobs there and moving goods to a Lathrop warehouse. Save Mart acquired the Vacaville warehouse and one in Roseville on buying Albertsons in 2007.

Up to this point, demand for big warehouse space in excess of new supply in Solano and Napa counties has been fueling the 1.36 million–1.49 million square feet currently being built there, according to Colliers International and JLL.

'From large warehouse investment sales to new speculative buildings being quickly leased, there are many indications of a strong and active market in Solano and Napa counties,' said Phil Garrett, executive managing director in Colliers' Fairfield office.

The industrial vacancy rate for Solano and Napa counties declined in the second quarter to 6.2 percent of 49.5 million square feet, down from 6.6 percent in the first quarter, according to Colliers. Average asking monthly rental rates increased by 3 cents a square foot to 53 per square foot, on a triple-net basis.

Based on 61.5 million square feet JLL tracks in Solano, Napa, Sonoma and Marin counties, the second-quarter industrial vacancy rate is estimated to be 2.6 percent, after 2.9 million more square feet came off the market in the first half of this year than came on.

Developer confidence in North Bay industrial real estate has bounced back from the economic recession, when the vacancy rate for such product types peaked at 12.5 percent in 2009, according to JLL. The brokerage's North Bay team is based in San Rafael and led by Glen Dowling and Matt Bracco. Nearly 3 million square feet of warehouses and distribution centers are planned for southern Napa Valley, which has the highest concentration of any North Bay submarket, and 3.7 million square feet of projects, according to JLL.

In addition to Greenwood Business Park and Napa Logistics Park, key Napa-Solano projects are Panattoni Development Company's million-square-foot Gateway80 Business Park in Fairfield, Buzz Oates Group of Companies projects in Vacaville and soon American Canyon.

The Napa Commerce Center project has 152,000 and 81,600-square-foot warehouses set to break ground next spring, according to Glen Dowling of JLL.

The Gateway80 Business Park project has two 436,000-square-foot buildings under construction, with concrete walls titled up on one so far toward completion in January, Dowling said. Lease negotiations are in progress, including a full-building deal.

The Napa Airport Corporate Center project is seeking entitlements to break ground on two warehouses next spring, Dowling said. One would be a 254,000-square-foot cross-dock facility — items move from trucks on one side to trucks on the other — and the other would have 90,000 square feet.

A 56,000-square-foot industrial building is planned to come out of the ground on South Watney Way in Fairfield next spring, Dowling said.

Two two-story office buildings are entitled for construction to start at 4820-4870 Business Center Dr. in Fairfield's Green Valley Business Park once that space is half preleased, Dowling said.

'The food and beverage industry continues to dominate industrial activity in Napa Valley, while recent reshoring trends and lower oil prices have resulted in related spinoff industries, i.e., glass and cork factories, also are popping up in the area,' according to JLL. And wine is the key beverage pumping through the veins of the economies of Napa and Sonoma counties, though many industry suppliers are concentrated in Solano County too.

Logistics and distribution companies are actively scouting the North Bay for 5.03 million square feet of industrial space, according to JLL. That's the most active of any part of the 43 million-square-foot Northern California industrial real estate market, the report said.

Also on the horizon is a warehouse project bridging the wine regions in Sonoma and Napa counties. A large distribution center project planned for the wine production cluster south of Sonoma took a step closer to reality with the sale of the property.

The just-over-19-acre property at 22801 Eighth St. E. at the northwest corner of Highway 12 and Eighth Street East sold to a group led by a veteran North Bay developer of expansive North Bay warehouses. VSP LLC bought the land from Sonoma Valley Business Park LLC for nearly $4 million on April 29.

'The dearth of developable land is a real strain,' said Jose McNeill III.

His Fairfield-based McNeill Real Estate Services is leading development of the project called Victory Station. It would have about 260,000 square feet of warehouse space in a concrete tiltup structure with 25 truck-dock doors and some office space, according to McNeill.

The project cost is estimated to be about $30 million. Washington Capital Management has brought in investors to back the project.

Odyssey Development LLC had been developing Sonoma Valley Business Park for several years as a multibuilding retail-industrial project. The sale has been in escrow for more than a year as the project was reconfigured and taken back to the county of Sonoma for zoning, entitlement and design review. After a final design meeting, the goal is to get documents filed in time to begin construction before the rainy season.

Because of demand for large distribution warehouses, McNeill expects much or all the space will be preleased by the time the project is completed in summer 2017 or even before the walls go up.

The Victory Station project team includes Devcon Construction on design-build, RMW Architecture & Interiors and Santa Rosa-based civil engineering firm Adobe Associates. Steven Leonard, Brian Foster and Niels von Doepp of Cushman & Wakefield are handling leasing.