Serena & Lily leases 434,000sf Solano County distribution facility

Even as e-commerce continues to shake up retail real estate as shoppers opt for home delivery, it is making warehouses with the right stuff to fulfill consumer demand of higher demand.

And the latest local example is a new deal by a growing Marin County home décor e-tailer for over half of Northern California's largest single warehouse, which located in northern Solano County.

Serena & Lily (serenaandlily.com) just inked a lease for 434,000 square feet of warehouse and office space in the former Savemart distribution hub at 700 Crocker Drive in Vacaville, a 70-acre property now called NorthBay Logistics Center. The Sausalito-based company plans to move into its new facility in February.

“We are pleased to be able to retain our distribution center logistics in Northern California, where we were founded and remain to be headquartered,” said Brett Hilton, Serena & Lily senior vice president of finance and operations. “We look forward to servicing our customers' desires for home décor and furniture out of this new facility.”

Artist Serena Dugan and retired Microsoft executive Lily Kanter launched Serena & Lily in 2003, growing it out of Kanter's Mill Valley Baby & Kids Company bedding boutique started a year earlier. The company expanded its product line to adults in 2010, according to a San Francisco Chronicle article at the time.

Serena & Lily distributed its products to hundreds of retailers from its early days. But over three-quarters of its sales now are e-commerce, hence the need for the Vacaville facility, according to Denton Kelley, managing partner for Sacramento-based LDK Ventures, one of the facility owners.

In 2013, the retailer went from distribution and e-commerce to bricks and mortar, starting to open its own stores, according to Atlanta Magazine. That's a similar direction RH, a publicly traded Marin company formerly known as Restoration Hardware, took in expanding from catalogs and online sales of home décor to high-end stores tailored to interior design.

Today, Serena & Lily has about 170 employees and nine stores, according to a Marin Independent Journal interview with Kanter earlier this year. Those sites include eight “design shops” on both coasts, including Atlanta opened this summer and one coming to Pacific Palisades in California, plus an outlet store in Berkeley.

Two years ago, Kanter stepped down as CEO of the company, bringing in former Victoria's Secret CEO Lori Greeley to take the reins. Still on the board of directors, Kanter has long been philanthropically minded, even making the July 2000 Time magazine cover for the story “The New Philanthropists.”

The Marin resident's latest give-back venture is Boon Supply Co., launched in May of this year after retooling an acquired Burlingame company into what the Marin IJ called “Go Fund Me meets online shopping.”

Serena & Lily would be the first tenant in the 840,000-square-foot NorthBay Logistics Center building since acquired vacant by Los Angeles-based real estate investor and financier PCCP LLC and Sacramento area's LDK Ventures LLC in September 2017 for $31 million.

Over $2 million since then has gone into repositioning the property for market, Kelley said. That included repainting the inside and outside of the building and guard house at the front gate, renovated the restrooms, repaired and replaced paving, swapped out the skylights, fixed dock doors and put in energy-efficient LED light fixtures.

The space Serena & Lily will be occupying already had a concrete demising wall. The 400,000-square-foot balance of the building can be divided to accommodate tenants needing as little as 70,000 square feet.

“There has been good (prospective-tenant) activity across the building and for the remainder, so we're optimistic about leasing the balance sometime next year,” Kelley said.

Typical users of large North Bay warehouses tend to be those that need a location on the Interstate 80 corridor between Napa and Sacramento, else tenants would opt for large, less-expensive distribution centers in the Central Valley.

But e-commerce users wanting hubs with shorter supply and delivery times have been snapping up big North Bay buildings in the past two years. Napa-based WineDirect commissioned a 268,000-square-foot build-to-suit facility in American Canyon for direct-to-consumer shipments. Ikea leased a 646,000-square-foot building also in American Canyon for one of its new U.S. fulfillment centers. And e-tail giant Amazon leased its first North Bay hub, a new 323,000-square-foot warehouse near NorthBay Logistics Center.

A big reason why the Vacaville location is compelling for e-commerce tenants is its proximity to the Port of Oakland and interstates 80, 505 and 680, according to Brooks Pedder, part of the Cushman & Wakefield team that's marketing NorthBay Logistics Center and also has been involved in the North Bay deals with Ikea and Amazon.

"For e-commerce, they are delivering to folks' homes," Pedder said. "Logistics companies in the Central Valley are set up for deliveries up and down the West Coast, rather to get to homes in the Bay Area in a reasonable timeframe is making the North Bay popular (for e-commerce distribution centers)."

Cushman & Wakefield Consulting Services conducted a survey in the past three months and found that Vacaville seems to be rather unique in the region for having a surplus pool of labor for fulfillment-center jobs.

Beyond office upgrades for Serena & Lily's new Vacaville facility, common features for e-commerce centers are added power to accommodate automation systems and more allocated parking to accommodate the more employees needed for pick-and-pack order fulfillment than the typical warehouse, Kelley said.

The second phase of NorthBay Logistics Center is in the entitlement process now to poise it for construction next year, if the market calls for it, Kelley said. That would include a 600,000-square-foot building, one with 90,000 square feet and a smaller structure.

Pedder, Tony Binswanger and John McManus of Cushman & Wakefield represented the owner of NorthBay Logistics Center in the lease to Serena & Lily, which was represented in the deal by Craig Hagglund and Brian Barden of Lee & Associates in Oakland.