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E-commerce drives Solano County industrial real estate market

Solano County by the numbers

Demgraphics

Population: 446,610, 0.259% growth

Median age: 38.5

Number of employees: 216,357, 4.95% growth

Median household income: $84,395, 9.41% growth

Median home value: $442,700, 7.53% growth

Source: DataUSA.io

Q3 commercial real estate metrics

Industrial vacancy rate: 4.4% of 30,099,410sf

Office vacancy rate: 17.4% of 3,550,000sf

Retail vacancy rate: 7.9% of 8,025,770sf

Sources: Colliers International and Cushman & Wakefield

Significant deals of 2020

Undisclosed firm leased 617,000 square feet at NorthBay Logistics Center, Vacaville

Shop Heroic leased 15,200 square feet at 601-655 Elmira Road (Regency Park Plaza), Vacaville

Par Electrical Contractors leased 14,144 square feet at 810 Vaca Valley Parkway, Vacaville

Cajun Crackin’ leased 8,100 square feet at 200 Nut Tree Parkway, Vacaville

Sources: Cushman & Wakefield and Colliers International

The coronavirus pandemic saw its first community spread in Solano County, and the county has inched back into reopening. But one of the biggest parts of Solano commercial real estate — big warehouses, manufacturing and other industrial spaces — kicked into overdrive as residents sheltering at home leaned heavily into restocking their pantries.

Demand for distribution warehouses from e-commerce companies sped up the pace of space absorption of such space in Solano by about 10 years in a few months, according to Brooks Pedder of Cushman & Wakefield. He personally has worked on six large deals with e-tailers in the North and East bay areas in the past year.

“Solano County still has some spots where a large e-commerce facility can locate with the labor demographics to support,” Pedder said. “You can’t replicate that anywhere else in the Bay Area.”

Net absorption of Solano industrial totaled nearly 666,000 square feet in the third quarter alone and 893,000 square feet in the first three quarters, according to Colliers International. The vacancy rate declined to 4.6% of 37.5 million square feet in the third quarter from 7.0% a year earlier and 6.0% in mid-2020.

A second phase received entitlements at NorthBay Logistics Center, home to the existing 843,000-square-foot former Savemart distribution center that’s now home to e-commerce hubs for Serena & Lily and 24Seven Enterprises. The new phase would have three more buildings totaling 745,000 square feet, and a deal is said to be in the works for much of that new space.

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. The project only needed staff-level approval, which was granted in June, and now is going through the plan-check process before building permits are issued.

And Buzz Oates Group of Companies is seeking entitlements for 306,000- and 205,000-square-foot warehouses on Aviator Drive in Vacaville.

Rents for industrial space in Solano are holding steady, but owners of smaller light-industrial space in the Fairfield area are moving up pricing especially for 5,000- to 15,000-square-foot spaces because of demand from food and wine related companies, contractors and regional distributors, according to Chris Neeb of JLL.

The Solano office vacancy rate in the third quarter was 17.4% of 3.55 million square feet, up from 16.9% at mid year but considerably improved from 18.9% a year earlier, according to Colliers International. Just over 44,000 more square feet became available for lease in the second and third quarters than came off the market, continuing a trend of negative absorption of office space in the Solano-Napa market over the past 12 months.

“COVID-19 has already begun to shift the office market landscape,” wrote Colliers Fairfield office researcher Rob Gerard in the quarterly report. “Many companies are revising their real estate strategy to a ‘hub and spoke’ model with more smaller offices in suburban locations as opposed to focusing on the urban core of larger cities.“

The largest significant office lease in the third quarter was 14,000 square feet to Par Electrical Contractors in a relocation of its Vacaville regional office. Colliers expects office leasing in Solano to remain slow “foreseeable future.”

Yet buildings have been selling, most notably Fairfield Corporate Commons, which has 81,000 square feet in five class B buildings, Colliers noted.

Solano’s economic boosters in the public and private sector have been working for several years on ways to improve the business environment countywide and in key areas that have potential to become Bay Area breakouts and others that need a boost, according to Bob Burris, CEO, Solano Economic Development Corp.

The latest effort is called Moving Solano Forward 3. It’s the third chapter of an effort that has included identifying industry clusters that are the county’s strengths and weaknesses. This phase involves locating local geographies that could use enhanced infrastructure such as industrial wastewater processing and workforce training for special skills.

“Potentially at end this project we will be able to say these are the key areas that need jobs, and then we can go out for funding for infrastructure projects to help make them a reality,” Burris said.

So far, SEDCorp, county and city economic development have identified clusters such as these: high-technology manufacturing and production of food and beverages. Vacaville has rolled out a strategic initiative to encourage more biomanufacturing businesses around the existing Genentech campus.

Solano County by the numbers

Demgraphics

Population: 446,610, 0.259% growth

Median age: 38.5

Number of employees: 216,357, 4.95% growth

Median household income: $84,395, 9.41% growth

Median home value: $442,700, 7.53% growth

Source: DataUSA.io

Q3 commercial real estate metrics

Industrial vacancy rate: 4.4% of 30,099,410sf

Office vacancy rate: 17.4% of 3,550,000sf

Retail vacancy rate: 7.9% of 8,025,770sf

Sources: Colliers International and Cushman & Wakefield

Significant deals of 2020

Undisclosed firm leased 617,000 square feet at NorthBay Logistics Center, Vacaville

Shop Heroic leased 15,200 square feet at 601-655 Elmira Road (Regency Park Plaza), Vacaville

Par Electrical Contractors leased 14,144 square feet at 810 Vaca Valley Parkway, Vacaville

Cajun Crackin’ leased 8,100 square feet at 200 Nut Tree Parkway, Vacaville

Sources: Cushman & Wakefield and Colliers International

“We’re seeing a lot of interest, especially in the time of COVID,” Burris said. “Vacaville has capacity for vaccine manufacturers and medical testing equipment manufacturers, but there will become a point with the available land when they will need to build wastewater handling to bring in more biomanufacturers.”

Fairfield has supported a growing cluster of food and beverage producers such as Anhauser Busch, Caymus Vineyard and wine-related suppliers with installation of water and wastewater treatment facilities, and the city has land that’s being developed for more such facilities, Burris said. But the booster project is looking at whether treatment facilities as well as redundant high-speed internet service will be needed to support the growing wine business in Green Valley and rural business in Rio Vista, he said.

In Vallejo, county business boosters are eager to see what happens under the new ownership of the former Mare Island Naval Shipyard.

The Nimitz Group got involved with redevelopment plans on Mare Island in 2018 then started acquiring more land on Mare Island throughout last year from property owners and Lennar Mare Island, an affiliate of Florida-based Lennar Corp. that has been redeveloping 650 acres of the island since 1999. Nearly a year ago, the group inked public-private partnership with the city to take over as the new redeveloper and property manager of 3.6 million square feet of leased commercial, light industrial, manufacturing and office space that's home to over 110 businesses and 3,000 jobs.

The group is led by vintner and distiller Dave Phinney, creator of The Prisoner and Orin Swift fine-wine brands; billionaire investor Gaylon Lawrence Jr., owner of Heitz Cellar in Napa Valley; and Sebastian Lane, who owns Depiction Wines.

They first got involved with the decommissioned Navy shipyard when the city of Vallejo selected its redevelopment proposal for 157 acres at the north end of the island.

Since picking up Lennar Mare Island’s stake, Nimitz brought in Southern Land Company as the master developer-redeveloper, and community planning meetings to craft a new look for the area have been held in the past 12 months.

“If you develop out areas like that, it could become a game changer for interest from the Bay Area and supporting functions for Napa wine business,” Burris said about the countywide efforts. “This could really create a lot of jobs.”

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

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