Napa-Solano office, industrial real estate market tightens further as big projects near construction
The Napa Valley boasted a solid year across all product types in 2018. Although the market did experience a little choppiness toward the end of 2018 with some mixed national and global economic news, it picked up again in the first quarter.
A few noteworthy retail, industrial, and office projects broke ground in 2018 to accommodate this positive ongoing market activity. The Wiseman Company completed construction on a 21,000-square-foot, three-story “class A” office-retail building at 1300 Main St. in downtown Napa, with strong leasing activity there. Just south at Imola Avenue and Gasser Drive off Soscol Avenue, Fairfield Residential is constructing a 282-apartment complex. Also there, the Gasser Foundation is pushing forward with additional commercial and retail space, and a hotel developer is going to construct 141 hotel rooms.
South of the city and just below the iconic Grape Crusher statue in Napa Valley Commons, Pacific Hospitality Group just completed the 145-room Vista Collina Resort addition to The Meritage hotel, featuring nine wine tasting rooms. These new amenities will keep upward pressure on asking rental rates, not only for retail space but also for office and industrial space in surrounding business parks.
TIGHT SUPPLY OF NAPA OFFICE
The Napa office inventory totals just shy of 2 million square feet, stretching from the airport area north to St. Helena. While the downtown Napa submarket remains tight for space, vacancy creeped up over the 12 months to just under 6.8 percent from around 4 percent. Contributing factors include recent new buildings to the market, with the completion of 1300 Main, First Street Napa’s delivery of additional office space at 1300 First St., along with some other class B office space availabilities that recently hit the market.
Rents for class A space downtown are $3.50–$4.00 per square foot monthly on a triple-net basis. Rents for class B space in downtown range from $2.05–$2.70. With no planned office development projects in the pipeline for 2018 and 2019, the south Napa office submarket (airport and Napa Valley Commons area) vacancy shall remain somewhat limited for both class A and B office.
Submarket vacancy is 5.7 percent, down over 4 percentage points from the prior year. Rents have been slowly creeping upward over the past 12 months and are up by about 5 cents a square foot since the end of last year, to $1.55–$1.80. Due to limited class A supply, class B rents are increasing as landlords renovate second- and third-generation space. Rents will likely remain steady throughout 2019.
Notable office transactions include Wilson Daniels lease of 6,700 square feet at 1300 Main, and Merrill Lynch renewed in 8,500 square feet at 700 Main St. downtown. In the south Napa market, Bush Group and Trinitas Cellars leased 6,800 more square feet space at 860 Napa Valley Corporate Way, Specialty Program Group leased 8,500 square feet at 222 Gateway Road W., and BBSI leased 5,700 square feet on the first floor of 555 Gateway Drive. Redwood Credit Union purchased a 17,000-square-foot office building at 1190 Airport Blvd., with over 7 acres of excess land for a planned expansion.
The current industrial real estate inventory in Napa County totals just over 14 million square feet. Vacancy in the Napa market has remained consistently tight, sitting at 1.9 percent in the fourth quarter, virtually unchanged from 12 months earlier.