Significant Napa Valley office space is becoming harder to find and more in demand, while big warehouse spaces in Napa and Solano counties are getting leased up soon after built, with even more projects in the offing.
The bulk of Napa County’s office and office-flex markets have about 1.9 million square feet. The northern Napa Valley market — downtown Napa through St. Helena — is tremendously active, with several large retail and hotel developments underway.
The Archer Hotel project, consisting of five stories and 183 rooms, will be the center of a new mixed-use development including 40 shops and restaurants. Meanwhile, just five miles south at Napa Valley Commons Business Park, the Meritage Hotel has broken ground for the addition of 145 hotel rooms, a demonstration kitchen, an outdoor lawn area, wine tasting rooms, and a market for guests. The Culinary Institute of America acquired the former Copia Center of Wine Food & Arts 78,000-square-foot building at 500 First St. in Napa in downtown Napa. The delivery of these additional amenities and services, anticipated for mid-2017, will continue driving up asking rental rates in downtown Napa and surrounding business park areas.
Downtown Napa is only getting tighter and rents are rising, with vacancy at just under 4 percent and rents for class A office space currently are $2.25–$3.50 per square foot on a triple-net basis.
Over the past 24 months, tenants have been migrating toward the southern end of Napa in search of more reasonable rents and better availability available. Vacancy in south Napa has tightened to around 10 percent. This should continue well into 2017.
Demand is pushing up south Napa office rents. Rates for class A buildings are $1.25–$1.75, triple-net.
Tenant touring of space options picked up considerably at year-end and so far in the first quarter. Most notable among several new requirements is demand for space over 10,000 square feet. That suggests office demand could remain steady this year.
NOTABLE OFFICE DEALS
Several notable office lease and sale transactions have occurred in the last few months. Naked Wines leased 10,350 square feet at 135 Gasser Center Drive in South Napa Center Century Center, where a 19,000-square-foot retail and office building is under construction. At 860 Napa Valley Corporate Way in Napa Valley Commons business park, Busch Firm leased 6,200 square feet for expansion.
Office investment and owner-user sales have been steadily gaining momentum over the past 36 months. DR Stephens purchased LBA Realty’s 860 and 870 Napa Valley Corporate Drive in Napa Valley Commons. This project includes two single-story office-flex buildings with 68,000 square feet, and it was 70 percent leased at time of sale.
Marcel Schurman/Papyrus acquired 240 Gateway Road W., which is a 39,000-square-foot single-story office building, relocating the Fairfield operation to Napa. This building was formerly home to Diageo Chateau & Estate, which vacated several months earlier.
RPE Plum and Gethead acquired three single-story office buildings at 211 and 221 Gateway Road and 477 Devlin Road, totaling 32,400 square feet. They were about 90 percent leased at the time of sale.
NAPA VALLEY INDUSTRIAL
The current industrial real estate inventory in Napa County totals more than 13.6 million square feet of warehouse, production and light industrial space.
Asking rates continued to rise, which are being fueled by strong demand, escalating cost of new construction, land prices and substantial increases in building permits and fees. Monthly rates for conditioned wine space – if you can find it – currently are 65–85 cents a square foot on a triple-net basis for smaller spaces, under 40,000 square feet.