Solano-Napa industrial real estate developers bullish
Despite national and global concerns about the economy’s future, the San Francisco Bay Area’s strong economy continued to forge ahead throughout 2018 and has led to low vacancy rates throughout the region, and Solano and Napa counties are no exception.
The 1,014,842 square feet of industrial buildings currently under construction in the two counties is the most in two years, with more than 4 million square feet of additional construction planned. Clearly, developers and owners are bullish on Solano and Napa counties’ future prospects.
The year 2018 ended with the vacancy rate for industrial properties in Solano and Napa counties declining for the third consecutive quarter. The combined vacancy rate at the end of the fourth quarter of 2018 was 5.2 percent, down 0.3 percentage points for the quarter and down 0.8 percentage points for the year.
Average asking rates increased by 1–57 cents per square foot monthly on a triple-net basis (NNN) for the fourth quarter of 2018.
The largest industrial sale in the two-county region in 2018 took place in American Canyon. RAR2 Napa Logistics Park (RREEF America) purchased the 646,000-square-foot warehouse occupied by IKEA and located at 1 Middleton Way in the Napa Logistics Park. The price was $90.45 million, or $140 per square foot, at a capitalization rate of 4.7 percent.
After increasing for the first three quarters of 2018, the office vacancy rate in Solano and Napa counties declined in the fourth quarter, dipping to 16.1 percent from 16.5 percent. The combined average asking rate across all classes of office space continues to steadily rise, increasing in the fourth quarter to $1.96 per square foot monthly on a full-service basis from $1.91.
The largest regional office sale was Channel Properties’ purchase of the six-building office-flex Napa Airport Centre from Westcore-AG Napa. The total square footage was 152,277 square feet and the sales price was $28 million, or $184 per square foot, at a cap rate of 7 percent. The buildings were approximately 79 percent occupied at the time of the sale.
Phil Garrett is executive managing director of Colliers International’s Fairfield office.