WESTERN SNAPSHOT, MAY 2004

North Bay Industrial Market

Condominium construction is the major trend in industrial development in the North Bay area, says Dennis Brisken, senior vice president for BT Commercial in Santa Rosa, California. Coupled with skyrocketing construction costs for large product, the lack of small stand-alone, for-sale industrial buildings has helped produce a supplier’s market.

“There is great demand in the 1,800- to 7,500-square-foot range by small- to medium-sized owner/users who wish to own their spaces,” he says. “With interest rates at an all-time low and small spaces at a premium to lease, it is a great time to have this product in the marketplace.”

Significant industrial developments in the tri-county North Bay area are few and far between. In Marin County, Keenan-Lovewell Ventures is building an approximately 135,000-square-foot industrial and office condominium complex. Located at 4300 Redwood Dr. in San Rafael, California, the development will feature condo space ranging from 1,900 to 17,000 square feet. Brisken reports that approximately 40 percent of the project is already committed with rates starting at $160 per square foot for a cold shell. “There is virtually no more available industrial land [in which] to develop this kind of product in Marin County,” he says.

The only new industrial product in Sonoma County can be found at Technology Lane in Petaluma, California. Radius Development Group is developing approximately 36,000 square feet of industrial condominiums in two buildings at a rate of $175 per square foot. Brisken notes that small industrial users should gobble up this space with little effect on the overall market.

Major industrial leases in the region include Labcon’s signing a long-term contract — the largest of 2003 — for approximately 108,000 square feet at 3700 Lakeville Hwy. in Petaluma in Sonoma County. In Napa County, Zephyr Express occupied 107,000 square feet at Green Island Industrial Park, The Hess Collection leased 183,000 square feet to fill out a new processing/warehouse facility and North Coast Distribution absorbed 45,000 square feet at 745 Skyway Ct.

Due to land availability, the majority of industrial development in the North Bay market is taking place in south Napa County. Of course, wine producers and distributors make storage the largest single use in the county. “With a rebound in the wine industry, there will be increased demand in Napa County for large spaces,” adds Brisken.

Industrial vacancy in Napa County is approximately 7 percent, reflecting a balance between developers and new or expanding tenants. Vacancy rates for Marin and Sonoma counties are 2.5 and 12 percent, respectively. According to Brisken, the Santa Rosa airport submarket has skewed North Bay’s industrial vacancy upward. Large blocks of industrial space remain vacant there due to users’ hasty decisions made just before the economy turned sour, he says.

Industrial rental rates range from 50 cents for older storage space to 85 cents for newer product in Sonoma and Napa counties. In Marin, lease rates vary from 90 cents to $1.20. North Bay industrial offerings are primarily attracting distribution and light manufacturing tenants.


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