NORTH BAY BUSINESS JOURNAL EVENT
Tuesday, August 26, 2008, 8-10:45 a.m.
COMMERCIAL REAL ESTATE GUIDE
SOLANO COUNTY MARKET ANALYSIS: Warehouse, industrial bright spots for area linked to two big metro areas
Monday, August 25, 2008
BY JEFF QUACKENBUSH
Labor force, June 2008 214,200
Unemployment rate, June 2008 6.9%
Northern Solano County:
Average home sales price,
June 2008 $323,427
Median home sales price,
June 2008 $299,900
Southern Solano County:
Average home sales price,
June 2008 $303,238
Median home sales price,
June 2008 $284,900
Apartment vacancy rate,
spring 2008 4.9%
Industrial vacancy rate,
second quarter 2008 13.8%
Office vacancy rate,
second quarter 2008 27.4%
SOLANO COUNTY – Situated along the Interstate 80 corridor between the Sacramento and San Francisco metropolitan areas, Solano County provides affordable housing and space for distribution warehousing, manufacturing, processing and back-office functions for both regions.
In line with national trends, the market for office space in Solano has been soft, and owners have been adjusting rents accordingly. Yet demand for production and warehouse space has been growing, and rents have been largely holding firm.
The office vacancy rate in Solano was unchanged for the first half of 2008 at 27.4 percent of 2.69 million square feet available for lease, according to Colliers International. Average rent in June was $2.12 a square foot per month on a triple-net basis.
By comparison, the vacancy rate for the 3.21 billion square feet in all suburban markets in the U.S. was 14.2 percent, according to the brokerage.
Vacaville and Fairfield account for 2.18 million square feet of the county’s commercial office space and had the highest availability rates of 32.4 percent and 29.3 percent, respectively, in mid-2008.
Solano is a suburban office market that is challenged to have the draw of central business districts for corporations, according to Eric Dakin, research director for Colliers International’s Fairfield office.
“In a suburban market, you have a pepperoni pizza effect with clusters of activity spread out around the county, such as Green Valley and West Texas Road,” Mr. Dakin said.
Suisun City, in the heart of the county, is an up-and-coming commercial real estate market, which had a mid-year office vacancy rate of 21.7 percent based on 153,000 square feet, according to Colliers. Locally based Main Street Partners is remaking the waterfront on the Sacramento River delta into a mixed-use development anchored by a 34,000-square-foot Harbor Square office and retail building.
That adds to class A office buildings built by The Wiseman Co. The 72,000-square-foot 333 Sunset Ave. building was finished in 1994 and the 50,000-square-foot One Harbor Center building in 2001.
Petaluma-based Basin Street Hospitality, led on the project by former Basin Street vice president and Main Street partner Frank Marinello, just started construction on a 102-room Hampton Inn & Suites hotel.
Also in the works for Suisun is a 175,000-square-foot Wal-Mart Supercenter to anchor the 20-acre Walters Road West retail development.
Another retail development in progress is the 153,000-square-foot shopping center approved in early 2008 for 14 acres in Dixon.
In Vallejo, among the 7 million square feet of existing and planned commercial space on Mare Island, Touro University recently got a green light from the city for its $300 million cancer research and treatment center project.
The Solano unemployment rate in mid-2008 was estimated to be 6.9 percent of 214,200 in the work force, according to the state Employment Development Department. That’s just below the state figure for June of 7.0 percent but above the national rate of 5.7 percent.
Solano’s jobless rate in June 2007 was 5.3 percent. The work force expanded by 1.3 percent over the 12-month period, but changes in employment levels in key industries for Solano reflect some of the economic pressures facing other counties as well. With the housing slowdown, construction employment dropped by 2,000 to 9,400 in June from a year before. Manufacturing lost 600 positions in that time, and the financial and professional services each shed 400 jobs.
The Solano Economic Development Corp. recently received funding from the county for a three-year project to study five industry clusters, update the Solano County Index of Economic and Community Progress and tally the amount of commercial and industrial land suitable for development.
While there have been job losses in manufacturing, the Solano industrial market has been very active, including new and planned development by large county producers.
Though the slowing economy and worries about the economy have pressured companies to start trimming their facility portfolio, 585,300 more square feet of Solano industrial space was leased than came on the market in the first half of 2008, with 373,100 square feet of net absorption in the second quarter alone, according to Colliers.
“Compared to previous years, that’s a bit shy of the leasing in the late 1990s and early 2000s,” Mr. Dakin said.
Key recent warehouse deals include 74,000 square feet in two deals by Freight Transport at 801 Chadbourne in Fairfield, a 192,000-square-foot building that was purchased recently as an investment by Pamco, and a 111,000-square-foot lease by Total Warehousing Inc. at 400 Crocker Drive in Vacaville.
The mid-year industrial vacancy rate was 13.8 percent for Solano’s 22.7 million square feet of available space, according to Colliers. The percentage of available space increased from 12.5 percent in the first quarter of 2008, largely because of 220,000-square-foot former West Coast Beauty Supply warehouse in Benicia came on the market along with the completion of a 57,300-square-foot warehouse in Fairfield.
Solano’s manufacturers and producers have been active. Campbell’s Soup Co. in mid-2008 announced plans to spend $23 million expanding its Dixon tomato processing plant and extended an offer to California growers to supply vegetables. Jelly Belly in Fairfield is looking into expanding its use of local fruit juice for its jelly beans and candy.
Also, Ghiringhelli Specialty Foods, co-founded by Fairfax pizza proprietor Mike Ghiringhelli, is planning a move from San Pablo to 40,000 square feet of renovated warehouses in Vallejo, which will create 120 jobs.