E-commerce and logistics demand propels Solano-Napa industrial real estate transactions


The industrial real estate market in Solano and Napa counties has flourished since the onset of COVID-19, while the office market in those counties has struggled.

In fact, industrial demand and transaction speed increased significantly from the first to the third quarter of 2021 and finished strong through the end of the year. Key factors driving the increase in industrial demand include the rapid transition of local, national and global markets towards e-commerce and the continued growth of the food and beverage industries.

Tenant demand in Napa and Solano counties consists primarily of regional wine, food and beverage production, e-commerce, third-party logistics operators, and packaging companies. Solano continues to benefit from tenants being priced out of East Bay and other surrounding submarkets and is instead considering more affordable space options in Solano and Napa counties.

Industrial rents in Solano and Napa continue to be approximately 20-30% lower than industrial rents in the East Bay submarkets.

With rising construction costs, limited supply and steady demand, asking rates are steadily rising to local record rates in Napa and Solano. Monthly rates for air-conditioned winery space in Napa and American Canyon (50,000 square feet and above) currently range from $0.85 to $1 per square foot, per month on a triple net basis. Light industrial rates for small spaces (5,000 to 30,000 square feet) range from $1.00 to $1.20 per square foot, triple netting. These rates are up by more than 10% compared to the previous year.

At Solano, Class A warehouse ranges from 50 cents to 80 cents per square foot per month on a triple net basis for large spaces (over 100,000 square feet).

The wide range is mainly due to a substantial availability of new products and which has been delivered to Vacaville through new construction, with rates still hovering between 50 cents and 60 cents NNN. Fairfield, on the other hand, sees much higher rates for larger spaces, ranging from the mid 70 to 80 cents NNN. Smaller, light industrial space in Solano, between 5,000 and 25,000 square feet, ranges from 70 to 90 cents, depending on the amount of office space needed to build.

The Napa and Solano markets have over 3.5 million square feet of active user requirements targeting occupancy over the next six to 12 months. Most range from 75,000 to 200,000 square feet, with a handful ranging from 250,000 to 600,000 square feet.

The market barometer that best illustrates the significant leasing activity in Napa and Solano has been the staggering positive “year-over-year” net absorption numbers since March 2020: 1,875,381 square feet in 2021 and 2,156,972 square feet in 2020. In comparison, the positive net absorption for 2019, was only 201,393 square feet.

Napa County has 14.8 million square feet of warehouse, manufacturing and light industrial space, and Solano has 38 million square feet.

Industrial vacancy in Napa County has remained consistently low, currently at just 2.6%. Just about all of this vacancy (360,000 square feet) is in a newly constructed 702,000 square foot building located at 400 Boone Road, American Canyon.

Solano’s industrial vacancy has diminished even with the substantial amount of new warehouse construction that has been delivered to Napa and Solano, as mentioned below. Solano County’s year-end 2021 vacancy rate was 4.2%, compared to 4.7% at the end of 2020. With continued demand from tenants and homeowners , we expect the supply of industrial products for both markets to remain limited throughout the year. 2022.

New developments largely pre-let

More than 1.7 million square feet of new development is coming to Napa and Solano counties. The projects are driven by tenant demand, illustrated by more than half of the pre-let spaces. Several new construction projects have been delivered in 2021, with more planned for 2022 in Napa and American Canyon.

The Pigman Company, Kraemer Land and Cardinal Development have delivered Phase 3 to the Napa Commerce Center, a 79,943 square foot Class A warehouse at 502 Devlin Road in Napa that started in the summer of 2021. This project will also soon have groundbreaking work on buildings A, B and E, which total 85,880 square feet of light industrial products in three buildings.

Orchard Partners, Divco and RREEF delivered the 201,950 square foot custom build warehouse at 300 Boone Drive for an e-commerce company – apparently, Amazon – and completed speculative 702,000 square foot warehouse space leased 50% off at Biagi Bros. Inc. Innova has delivered a two building light industrial project totaling 64,000 square feet at 115 and 125 E. Gateway Road in South Napa.


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