Industrial Market Cool But Not Cold

FAIRFIELD, CA—Colliers International's Fairfield office, which covers Solano, Napa and parts of Contra Costa counties, released market research reports indicating the industrial market has cooled, yet remains healthy. After nine consecutive quarters of significant vacancy rate declines, vacancy rates increased slightly from 7.2% to 7.6%.

Construction activity is at its highest level in several years as four large warehouse/distribution centers totaling 936,896 square feet are currently under construction. Buzz Oates has begun building two of these warehouses on Cordelia Road in Fairfield for Saxco Glass: one will be 473,136 square feet and the other will be 176,760 square feet. The other two buildings under construction are the two warehouses totaling 287,000 square feet at the Lombard Crossings Industrial Park in American Canyon.

Napa's vacancy rate increased from 6.4% to 7.6% in the second quarter as there was limited leasing activity, combined with two large available properties coming on the market. Despite the uptick in the vacancy rate, inventory remains tight in Napa as the majority of availability consists of smaller light industrial spaces less than 50,000 square feet in size.

Strength in the wine industry is clearly the driving force behind the relatively low industrial vacancy rates. In 2013, California wine shipments to US markets grew 5% by revenue and 3% by volume over the prior year, according to research published by Gomberg-Frederikson & Associates and Wine Institute.

The office market in Solano and Napa counties remained challenged in the second quarter of 2014. Leasing activity was light and sales activity was non-existent. The vacancy rate dipped by a negligible 0.1 percentage points to 20%.

Despite a cooling off of activity in the second quarter, the current industrial market is considered to be very healthy as the overall vacancy rate is 7.6%, which is nearly half of the recent vacancy rate peak of 15.0% in early 2011. Given the strength of the wine industry driving both counties, and Solano County's location as a regional transportation hub, the outlook is positive for both the short and long term in the region.