North Bay Industrial Market Report
Vallejo-Fairfield
Market Performance
The vacancy rate in the Vallejo industrial market is at 4.9%, marking a 2.1% increase over the past 12 months. In the same period, 2.5 million square feet of industrial space has been delivered, while 1.3 million square feet has been absorbed.
Logistics space dominates the Vallejo market with 39.5 million square feet, followed by specialized space at 9.0 million square feet and flex space at 2.6 million square feet, making for a combined total of 51.6 million square feet. Rental rates stand at approximately $11.60 per square foot, reflecting a 2.5% increase over the past year and a cumulative increase of 19.3% over the past three years, which is slightly lower than the national average of $11.90 per square foot. Construction is underway for approximately 1.1 million square feet of space, representing a 2.2% expansion of inventory.
There have been 26 sales in the past year, with an average price of $123 per square foot. The logistics space has seen the most transactions, consistent with its dominance in the Vallejo market. Over the past three years, there have been a total of 113 sales, amounting to approximately $877 million. The market cap rate for Vallejo has risen to 6.4%, exceeding its trailing three-year average of 5.8%. Employment and population have both grown over the past year, with job growth outpacing population growth, increasing by 1.5% and 0.5%, respectively.
By the Numbers | Last 12 Months | Source: CoStar Group
- Vacancy Rate: 4.9%
- Rent Growth: 2.5%
- Deliveries in SF: 2.5M
- Absorption in SF: 1.3M
- Sales Volume: $79M
Santa Rosa
Market Performance
The Santa Rosa industrial market has faced challenges in retaining tenants, with net absorption remaining negative since Q2 2022. Over the past year, net absorption has decreased by -246,000 square feet, causing the vacancy rate to rise to 7.2%. Difficulty in filling large vacancies has been evident as lease sizes have decreased since 2022. As of the end of Q3 2023, only one deal has exceeded 50,000 square feet, and none have reached 100,000 square feet. This deal involved 61,000 square feet at 89th St in Santa Rosa, leased by Meyers Restaurant Supply.
The market is expected to face additional pressure from the supply side, with 240,000 square feet currently under construction, contributing an additional 0.7% to the market. This is on top of the 210,000 square feet delivered in the past year. Slowing demand has resulted in a slowdown in rent growth, which now stands at 1.3%, compared to the three-year average of 7.0%. Despite recent negative absorption, logistics properties continue to see appreciation, increasing by 2.2% over the same period.
Sales activity has also slowed over the past year, totaling $95.1 million from 40 transactions, falling short of the previous three-year total of $225 million. Early 2023 saw a focus on smaller properties, with larger transactions occurring in the third and fourth quarters of 2023.
By the Numbers | Last 12 Months | Source: CoStar Group
- Vacancy Rate: 7.2%
- Rent Growth: 1.3%
- Deliveries in SF: 213K
- Absorption in SF: -246K
- Sales Volume: $95.1M
Napa
Market Performance
In the Napa industrial market, the vacancy rate stands at 2.1%, marking a 1.2% increase over the past 12 months, slightly lower than the national average increase of 1.9%. Over the same period, 383,000 square feet of industrial space have been delivered, with 135,000 square feet absorbed. Total availability, including sublease space, represents 3.9% of the overall inventory.
Logistics space dominates this market, comprising 17 million square feet, followed by 1.8 million square feet of flex space and 1.5 million square feet of specialized space, totaling 20.3 million square feet. Despite its smaller size compared to the average industrial market, Napa’s rents are relatively high at around $17.70 per square foot, reflecting a 2.7% increase from a year ago and a cumulative 19.6% increase over the past three years. This market is notably more expensive than the national average of $11.90 per square foot. Currently, 98,000 square feet are under construction, representing a minor 0.5% expansion of inventory.
There have been 18 sales in the past year, averaging $300 per square foot. Logistics space accounts for the majority of these transactions, with 12 sales reflecting the market’s overall composition. Over the past three years, there have been 92 sales totaling approximately $351 million. During this period, the market cap rate for Napa has increased to 6.3%, higher than its trailing three-year average of 5.7%.
By the Numbers | Last 12 Months | Source: CoStar Group
- Vacancy Rate: 2.1%
- Rent Growth: 2.7%
- Deliveries in SF: 383K
- Absorption in SF: 135K
- Sales Volume: $72.2M
