Submarkets Quarterly Newsletter (1st Qtr 2009).indd

Keegan & Coppin Company, Inc. ONCOR International SONOMA COUNTY SUBMARKETS QUARTERLY NEWSLETTER INSIDE THIS ISSUE: 1st QUARTER 2009 Market Highlights Notable Transactions Vacancy Trends Business Parks Petaluma Rohnert Park/Cotati Santa Rosa North Corridor (Airport Area/Windsor) OFFICE LOCATIONS: Santa Rosa 1355 North Dutton Avenue Santa Rosa, CA 95401 (707) 528-1400 Petaluma 1201 N. McDowell Blvd. Petaluma, CA 94954 (707) 664-1400 Larkspur 101 Larkspur Landing Circle Larkspur, CA 94939 (415) 461-1010 Napa 477 Devlin Road #104 Napa, CA 94558 (707) 252-1400 Keegan & Coppin REAL ESTATE Check out our Website: www.keegancoppin.com OFFICES IN 220 CITIES: UNITED STATES, CANADA, DENMARK, FRANCE, GERMANY, INDIA, AUSTRIA, RUSSIA, CHINA, AUSTRALIA, UNITED KINGDOM, THE NETHERLANDS, MEXICO, JAPAN, ITALY, SPAIN, SWITZERLAND, CZECH REPUBLIC, BELGIUM, POLAND, NORWAY, UKRAINE, SWEDEN, FINLAND, HUNGARY, BRAZIL, CHILE, ARGENTINA, IRELAND ONCOR INTERNATIONAL The above information, while not guaranteed, has been secured from sources we believe to be reliable. Submitted subject to error, change or withdrawal. An interested party should verify the status of the property and the information herein. PETALUMA Downsizing and repositioning of company requirements will continue as we begin 2009. Homecomings and Jandy have moved out of Petaluma, and companies such as 3M, Avalon/Hain Celestrial have given notice that they are moving out of Petaluma to consolidate outside of the area. Tellabs and Alcatel continue to downsize and 3M, which owns and occupies 70,000 square feet, will vacate and sell the building. Avalon will vacate lease space, increasing the vacancy rate and adding to further job loss. Rental rates for “Class A” office space has a very wide range of $1.09 - $2.50 per square foot full service, and the single-story “Class B” and “C” space ranges from $.99 gross to $1.25 per square foot NNN, with varying incentives for moving costs, free rent and furnished space. Warehouse/Industrial space rents range from $.55 per square foot for space over 10,000 square feet to $.75 - $.95 per square foot for spaces less than 5,000 square feet. The smaller sizes will run at a premium rate as the smaller industrial vacancies remain low. Vacancy rates for Petaluma’s first quarter of 2009 for Office space was 36.4%, up almost 2% from the 4th quarter of 2008. Industrial vacancy rates were also up for the 1st quarter to 15.3%, from the 4th quarter’s 13.9%. Retail vacancy rates jumped also, up from 6.8% in the 4th quarter of 2008 to 10.5% for the 1st quarter of 2009. This market has created the best opportunity for companies that either need to reposition their requirements to save rent or purchase, or lease new space at bargain basement prices. Rents and prices are heavily discounted with great incentives being offered to attract business prospects. The more attractive lease opportunities are with office space due to the huge vacancy and rent competition with direct owners and the sublease market. Potential investors and users looking to purchase property and projects will remain very conservative and cautious in pursuing those purchase endeavors. There is no doubt that both the office and industrial markets will continue to be challenged as we move further into 2009. BUSINESS PARKS NOTABLE TRANSACTIONS 715 Southpoint Blvd., Suite E, 11,490 sf, Industrial Space to Lagunitas Brewing 1351 Redwood Way, 19,680 sf, Office Space to Technovus, Inc. 1650 Corporate Circle, #200, 28,571 sf Office Space to Amy’s Kitchen 1425 No. McDowell Blvd., #200, 6,430 sf Office Space to Environmental Science Assoc. PETALUMA-INDUSTRIAL 20.00% 17.50% 17.30% 17.00% 18.00% 15.00% 16.00% 13.90% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 0.90% 0.90% 0.90% 1.00% 2.00% 0.00% 0.00% 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 2007 2008 2008 2008 2008 Direct Vacancy Sublease Space PETALUMA - OFFICE 40.00% 34.60% 35.00% 31.10% 28.90% 30.00% 26.20% 24.90% 25.00% 20.00% 15.00% 9.20% 7.70% 7.60% 10.00% 6.30% 6.10% 5.00% 0.00% 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 2007 2008 2008 2008 2008 Direct Vacancy Sublease Space Keegan & Coppin REAL ESTATE Santa Rosa - (707) 528-1400 Petaluma - (707) 664-1400 Larkspur - (415) 461-1010 Napa - (707) 252-1400 Sonoma - (707) 935-1400 ROHNERT PARK/COTATI The outlook for Rohnert Park/Cotati market as 2009 begins mirrors that of the economy in general, with some pressure now being applied to the commercial markets. The office market with its higher vacancy rate is very attractive for tenants as landlords are offering rent concessions and attractive rates. Office space rents varied from $1.70 - $1.95 psf Full Service, to $.97 - $1.70 psf Gross. Vacancy rates for the 1st quarter of 2009 rose almost imperceptibly from 27.1% for the 4th quarter of 2008, to 27.3%. The industrial market has seen flat rents, but with building prices showing signs of declining somewhat, there may also be slightly lower rents on the industrial side as well. Rents ranged from $.70 to $1.10 psf Gross and $.70 $1.55 psf for NNN. Vacancy rates for the industrial market rose slightly, from 13.9% in the 4th quarter of 2008, to 15.3% for this first quarter of 2009. On the Retail front, vacancy rates jumped significantly, from 6.8% for the last quarter of 2008, to 10.5% for the 1st quarter of 2009. Retail rents ranged from $1.25 - $3.00 psf NNN. The City of Rohnert Park has adopted a “green building” resolution with a goal of achieving a 20% reduction in greenhouse emissions generated by city government activities. The City encourages the private sector to participate in this effort as well. BUSINESS PARKS NOTABLE TRANSACTIONS 5625 State Farm Drive, 3,920 sf, Industrial Space to Best Built Cabinets 5420 “D State Farm Drive, 1,736 sf, Office Space to Spirit Led Worship Center 5550 #8/9 Commerce Blvd., 1,100 sf, Office Space to Labor Finders ROHNERT PARK INDUSTRIAL 12.00% 10.00% 8.00% 6.00% 8.10% 9.00% 7.50% 9.00% 11.00% ROHNERT PARK OFFICE 30.00% 25.90% 25.50% 25.10% 26.40% 26.30% 25.00% 20.00% 15.00% 10.00% 5.00% Keegan & Coppin REAL ESTATE 4.00% 2.00% 0.00% 1st Qtr. 2008 2nd Qtr. 2008 3rd Qtr 2008 4th Qtr. 2008 1st Qtr. 2009 0.00% 0.00% 0.00% 0.00% 0.00% 0.80% 0.80% 0.80% 0.80% 4th Qtr. 2008 1.00% 0.00% 1st Qtr. 2nd Qtr. 3rd Qtr. 2008 2008 2008 Direct Vacancy 1st Qtr. 2009 Direct Vacancy Sublease Space Sublease Space Santa Rosa - (707) 528-1400 Petaluma - (707) 664-1400 Larkspur - (415) 461-1010 Napa - (707) 252-1400 Sonoma - (707) 935-1400 SANTA ROSA As 2009 begins, it is anticipated that vacancies will continue to remain moderately flat. Over the past few months, leasing and touring activity has been limited, but there have not been any significant blocks of space come on the market. BUSINESS PARKS Demand for office space has been sluggish over the past few months as tenants seem to be weighing the effects of the current economic climate and impacts on the future growth of their companies. Many tenants have been looking for shorter term, one to three year commitments, as they feel the need to remain flexible with the changing business climate. In addition, a number of tenants NOTABLE TRANSACTIONS have been circling the market to assess rents and concessions being 418 B Street, 4th Floor, 4,400 sf, Office Space to United Way of the Wine Country offered by outside landlords. Many tenants are then returning to their 930 Petaluma Hill Road, 3,000 sf, existing landlord to renegotiate Industrial Space to Roseland Smog existing leases and ultimately end 1919 Dennis Lane, 3,000 sf, Industrial up renewing them. Landlords Space to David Dickson seem to be willing to listen in order to retain tenants in this competitive 3345 Industrial Drive, Unit 15, 3,029 sf, Industrial Space to Climate Insulating market. Products Vacancy rates for the first quarter of 2009 are up just slightly at 15.9%, from 15.3% in the last quarter of 2008. Office rents for Full Service ranged from $1.50 $2.79 psf. There is only one building in central Santa Rosa currently under construction. Basin Street Properties is developing a 3-story, 62,850 sf Class A, professional office building on Round Barn Circle in Fountaingrove. The building is slated for completion in May 2009 and can begin construction of tenant improvements immediately. Industrial vacancy rates for the 1st quarter of 2009 were also up to 15.3% from 13.6% for the last quarter of 2008. Rental rates ranged from $.25 $.82 per square foot Gross. Retail space vacancies jumped significantly from 6.6% in the last quarter of 2008 to 9.2% for the first quarter of 2009. Rents averaged $1.50 per square foot. SANTA ROSA INDUSTRIAL 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 1st Qtr. 2008 2nd Qtr. 2008 3rd Qtr. 2008 4th Qtr. 2008 1st Qtr. 2009 0.40% 0.30% 1.30% 1.30% 0.90% 12.40% 12.50% 12.60% 12.30% 14.40% SANTA ROSA OFFICE 16.00% 14.60% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 1st Qtr. 2008 2nd Qtr. 2008 3rd Qtr. 2008 4th Qtr. 2008 1st Qtr. 2009 1.60% 2.10% 2.20% 2.30% 2.40% 14.40% 12.50% 13.10% 13.50% Keegan & Coppin REAL ESTATE Direct Vacancy Sublease Space Direct Vacancy Sublease Space Santa Rosa - (707) 528-1400 Petaluma - (707) 664-1400 Larkspur - (415) 461-1010 Napa - (707) 252-1400 Sonoma - (707) 935-1400 NORTH CORRIDOR (AIRPORT AREA & WINDSOR) As with other areas, expectations for the North Corridor area of Sonoma County for 2009 remain uncertain because the current forecast on the local economy is very unclear. Competition for tenants is fierce across all markets with Owners offering lease incentives to attract users. With many of the business closures already occurring and no new construction planned, vacancy rates for both office and industrial space are expected to remain flat or possibly decrease slightly over 2009. Office vacancy rates for the first quarter of 2009 rose just slightly to 14.8%, up from 14.1% in the last quarter of 2008. Office rates ranged from $.63 - $1.00 psf Gross; to $1.10 $2.50 psf NNN; to $1.30 - $2.40 psf for Full Service. Industrial activity was slow, but NeilMed Pharmaceuticals signing of a lease on Skylane Boulevard was substantial. Industrial vacancy rates in the North Corridor actually decreased a bit in the first quarter of 2009, down to 11.7% from 2008’s last quarter rates of 12.1%. Industrial rental rates ranged from $.60 - $.82 psf Gross. In late 2009 the economy is expected to stabilize with the hope of businesses being able to plan for growth, make longer term decisions and ultimately sign lease commitments. BUSINESS PARKS NOTABLE TRANSACTIONS 5621 Skylane Blvd., 14,300 sf, Industrial Space to Neilmed Pharmaceuticals 4853 Old Redwood Highway, 1,061 sf, Office Space to Brenk & Company Insurance Services NORTH CORRIDOR INDUSTRIAL 8.00% 7.00% 6.00% 5.00% 4.00% 5.00% 5.10% 5.10% 6.90% 5.20% 6.90% 4.80% NORTH CORRIDOR OFFICE 16.00% 14.60% 13.70% 14.00% 11.90% 11.40% 12.20% 12.00% 10.00% 8.00% 6.00% 3.40% 2.70% 4.00% 2.60% 2.40% 2.10% 2.00% 0.00% 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2008 2008 2008 2008 2009 Direct Vacancy Sublease Keegan & Coppin REAL ESTATE 3.00% 2.00% 1.00% 0.00% 1.80% 1.80% 1.80% 1st Qtr. 2008 2nd Qtr. 2008 Direct Vacancy 3rd Qtr. 2008 4th Qtr. 2008 1st Qtr. 2009 Sublease Space Santa Rosa - (707) 528-1400 Petaluma - (707) 664-1400 Larkspur - (415) 461-1010 Napa - (707) 252-1400 Sonoma - (707) 935-1400