The office market within the city limits has been even tougher as a number of tenants have still not fired all workers from COVID-era remote work, Moffett said.
“Before COVID, I did 50 to 80 leases a year,” Moffett said. “But I’ve probably done 30 deals this year, and it’s a mix of sales and leases – a few renewals and a few small offices with one or two rooms.”
Some owners of large office buildings in business parks near the Napa County airport are considering converting them to flex-type spaces, which are industrial properties that can accommodate offices, Moffett said. This may involve replacing windows at the rear of buildings with roll-up doors for truck access.
“It ends up being an expensive flex space,” Moffett said.
Leases from small tenants boost the office market in Marin
In Marin County, a series of smaller office leases appear to represent a third consecutive quarter of net office space absorption, according to Haden Ongaro, who oversees Newmark’s operations in North Bay.
Net absorption is a measure of whether more commercial space is leaving the market through leases and sales than is being put back on the market.
Of 123,000 square feet of Marin office leasing in the first quarter of this year, net absorption was 55,000 square feet, down slightly from 67,000 square feet in the fourth quarter, Newmark reported. When the estimates for the second quarter are completed in mid-July, Ongaro expects an improvement similar to that of the last two quarters.
“We’ve done a lot of transactions over the past three months for smaller tenants,” Ongaro said. “There is an increase in activity and actual deals being made.”
Companies active in the market are now looking for 1,000 to 3,000 square feet, and some are considering older Class B space, Ongaro said. Law firms are now key players in this size bracket.
Medicine-related businesses are also looking, and some of them are looking for 8,000 to 10,000 square feet, Ongaro said.
Even with recent activity, the needle has barely moved on the amount of office space available for rent in Marin. Newmark estimated the first quarter availability rate (also known as vacancy rate) to be 18.9% of the 7.5 million square feet the brokerage tracks in the county. That’s down slightly from 20% at the end of last year, but almost identical to what was on the market a year before.
The trend of short-term renewals since the early months of the pandemic, when economic uncertainty reigned, continues, Ongaro said. He mentioned a national financial corporation that has just renewed its local lease for two years and is signing one- to two-year contracts across the country, so that it can reassess the economy later.
The conversion of some offices into housing continues, Ongaro said. Beyond announcements of major projects like the redesign of the former Fireman’s Fund campus in Novato and the Northgate Mall north of San Rafael, some developers are in negotiations for options on the property while preparing applications for the services of local planning for conversion projects.
Sonoma County: good industrial deals, extension of office leases
In northern Sonoma County along the Highway 101 corridor, Keegan & Coppin Co. Inc. agent James Manley said he’s already seen the impact on real estate activity trade of the Federal Reserve’s three-quarter point hike in mid-June at its peak. assess.
“It was a bit like dusting a cookie with a sandblaster,” Manley said of the Fed action. “Warning, the cookie needed dusting.”
He had worked with a client on a cash purchase of property in southern Sonoma County. But the effect that the Fed’s decision to contain the highest inflation in four decades has had on financial markets has considerably reduced the resources of this buyer. The deal was heavily dependent on the buyer’s investments, which fell 40% in just a few days.
As in Marin, a number of Sonoma County office tenants have requested short-term lease extensions, Manley said. The office vacancy rate rose for the third consecutive period, to 14.6% in the first quarter, according to Keegan & Coppin. That’s barely changed from the level of vacancy in the county since the second half of 2020.
But the market for industrial space, the little that is available in Sonoma and Marin counties remains hot, Manley said.
“I put a small industrial condo on the market two weeks ago and I get five to 10 calls a day about it,” he said of the 1,500-square-foot space that is for sale.
The vacancy rate for industrial space in Sonoma County declined for the third straight quarter, falling to 6.9% in the first quarter from a peak of 8% midway through last year, according to Keegan & Coppin.
Jeff Quackenbush covers wine, construction and real estate. Before joining the Business Journal in 1999, he wrote for Bay City News Service in San Francisco. Contact him at [email protected] or 707-521-4256.