Much of the activity in Napa County’s commercial property market has been in south valley warehousing and in downtown Napa retail and office spaces.
Outside the industrial parks around Napa County Airport where big projects have been landing big occupants, the velocity of business property deal-making in the valley tends to be slower than in surrounding counties and elsewhere in the Bay Area, according to Michael Holcomb of Strong & Haden Commercial Real Estate in Napa.
“Yountville tends to not turn over a lot. Calistoga is slow moving. American Canyon has more interest in leasing activity, especially, Napa Junction, Canyon Corners and Canyon Plaza,” Holcomb said. “But Napa proper is where things are happening.”
The Riverfront, a residential and commercial property with a promenade along the Napa River that Holcomb markets, recently attracted a seafood and a Mexican restaurant to its two ground-floor dining spaces that had been vacant since the early days of the coronavirus pandemic.
And another burst of activity has come in and around Zapolski Real Estate’s and Trademark’s First Street Napa project, which has been redeveloping a beleaguered downtown shopping center and revamping surrounding buildings to create a premium shopping district. The project has landed over a dozen tenants in the past two years, such as a Boisset Collection tasting room, Anthropologie, floral studio Camino and The Perfect Provenance lifestyle store.
“The Bay Area is definitely traveling to Napa, and there has been a migration of new residents to Napa and spending time in Napa,” Holcomb said, pointing to the valley’s hot housing market as a leading indicator for interest in local commercial properties.
Also part of First Street Napa is the county’s newest and largest coworking space. Spaces, a division of global temporary-space giant Regus, opened roughly a year ago in 18,000 square feet leased in the former McCaulou’s department store building and space upstairs in that building.
The office rental market has been sluggish in Napa County amid employer uncertainty about the direction of the pandemic, especially with the rise of the delta variant in mid-summer, Holcomb said. But smaller office spaces in converted Victorian-style and other homes in the downtown area have been sought after by owner-users such as dentists, physicians and attorneys, he said.
Also generating buyer interest in Napa proper are small retail centers and apartment complexes, given the valley’s low housing vacancy rate.
“Investment properties in Napa are doing well,” Holcomb said.
But a lack of retail space with good customer traffic and visibility is limiting deal-making in the valley, a situation that predated the pandemic, according to Jennifer Hibbitts, a retail specialist with Cushman & Wakefield.
“Most national and regional tenants where location is important are waiting for the right space, rather than just going for (class) C-minus location just because. They will wait. There’s definitely demand for (class) A retail real estate,” Hibbitts said.
Only 2.2% of 2.63 million square feet of retail space Cushman & Wakefield tracks in Napa County was vacant in the second quarter, the lowest proportion in the North Bay.
Big deals for scant big warehouse space
Though most of the 2.4 million square feet of industrial space under construction in the North Bay is in Solano and Napa counties, nearly half of that is already preleased, according to Chris Neeb of JLL. And that is particularly true for warehouse space in Napa County.
“In the Napa (County) Airport area, if you’re looking for space over a couple thousand square feet, it doesn’t really exist,” Neeb said. “Because the supply of space is so limited, we have some wine storage tenants that are starting to look at Fairfield.”
Of the 2.6% vacancy in the 14.6 million square feet of industrial space JLL tracks in Napa Valley, most all that 380,000 square feet available is in one building, he pointed out. That’s roughly half the 702,000-square-foot 400 Boone Drive building that Biagi Bros. does not occupy in in the Napa Logistics Park project, which is marketed by Cushman & Wakefield.
That 218-acre project in American Canyon has filled up in the past two years with deals for the last two parcels being leased to Amazon and Pacific Gas & Electric Co. The first building, with 646,000 square feet at 1 Middleton Way, was completed in 2016 and leased to Ikea.
Instead of the originally planned 1 million-square-foot building at 300 Boone Drive, the e-commerce giant went with a 201,000-square-foot distribution center with space for nearly 2,000 vehicles, to serve as a “last mile” delivery hub for the company’s Amazon Logistics business. That building was completed earlier this summer and is operational.
The other site, 500 Boone Drive, was recently approved for the utility to construct a maintenance and equipment yard to serve the North Bay region.
Colliers International noted that third-quarter industrial vacancy was just 1.2% of the 6.9 million square feet it tracks. That’s down for the seventh consecutive quarter.
Scannell Properties is building an 83,200-square-foot wine production facility at 144 Gateway Road E. in south Napa, according to Colliers.
At 500 Devlin Road in the Napa Commerce Center project, The Pigman Companies is set to wrap construction on Building H. The nearly 80,000-square-foot warehouse already is leased to M7 Wine Solutions.
New warehouse space that already isn’t preleased won’t arrive until late next year, Neeb said.
Already an active Napa Valley warehouse developer over decades, Stravinski Development plans to break ground on a couple more warehouses next month, including a 200,000-plus-square-foot facility.
And likely a few years at the earliest from breaking ground is Panattoni Development’s recently acquired 55-acre project at the Syar Industries quarry and industrial complex at 11 Basalt Road. Just in the beginning stages of seeking entitlements, the site is being envisioned for construction of four warehouses with 150,000–200,000 square feet each.
And another industrial project in the offing is Channel Properties’ south Napa site that has been designed for construction at an unspecified time in the future of a 100,000-plus-square-foot warehouse and an adjacent one with 20,000 square feet.
But supply chain issues are posing a challenge for current and future industrial construction projects, which can be price sensitive, Neeb said.
“It’s difficult for these developers to quote pricing,” Neeb said.
Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at [email protected] or 707-521-4256.