Vacancy Rises While Asking Rates Remain Flat
With summer coming to a close, the third quarter of 2007 ended with an increase in vacancy for the Sonoma County office market, while the average asking rate remained flat. Sonoma County posted a vacancy rate of 23.2% at the close of Q3-07, up from Q2-07, while its average asking rate fell by $0.01 to $1.91 per rentable square foot (full service). Sonoma County finished third quarter 2007 with slightly more than 2.4 million square feet of total available office space on the market, comprised of 2.16 million square feet of direct space and 241,000 square feet of sublease space. Gross absorption for the quarter finished at 172,114 square feet, while the county posted a negative net absorption figure of 39,509 square feet, indicating the amount of new space added to the market during the third quarter.
Petaluma
In Petaluma, the overall asking rate remained unchanged from last quarter at $1.99 per rentable square foot (full service). Meanwhile, vacancy ticked up to finish the quarter at 25.6%. This was the third consecutive quarter that vacancy increased in this submarket, having increased by two full percentage points from 23.6% in Q4-06. In Petaluma, the story remains the same—large blocks of space remain vacant in both the North and South McDowell veins, while downtown Petaluma posts a vacancy rate of just 4%. Downtown Petaluma remains in demand, while commodity space east of Highway 101 sits empty.
Rohnert Park/Cotati
The combined Rohnert Park/Cotati submarket has actually decreased its vacancy rate, with Codding Enterprises signing its first deal at the newly renovated Sonoma Mountain Village green development (the former Agilent campus). Codding Enterprises negotiated a 40,000-square-foot lease with AT&T, to bring in the first large tenant to the 700,000-square-foot project of both office and industrial space. The statistics for the submarket at the close of Q3-07 were a 45.1% vacancy rate coupled with an average asking rate of $1.84 per rentable square foot (full service). This represents a decrease in vacancy while the asking rate has remained unchanged.
Santa Rosa
Santa Rosa posted an increase in vacancy to finish the third quarter at 12.8%, the lowest vacancy rate of the four Sonoma County submarkets. Meanwhile, the average asking rate in the submarket dropped $0.05 in Q3-07 to $1.95 per rentable square foot (full service). Santa Rosa tallied 75,066 square feet of gross absorption, and for the second quarter in a row posed a negative net absorption with -63,980 square feet.
The Santa Rosa Airport submarket posted a slight decrease in vacancy to finish the third quarter at 24.7%. The average asking rate remained unchanged at $1.81 per rentable square foot (full service) in Q3-07. Its rate has grown just $0.03 over the past year. Overall, the Sonoma County office market witnessed a somewhat sleepy summer, showing an increase in vacancy and an asking rate that’s remained at the status quo for the past three quarters. The catch phrase of the summer has been "credit crunch," and we’ll have to wait to see how this impacts Sonoma County’s employment rate and commercial property interests.
Sonoma
In Sonoma’s Carneros Business Park, construction recently started on a 42,000-square-foot office/condo complex which will be zoned to allow a full range of industrial, warehouse and/or office uses. The Carneros Business Condominiums will feature 41 office/warehouse units, ranging in size from 765 to 1,553 square feet, and ranging in price from $194 to $262 per square foot. By assembling multiple units, the condos will be able to accommodate businesses of 1,000 square feet up to 10,000 square feet.
