The Sonoma County office market experienced a slight increase in vacancy, while the average asking rate saw a subtle $0.02 decline in the second quarter of 2008. Sonoma County posted an overall vacancy rate of 24.9% at the halfway mark of the year, up from 24.1% in first quarter 2008, while its average asking rate decreased $0.02 to $1.88 per rentable square foot (full service). Class A space was 31% vacant, whereas Class B space was 15.2% vacant. The gap in asking rates among the two classes was much more narrowly defined, with Class A averaging $1.89 and Class B at $1.81.
Sonoma County, which has a building base of roughly 10.5 million square feet, finished the second quarter 2008 with slightly more than 2.6 million square feet of total available office space. Class A product accounted for more than 2 million square feet, or 78%, of the total availability. Sublease space totaled 388,000 square feet, or 15%, of the County’s total office availability at the close of second quarter 2008.
Gross absorption for the second quarter finished at 110,464 square feet, while the county posted a net absorption figure of -76,348 square feet (the net amount of new space added to the market during the quarter), a continued reflection of the shrinking financial services sector.
Petaluma
In Petaluma, the overall asking rate increased $0.02 from last quarter to $1.89 per rentable square foot (full service). Meanwhile, vacancy climbed up 270 basis points to finish the quarter at 29%. This was the sixth consecutive quarter that vacancy noted an increase in this submarket; with second quarter 2008 marking the highest rate since NAI BT began tracking this market in 2004. In Petaluma, the story remains the same: Large blocks of space remain vacant in both the North and South McDowell veins, while downtown Petaluma remains healthy. Downtown Petaluma space remains in demand, while commodity space east of Highway 101 sits empty.
Rohnert Park/Cotati
The combined Rohnert Park/Cotati submarket reported a minimal, 10-basis-point increase in vacancy in the second quarter of 2008, closing at 48.3%. Its average asking rate remained flat at $1.82 per rentable square foot (full service), the lowest of any submarket countywide. It’s important to note that this submarket remains dominated by large blocks of space at 1212 Valley House Drive, Sonoma Mountain Village and 5789 State Farm Drive (the former Motorola building) that can’t be easily demised. The buildings have a combined total ±631,932 square feet of vacant space. By removing these large blocks of vacant space, this submarket would achieve a healthy 9% vacancy rate.
Santa Rosa
Santa Rosa posted an 80 basis point decrease in vacancy to finish the second quarter at 13%, the lowest vacancy rate of the four Sonoma County submarkets. Meanwhile, the average asking rate in this submarket remained flat at $1.93 per rentable square foot (full service). Santa Rosa tallied 70,364 square feet of gross absorption, and for the first time in five quarters posted positive net absorption with 30,578 square feet.
The Santa Rosa Airport submarket posted an increase in vacancy of 130 basis points to finish the second quarter at 24.1%. The average asking rate remained relatively unchanged, decreasing a slim penny to $1.90 per rentable square foot (full service) at the end of the second quarter 2008.
Summary
The second quarter for the Sonoma market was very quiet. As consequences of the credit crunch start to settle for this market, vacancy rates and average asking rates will start to become more realistic. Many are still waiting on the sidelines, hesitant to commit due to current economic conditions.
