Many companies, such as Amy's Kitchen, have opted for out-of-state locations to curb the growing burden of workers' compensation insurance, difficulties in obtaining governmental approvals, excessive regulation, and the high cost of housing. However, in spite of the exodus of manufacturing out of California, the Sonoma County industrial market remained surprisingly stable. Monthly asking rents remained unchanged from the previous year, ranging $0.55-$0.65/sf NNN for warehouse space and $0.90-$1.15/sf NNN for office space.
The market remained weighed down by large blocks of “flex” space that were placed on the market in 2002, most notably Agilent's campus in the airport area and the new and old Weigh-tronix facilities, also located in the airport area. Combined, these facilities represent approximately 525,200sf of flex/industrial space, the majority of which still remains vacant. The difficulty in leasing the space is due to the inability to divide these larger building into smaller sizes.
At the end of 2004, approximately 815,000sf out of a total inventory of 9,157,756sf of industrial and flex space in Santa Rosa was available for lease or sublease.
Large industrial lease transactions in Santa Rosa in 2004 include 22,500sf to La Tortilla Factory at Westwind Business Park, 13,000sf at 133 Aviation Boulevard for Precision Navigation, and 25,000sf in Santa Rosa for DHC Supplies.
Good news, bad news
In 2004, small and medium-size companies
shifted away from leasing and toward ownership. These
are owner-led companies with headquarters in Sonoma
County. The good news is that these company owners do
not want to leave the high quality of life they enjoy in
the North Bay despite the rising costs of doing business
here.
The bad news for the leasing market is that low
financing rates are inspiring many of these local CEOs
to buy rather than lease space. In Santa Rosa, it is far
easier to sell a 10,000sf industrial building than it is
to lease it. Within the city limits of Santa Rosa, about
21 industrial buildings were sold last year, with an
average sale price of $105/sf.
High land prices, efforts to preserve habitat for the
California tiger salamander, a soft leasing market, and
high construction costs are keeping developers from
launching any new pure industrial projects in Santa
Rosa. This lack of future development should reduce
industrial vacancy rates even further if the long
expected uptick in the local economy happens this year.
When the economy does make its move, we should see more
office and flex product built.
• • •
Preston Smith is a commercial real estate agent and
principal at Orion Partners; 707-543-8316;
psmith@orionre.com.
Haggin Marketing on a roll
SAUSALITO -- Haggin Marketing is doing more than rising from the ashes of the turn-of-the-century Dot Bomb. The direct marketing and retail advertising services agency is undertaking one of the boldest corporate expansions in southern Marin in the past several months.
Haggin increased its workforce 40% to 100 employees last year to accommodate a 110% increase in billings, according to president Jeff Haggin. With plans to hire as many as 50 this year, Haggin is expanding from Sausalito to Mill Valley in May.
The agency has signed a five-plus-year lease for 20,000sf at Shoreline Office Center, located at 100 Shoreline Highway along an arm of Richardson Bay. Meryl Sebestyen of Orion Partners handled the deal for Haggin, and Matt Krupp and Brian Eisberg of Orion represented the building owner.
Haggin is growing along with its clients, which include Dell's consumer direct marketing division, eBay, SBC, Good Guys Electronics, USAA, and Sunglass Hut International. Key to those relationships has been strategic planning to help clients reach consumers who are increasingly using more than one sales channel to research, compare, select, and purchase items, according to Mr. Haggin.
Pundits predicted the emergence of the Internet, e-commerce, and e-mail marketing in the late 1990s would toll the death knell for print and telephone direct marketing, but the truth has been far from that, according to Haggin senior vice president of strategy Mark Swedlund.
“Catalogs and the Web work hand in glove,” he says. “Catalogs are direct marketing vehicles, and the Internet is a direct sales vehicle.”
Mr. Swedlund compiles sales data
from more than 100 catalog retailers for the New York-based trade group Direct Marketing Association. His figures show that 35%-40% of the $150 billion in annual U.S. catalog sales ($90 billion from consumers and the rest business to business) are consummated online. Sales stemming from direct marketing have grown about 10% a year, double that of the retail sector as a whole, and are expected to grow 7% annually for the next five years.
Novato-based outdoor living products retailer Smith & Hawken has noticed that Internet, catalog marketing, and retail stores support each other, according to senior vice president of marketing Michelle Farabaugh. The company is exploring the interplay between online, catalog, and retail sales channels.