2010 Global Market Report - NAI Commercial Real Estate

Sonoma County, CaliforniaVentura County, CaliforniaContactNAI Global+1 609 945 4000Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage Income459,348446,684240,062$80,118Sonoma County, “the gateway to the wine country,” isbordered on the south by Marin County, on the east by NapaCounty, on the north by Mendocino County and on the westby the Pacific Ocean. Sonoma is a highly regarded touristdestination with nearly 7.5 million visitors in 2008.Sonoma office vacancy was at a high of 11.2% in 2004,but has since climbed to 29.2% in Q3 2009. Vacancyincreased 300 basis points since Q3 2008. The averageasking rate decreased $1.32 in the past year to $20.80/SFfull service per year. Since 2004, nearly 4.8 million SF ofoffice space has been absorbed from the county’s availablemarketplace.The City of Santa Rosa remains relatively healthy withvacancy at 20.2% in Q3 2009, compared to 15.8% a yearago. Even with the vacancy spike, this submarket is still thelowest in Sonoma County. Petaluma’s vacancy remainsamong the highest in the county at 32.4%.Industrial vacancy remains on a healthy path, with Q3 2009ending at 13.9%, up 270 basis points since Q3 2008. Theaverage asking rate closed Q3 2009 at $8.25/SF gross peryear, down $0.24 SF from a year ago. Year-to-date 2009,Sonoma County has recorded about 610,000 SF of leasedspace. The industrial market has seen a slowdown in itsabsorption, although the food industry is taking advantageof this downturn by picking up large blocks of this space.Commercial sale activity has come to a stalemate during2009. Tenants and buyers are aggressively looking to takeadvantage of today’s soft market conditions, although at alevel that is sometimes more aggressive than landlords andsellers are able or willing to consider.We anticipate continued softening in values as capitalizationrates rise to accommodate perceived risk. Many are stillwaiting on the sidelines hesitant to commit due to currenteconomic conditions. There remains a large gap in perceivedvalues between owners and tenants/buyers.ContactNAI Capital (Ventura County)+1 805 278 1400NAI Capital (Westlake Village)+1 805 446 2400NAI Capital (Simi Valley)+1 805 522 7132Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage Income795,243857,787,305371,999$90,424Ventura County has certainly felt the impact of the recessionwith the demise of Countrywide, resulting in a negativeimpact on the office market. Vacancy rates are approaching20% and net absorption was negative through 2009 Q3.While this amounts to a substantial inventory, there is somegood news. Very little space is expected to return to themarket as it appears that Countrywide/Bank of America hasreturned the majority of its unused space. This will helpreduce vacancy rates for Class A space, the preferred spaceof Countywide.Demand for industrial space has slowed. A good deal ofthe decline is tied to the regional and national manufacturingsector and the Port of Hueneme. The port importsa significant number of the BMW automobiles that enter theWest Coast for US distribution. As demand for cars dwindled,so did the demand for industrial space related to warehousingand transporting. As it appears that world trade has begunto increase, it is likely that demand for industrial spacein Ventura County will also increase during the next 12months.The retail market also experienced contraction during therecession but seems to be improving. Rents have leveledoff and do not appear to be declining. In the WestlakeVillage/Thousand Oaks market, many centers have avacancy factor of less than 4%. The number of delinquenttenants has also dropped significantly and most retailersare reporting that sales activity is improving. One potentialproblem is a proposal by the City of Ventura to raise thesales taxes. If this ballot initiative passes, retail sales arelikely to fall across the board. This could have a negativeimpact on the demand for retail space.Tight credit conditions, increasing commercial default rates,and declining lease rates are negatively impacting the abilityof buyers to secure financing. As a result, the numberand dollar value of sales transactions is down considerably.However, low prices mean it is a good time to buy for thosewith adequate financing.MedianHousehold Income$67,472MedianHousehold Income$75,440Total PopulationMedian Age40.3Total PopulationMedian Age36.1Sonoma County At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIAL$$N/AN/AN/AN/A16.2016.20$$N/AN/AN/AN/A30.0030.00N/AN/AN/AN/A$ 21.96$ 18.84N/AN/AN/AN/A34.6%20.2%Bulk WarehouseManufacturingHigh Tech/R&DRETAILDowntown$$4.564.56N/AN/A$$12.0012.00N/AN/A$$8.288.28N/AN/A13.9%13.9%N/AN/ANeighborhood Service CentersCommunity Power CenterRegional Malls$$22.2015.00N/A$$$36.0042.0035.40$ 24.76$ 26.13$ 21.834.1%3.0%14.4%DEVELOPMENT LAND Low/Acre High/AcreOffice in CBDLand in Office Parks$N/A871,200.00N/A$ 1,306,800.00Land in Industrial Parks$ 435,600.00 $ 871,200.00Office/Industrial Land - Non-parkRetail/Commercial Land$$653,400.00871,200.00$ 1,089,000.00$ 1,306,800.00Residential$ 2,718,000.00 $ 2,613,600.00Ventura County At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power CenterRegional Malls$$$$$$$$$N/AN/AN/A27.0027.0021.004.204.806.00N/A6.6013.4517.00$$$$$$$$$N/AN/AN/A35.0035.0026.4010.807.8015.00N/A39.0034.0048.00$$$$$$$$$N/AN/AN/A30.0030.0024.0015.0012.6010.50N/A25.7023.6321.17N/AN/AN/A78.8%19.6%16.7%5.9%6.3%7.0%N/A9.1%5.4%2.3%DEVELOPMENT LAND Low/Acre High/AcreOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidential$$$N/A430,500.00350,000.00N/A525,000.00N/A$$$N/A1,300,000.00875,000.00N/A1,300,000.00N/A2010 Global Market Report ■ www.naiglobal.com 80