Walnut Creek, for many, is considered a small market for industrial space in the region. However, the industrial sector continues to show strong indicators of positive activity according to a recent report from Colliers.
“Industrial in Walnut Creek for the most part does not exist” said Curt Scheve, executive vice president for Colliers Walnut Creek office. “The area is largely oriented towards office and office property, residential and retail. There are a handful of small warehouses but the majority of industrial and light industrial buildings are located in Concord and Pleasanton.
Walnut Creek’s lack of industrial space is related to readily-available, expensive land with unique zoning laws.
“Walnut Creek proper’s land is scarce, expensive and zoning lends itself to non-industrial uses” said Scheve. “Industrial is pushed to areas like Concord and Martinez.”
When compared to other areas, Walnut Creek’s lack of space, and size of inventory, is notable. Many of the buildings in Walnut Creek are Class B and C buildings, not as large as Class A properties in other areas. For example, a recently sold property in Fremont, Calif., 47550 Kato Road, was listed at 259,737 total square feet. 41099 Boyce Road, also in Fremont, Calif., was listed in a recent sale as having 2 buildings at 208,108 total square feet on 13.69 acres. A new development by Amazon in San Francisco, located at 900 Seventh Street, will total 650,000 square feet.
“The few industrial buildings in Walnut Creek are considered legacy properties from many years ago with small footprints,” said Scheve. “These buildings that typically encompass 3,000-5,000 square feet house companies that support the residential building trades.”
According to Colliers report, Walnut Creek has 284,514 square feet of industrial inventory. That is smaller than the 7,100,414 square feet in Concord and 1,074,048 square feet in Martinez.
“The Greater Walnut Creek area…which includes surrounding areas like Martinez, Pleasant Hill and Concord, is unique compared to other Bay Area industrial markets for its proximity to refineries and the services needed to service them” said Scheve. “Examples of these types of companies include electrical, pumps and piping, maintenance, environmental services and other general business services. This underpinning of this industry helps support industrial activity and demand.”
Yet even with its small industrial footprint, there are still strong fundamentals in place in the Walnut Creek region, even amidst the COVID-19 pandemic. According to Colliers’ report, Walnut Creek shows strong market indicators such as low unemployment at 4.6 percent, 6.5 percent GDP growth, and 1.514 percent U.S. 10 year treasury note.
“The Greater Walnut Creek area was not as impacted as others due to the essential nature of energy and our dependence on it to power our homes and vehicles, among other things” said Scheve. “We don’t anticipate any adverse effects of COVID on this market due to the necessity of the industry.”
Meanwhile vacancy in the market is rising. According to Colliers, vacancy rose to 7.6 percent during the 4th quarter of 2021, up from 6.4 percent during the 3rd quarter. Vacancy was 5.6 percent during the 4th quarter of 2020.
Also, rental rates in the area have been decreasing. Rental rates during the 4th quarter of 2021 were at $0.79, down from $0.83 during the 3rd quarter of 2021. One year ago, during the 4th quarter of 2021, rental rates were at $0.90.
The biggest leases during the fourth quarter were 17,218 square feet at 1850 Bates Avenue in Concord by Cosmed, 12,320 square feet at 3275 E. 18th Street in Antioch by G&C Autobody, and 7,980 square feet at 5600 Imhoff Drive in Concord by Park Place.
Meanwhile the largest sales during the 4th quarter were 1011-1021 Detroit Avenue in Concord at $185 per square foot, 521 Wilbur Avenue in Concord at $228 per square foot, and 2300 Stanwell Avenue in Concord at $257 per square foot.
According to Colliers, the region’s industrial market wasn’t too terribly impacted by COVID-19. Net absorption for 2021, for example, finished with 332,924 square feet of negative absorption. Yet, much of that could be a result of large blocks becoming available in East County.
Also, as vacancy rates continue to fluctuate, the most pertinent challenge of the region lies with quality small and medium sized blocks with proper yard and dock doors. With few developments in the pipeline and the inventory challenges noted above, rents are expected to trend upwards while vacancy rebounds in 2022.