Sonoma County’s commercial real estate market declined in the first two quarters of 2021, but recovered significantly in the last two quarters. We have felt the highs and lows of COVID in 2021, repeating some of 2020’s high infection and hospitalization rates.
Fluctuations in the local economy have mirrored the effects of COVID on the national economy.
The stock market was buoyed by strong corporate earnings, low interest rates and the market’s romance with Big Tech. Therefore, the momentum sustained us through another challenging year.
The rental rate for commercial properties accelerated in 2021 compared to 2020 across North Bay. The rental rate reflects business confidence and, to some extent, the local economy.
In our local North Bay market, we saw a 12% increase in rental rate from 1,158,000 square feet in 2020 to 1.3 million square feet in 2021. We saw rental acceleration in the last two quarters of 2021, reflecting the national GDP rate of 6.9% for the fourth quarter of 2021.
In 2022, we believe the local economy will continue to accelerate its recovery as business confidence is solid, as evidenced by the strength of venture capital funding in the Bay Area. What happens in the Greater Bay Area also has a positive impact on this region.
Investment in commercial real estate in North Bay is another indication of business confidence in the future growth of the economy. With bonds and real estate still an alternative to the stock market, commercial real estate in particular has been good in 2021 and has also been refreshed locally. Users wishing to become owners have intensified as well as the strong demand from investors in the local market. There is very high confidence and demand for local industrial, office and retail properties in that order.
In 2021, we saw a record 92 properties sold, or nearly 1 million square feet, representing a value of over $237 million by our professionals. This is double the volume we sold in 2020.
Although hospitality and tourism may be slowed in North Bay due to COVID, economic base industries and the main street economy are poised to pick up speed in 2022.
Investment capital seeks existing business infrastructure – commercial buildings and development opportunities for the expansion of the local economy. Being part of the Bay Area is a major strength of North Bay.
Everything that happens to the south in the rest of the Bay Area affects this area in a staggered way. Venture capital funding in the Bay Area set records in 2021. Metro San Francisco attracted $93.1 billion in venture capital funding last year, ranked #1. Compare that with New York’s $51.9 billion, ranked No. 2. The United States added 467,000 reclaimed new jobs in January 2022 with an unemployment rate of 4.0%.
So what bodes well for Sonoma County is its strong economic base, and that should continue to support an expansion of the industry clusters that create the broad base of jobs in the North Bay: pharmaceutical and bioscience, medical science, agricultural business, electricians, software, social media, healthcare, machine tools, transportation, export, manufacturing, alternative energy.
Overall, the prospects for a strong economy on Main Street are all apparent. California is still the best place to start and grow a business, and it’s also home to North Bay with all of its natural beauty and resources. People like to live here and thrive.
Al Coppin is founder and president of Keegan & Coppin Co. Inc. Based in Santa Rosa, the commercial real estate brokerage firm (707-528-1400) has offices in Sonoma, Marin and Napa counties.