Lower Unemployment, Lower Vacancy
Napa and Solano counties’ office market vacancy rate declined in the second quarter of 2017 from 15.1 percent to 14.9 percent, the lowest level in the last ten years. Unemployment rates are typically an accurate predictor of office vacancy rates and unemployment has declined significantly since their recent peak during the Great Recession. Solano County’s unemployment rates is currently 4.3 percent, down from 13.1 percent in January 2011. Napa County’s unemployment rate has dropped at an even more pronounced rate over the same period from 11.4 percent to 3.4 percent currently. Net absorption in the quarter was positive 12,209 square feet. The combined average asking rate across all classes of office in the first quarter declined from $1.79 to $1.76 per square foot per month full service (FS). The explanation for the counter-intuitive decline in overall average asking rates amidst declining vacancy rates is there is now more office/flex space available than Class A office space available. Therefore Class A office’s higher rents are now less of a factor in the overall weighted average.