Freight track improvements in Marin and Sonoma Counties will drive industrial demand and development over the next decade

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By: Jordan Riesenberg, Research Analyst


Industrial development in the North Bay region has been historically stymied by a lack of infrastructure capacity, high land prices, and some of the strictest land use regulations in the United States. While the last two are unlikely to change, there is new infrastructure on the way. Greater transportation access may be the spark to broadly increase real estate demand in the North Bay region.

From an infrastructure standpoint, the North Bay region has historically been underserved. The North Bay, with the Golden Gate Bridge and the two-lane CA 37 highway being the only major access points to the region, combined with some of the strictest land use regulations in the nation, has seen much less development than other regions around San Francisco. Industrial inventory in the North Bay stands at 42 million square feet, less than half that of the Central Valley. As the last parcels of land in the inner Bay Area are developed in the South and East Bay suburbs, development pressure will undoubtedly increase in the North Bay in addition to the rapidly developing Central Valley markets.

Currently companies are trucking their goods down U.S. 101 to the freight line terminus in Windsor, followed by loading them on a train bound for the national freight network. As the rail line extends north the drawing power will increase. The North Bay region could become a major distribution point for goods coming in from as far away as southwestern Oregon in the distant future, as well as serve the growing local wine industry. Local wine storage and distribution has pushed down North Bay vacancy rates from 8.4 percent to 7.5 percent in the last 12 months.

Freight access to the Northwestern Pacific Railroad ended previously in 1999, though only minimal portions of the line were in service even at that time. The North Coast Rail Authority (NCRA), created by the state to prevent the entire Northwestern Pacific Railroad from abandonment, began repairing track between Schellville (South of the City of Sonoma) and Windsor in 2009. Much of this track repair was done in partnership with SMART, a local commuter rail project, utilizing its funds. Litigation from Marin County pushed back the start date for freight service by a year, but ultimately freight trains began rolling during the summer of 2011. Eventually the NCRA would like to continue improving freight tracks north to Willits by 2020, though that date will likely be pushed back farther. This would further the state’s long-term goal of eventual passenger and freight service up to Eureka and the far northern coast.

SMART, short for Sonoma-Marin Area Rail Transit, is a $428 million project scheduled to come online in late 2016 between Northern Santa Rosa and Downtown San Rafael. Officials are working hard to secure funding to bring the line to its southern terminus at the Larkspur Landing to connect with ferries to San Francisco. The system is envisioned to one day take passengers as far north as Cloverdale, but funding sections north of Santa Rosa will have to wait for a later decade. While passenger trains are the purpose of the SMART project, the track improvements paid for by SMART have brought freight service back to Marin and Sonoma Counties.

With a newfound importance as a distribution point on the freight network brought about by the NCRA, the outlook for medium and long-term industrial development is looking a bit brighter. As the rail-adjacent land with easy access to the San Francisco and Oakland core of the Bay Area continues to be developed, demand pressures may eventually push industrial development into Sonoma and Napa Counties where land costs and development restrictions are high.

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