Solar panel firm’s factory space up for grabs in McClellen Park

OptiSolar’s 700,000-square-foot industrial space, above, in McClellan Park is looking for a tenant. The solar panel manufacturer’s prospects seemed brighter last November, when Gov. Arnold Schwarzenegger, top, spoke at the North Highlands site.

Sixteen months after OptiSolar Inc. roared into Sacramento, the cavernous building it was converting into a factory at McClellan Park is seeking a new tenant.

As recently as last fall, the nearly 700,000-square-foot space was on track to be the largest solar panel manufacturing plant in North America. OptiSolar had torn out walls to connect several former Air Force storage bays, each larger than a football field, and was spending millions on heavy-duty plumbing and air conditioning systems. In November, Gov. Arnold Schwarzenegger stood in front of the factory as he ordered the state’s big utilities to get more of their power from renewable sources.

But the bad economy and a manufacturing glut in the solar power sector combined to choke off the financing OptiSolar needed to fuel its rapid growth. Mass layoffs started in January, and in early March the company merged with much larger First Solar Inc., based in Tempe, Ariz., in a deal worth more than $400 million in stock.

OptiSolar, now a subsidiary of First Solar, listed the McClellan site with global commercial real estate firm Jones Lang LaSalle earlier this month. Derek Johnson, a vice president with the brokerage, said OptiSolar is looking for one or more tenants to sublet or take over the lease on the entire site.

“They are not planning on using it,” he said.

The OptiSolar vacancy adds to the region’s growing expanse of empty industrial space.

Garrick Brown, research director in Sacramento for commercial real estate broker Colliers International, expects vacancies to rise from 11.5 percent today to roughly 14 percent by next year, meaning an additional 6 million square feet of industrial space will come onto the market.

“It’s going to be very, very challenging” to find a new tenant for the OptiSolar site, Brown said. He and others said the space is likely the largest on the local industrial real estate market.

OptiSolar initially held a 10-year lease worth $22.5 million. McClellan Business Park sued OptiSolar in late March for unpaid rent and other expenses, but the parties settled quickly. Larry Kelley, president of McClellan Business Park, declined to provide details of the agreement Monday, but said OptiSolar has recently been making payments.

OptiSolar’s troubles are part of a broader shakeout in a global photovoltaic sector likely to post a greater than 30 percent drop in shipments this year. It will be the industry’s first year of contraction on record, according to Paula Mints, a solar market expert with Navigant Consulting in Palo Alto.

Photovoltaic manufacturing capacity worldwide will reach 11 gigawatts this year, but the industry is likely to ship less than 4 gigawatts worth of panels, Mints said.

Hayward-based OptiSolar once envisioned the McClellan factory employing as many as 1,000 workers building low-cost panels for solar farms that would cover thousands of acres in rural areas.

A $20 million package of tax incentives from Sacramento County helped lure the company here in March 2008, and for several months OptiSolar was the centerpiece of the region’s green jobs push.

The company’s local operations never got big enough to trigger the tax breaks. Employment at the McClellan plant peaked around 200.

OptiSolar did not respond to requests for comment.

Tracey Schaal, director of strategic marketing at the Sacramento Area Commerce and Trade Organization, said green-technology companies, particularly European and East Asian firms, remain among the region’s best prospects for new manufacturing jobs.

“People are seeing this as a good time to get into the region at a good price point,” she said.

Schaal said one renewable-energy company is likely to announce a local investment shortly, but declined to give details.