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During the recession, a once-bustling hub of innovation and telecom startups in northeast Petaluma came to more closely resemble a graveyard of surplus office space.

Realty signs dotted many of the two-dozen buildings within the Redwood Business Park on North McDowell Boulevard and Old Redwood Highway. Rents became "negotiable."

Hulking structures went vacant as companies downsized or went belly-up when the tech boom imploded, leaving the ponds, waterfalls and employee basketball courts deserted.

Wild ducks and geese took over grassy areas where buzzing engineers used to bounce ideas off each other for pioneering new products.

But a resurgence of activity is breathing new life into the former Telecom Valley, while at the same time offering a salve on a community psyche wounded by the depressing sight of empty buildings.

During the past several months, several hundred thousand square feet of office and warehouse space in north Petaluma has been sold to new owners or leased to businesses seeking larger quarters or new homes.

Real estate experts say the moves are primarily the product of falling prices for commercial real estate.

"It seems that there's a whole new wash of new great tenants that are either expanding or moving to Petaluma," said Matt White, president of Basin Street Properties, a development firm that was founded in Petaluma.

"It's starting to sound and feel like some of the days back in the mid-1990s when Petaluma started to take off. It's certainly due to have some kind of economic recovery. It's been a tough 10 years."

Although second-quarter figures aren't yet available, real estate experts watching the Petaluma market speculate office space vacancies are about half of what they were a few months ago.

Office vacancies in Petaluma hit a high of about 42 percent in 2009 and have been falling ever since, according to Keegan & Coppin, a Santa Rosa commercial real estate firm.

In early 2010, 33.8 percent of office space was vacant, which dropped to 27.2 percent by the first quarter of 2011. Those numbers compare to the average in Sonoma County of about 22 percent.

All the recent leasing activity should drive Petaluma's vacancy rate even lower in the second quarter.

"The pricing is so attractive that companies from Marin, primarily, are gobbling up properties," said Al Coppin, president of Keegan & Coppin. "In Marin, they'd be looking at three or four times the price, so it's a no-brainer."

Sonoma County's relatively cheap home and building prices made Petaluma an attractive site for high-tech startups in the late 1990s.

White's father, Bill, built Redwood Business Park in 1982. He attracted a number of telecom equipment developers that flourished, making White's business park the heart of Telecom Valley.

But then the tech balloon burst, the economy soured and real estate values plummeted. One by one, the headlines showed another company closing up shop and moving out of Petaluma.

In 2005, Basin Street sold much of its local portfolio to Equity Office Properties in a $263 million deal, one of the largest real estate transactions in the North Bay. Equity Office Properties since has turned over its collection of Redwood Business Park buildings to lenders.

Now, real estate prices are relative bargains again, spurring a flurry of activity.

Earlier this year, Basin Street bought back eight of its former office buildings. The price: $21 million, or 28 cents on the dollar compared to what the company sold them for six years ago, Matt White said.

Cornerstone Properties snapped up seven of the buildings.

Companies moving into the area include some expanding smaller operations already in Petaluma and several from out of town or even out of the county looking for large already-developed sites at discount prices.

CrossCheck, a Rohnert Park financial services company, has leased 40,000 square feet from Cornerstone Properties on North McDowell and is remodeling to suit its high-security needs.

The company and a subsidiary, Optio Solutions, have about 180 employees. CrossCheck expects to add 20 employees at its new headquarters.

Enphase Energy, a Petaluma solar components company, has leased 96,000 square feet in two Basin Street buildings in the business park. Founded in 2006, the company now has about 200 employees worldwide with most in Petaluma. It recently announced plans to go public with a stock offering worth up to $100 million.

Farther south, San Francisco-based Mountanos Brothers Coffee Co. bought the old 3M building for $3.7 million, a 72,000-square-foot building that has sat vacant for the past two years. The company said it plans to turn the building into a production facility for its coffees and premium teas.

Another Marin County company, Lydia's Organics, plans to move its vegan and organic food processing operation — and a cafe — to the business park by September. In Fairfax, it employs about 75 people, and owner Lydia Kindheart said she hopes to add as many as 20 more with larger quarters in Petaluma.

Other notable moves in the northeast Petaluma area include:

-- The Paul Mitchell School of hair design, which took a 31,000-square-foot building.

-- Semiconductor test company Xandex Inc. moved into a 24,000-square-foot spot.

-- Lowepro USA, a former Sebastopol company that makes bags, cases and pouches for cameras and other digital equipment, leased more than 20,000 square feet, as did First California Mortgage.

-- The owners of Berkeley Nucleonics, a San Rafael company that makes radiation detectors, purchased two large buildings.

In the southeast part of town:

-- Natural Comfort, a Marin County bedding importer, bought an 86,500-square-foot warehouse on Cypress Drive.

-- ThermoFisher Scientific moved from the north to the south side of town and added space.

-- Torn Ranch, a Novato gourmet food and gift basket maker, agreed to lease 50,000 square feet of excess space in sticker maker Mrs. Grossman's Cypress Drive building.

Chris Castellucci, manager of Keegan & Coppin's office in Petaluma, said the recent moves build on themselves, encouraging more.

"Now these buildings have new owners who have money behind them," he said. "They've bought at rock bottom prices, so they should now be able to afford to do tenant improvements and be competitive in rents to attract tenants.

"That will tend to energize the community, as well as other businesses sitting on the sideline waiting for things to happen."

White said the price "reset" and changing of hands bodes well for the Petaluma market.

"In the '90s, 99 percent of it was driven by technology," he said. "This time it's driven by a wide range of industries. That means it's going to be healthier and more sustainable and better for Petaluma for the long term and short term."

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