The Seattle/Puget Sound retail market started the year strong
with vacancy decreasing to 3.3% and the quoted NNN rental rate exceeding $21/SF.
Vacancy levels hit their lowest recorded point in 10 years, with four new deliveries hitting the market this quarter. There was a slight drop in construction activity from the end of 2017, and the number of projects that broke ground was the lowest seen since 2016. According to the Puget Sound Economic Forecaster, the Puget Sound region added a total of 2,500 wholesale and retail jobs in Q1, a 50% drop from this time last year. The market has seen big box retailers such as Toys R Us and Sears close several stores, motivating companies to incorporate new strategies into their business model. Walmart is spending over $50 million in Washington State alone to acquire the following: more pickup facilities, advanced scanning technology, and upgraded vending machines. Home Depot is working to increase its footprint by hiring 1,000 new tech employees which will enhance its online and in-store presence. Conversely, Best Buy and Amazon are teaming up to sell Amazon Fire TVs in Best Buy stores and online. E-commerce sales in 2018 are projected to increase nearly 16%, representing 10% of the U.S. retail market by the end of the fiscal year. Washington State’s Employment Security Department projects retail trade to grow at an average of 2.9% per year through Q2 2018 in King County.
- Seattle saw four total properties hit the market in Q1, with the largest delivery being the Olympic Towne Center – Building C in Tacoma for 4,612 SF.
- Compared to this time last year, there were 98% more deliveries (754,909 SF) across all submarkets.
- Even though employment has decreased, population, household income, and residential construction growth have had a substantial impact on the market.
- The region saw the highest positive absorption since Q4 2016, highlighted by 211,101 SF in shopping centers and 84,778 SF in general retail properties.
- Vacancy continues to remain low and will likely drive rents higher in the coming quarters as construction is expected to decline in 2018.
- Heightened activity by players such as Walmart and Amazon will keep consumer demand elevated. 996,370 SF of retail space is currently under construction in the market, most of which is slated for completion in Q2 2018. A majority of this future inventory consists of The Village at Totem Lake, a 400,000-SF lifestyle center that will expand the affluent Eastside market. Other notable projects include: Costco in Tacoma for 150,000 SF and the Waterwalk at Point Ruston – Phase II Bldg for 106,810 SF.