The Seattle/Puget Sound industrial market continues to thrive along with a booming local economy.
The regional vacancy rate inched up to 3.1% despite over 2.5 million SF of new supply through the first six months of 2017. Regional absorption ended Q2 at 123,394 SF of negative net absorption due to the manufacturing industry’s decline throughout the state in recent years. While construction might be leveling off and aerospace has suffered significant employment drops, there is likely still no recession starting until 2019, according to Conway Pedersen Economics. They forecast regional employment to grow 2.5% this year as Amazon and many other companies are continuing their hiring sprees and people will move to where the jobs are. This period of elevated regional growth bodes well for the prolonged health of the industrial real estate market as developers aim to add more inventory while vacancy is low. The construction pipeline is still expanding as there is 2.1 million SF of industrial projects scheduled for delivery by the end of 2017 as well as another 3.4 million SF slated for completion in 2018. The Northwest Seaport Alliance (Ports of Seattle/Tacoma) is reporting that 2017’s container volumes are up 8.4% year-over-year, recording the strongest May on record for total international container volume. Wholesale/retail trade is projected to add almost 12,000 jobs this year which will help offset the losses in manufacturing. The Seattle region’s industrial market remains on its upward trajectory despite this negative quarter of absorption.
- There is still 2.1 million SF of industrial projects scheduled for delivery by the end of 2017. Another 3.4 million SF is slated for completion in 2018.
- 2.5 million SF has delivered during the first two quarters of 2017. 45% of the delivered buildings were in the Kent Valley while 42% were in Pierce County.
- Seattle/Puget Sound warehouses remain in high demand. Throughout the region in 2017, warehouses have recorded over 705,000 SF of net absorption, helping regional year-to-date absorption reach 366,611 SF.
- The manufacturing industry’s decline over the last year is now hitting the industrial markets. Manufacturing recorded 221,681 SF of negative net absorption throughout 2017 with 94% of that occurring in Q2.
- As the Seattle region continues to grow and outpace the rest of the nation, the industrial market should continue its positive progression after this negative quarter. With continued elevated job growth and demand from a wide array of industrial users, the Seattle/Puget Sound region will continue to put itself on the map by supplanting other top tier industrial markets.