The Seattle/Puget Sound industrial market experienced an active second quarter of 2018.
The Seattle/Puget Sound market remained one of the country’s most competitive industrial areas, with continued strong tenant demand and activity. Although the regional vacancy rate increased to 3.9%, this level is still among the lowest in the region’s history and testifies to tenants’ ongoing struggle to find industrial space in this growing market. A total of nine warehouses delivered this period, the majority in Pierce County. Pierce County will likely continue to see strong activity, as 1.2 million SF is scheduled to deliver by the end of 2018. Among the driving forces in the warehouse sector is Amazon, which has aggressively claimed distribution centers both in the Puget Sound and across the U.S. Overall regional absorption reached a whopping 1.8 million SF, five times higher than last quarter. The largest project currently under construction is Prologis Georgetown Crossroads in East of Duwamish, a first-of-its-kind three-story warehouse property, which will add close to 600,000 SF to the inventory in Q3. The largest property to change hands was the Redmond East Campus at 6565 185th Ave NE, a flex property purchased by Kennedy Wilson for $52 million.
- Nearly 2.6 million SF delivered during Q2, a 70% increase from the same period of last year. The largest property to hit the market was the IPT Tacoma Logistics Center. 55% of the total new space has been pre-leased.
- Pierce County submarkets accounted for more than 1.6 million SF of deliveries, 63% of all new supply this quarter.
- In addition to SBS Transportation, tenants beginning leases in Q2 included: Cosmos Granite West, LLC (148,500 SF), Supervalue (141,000 SF), and Talking Rain Beverage Company (95,533 SF).
- Pierce County industrial tenants impacted regional absorption the most in Q2, occupying in excess of 1.5 million SF of space.
- While construction activity decreased, notable lease commencements by GEODIS Logistics LLC at the Lakewood Tacoma Logistics Center and Black Raven Brewery at The Reserve at Woodinville will keep absorption levels elevated for the region.
- Going forward, a trend worth watching is how warehouse developers adapt to the increasing demand from e-commerce while also keeping construction modern.