The Seattle/Puget Sound industrial market remains among the nation’s hottest after a strong third quarter.
The regional vacancy rate fell to 2.8% as over 3.5 million SF of new supply began filling up through the first nine months of 2017. Regional absorption ended Q3 at 1,170,843 SF of positive net absorption as several large warehouse move-ins helped offset the decline in the manufacturing sector. The Employment Securities Department (ESD) projects manufacturing jobs to decline by .75% but the regional market looks to be able to mitigate that slowdown. While construction might be levelling off, the region has experienced an increase in sales activity and rental rates, which has quelled any fears of a recession in the coming years. Amazon, among others, continues to hire a high number of warehouse employees and has contributed to a projected unemployment rate of 4.5% according to the Puget Sound Economic Forecaster. This quarter of expanded growth has driven vacancy even lower and opportunities for developers to add to the market remain profitable. The construction pipeline shrank from last quarter with 1.1 million SF of industrial projects scheduled for delivery by the end of 2017 as well as another 3.8 million SF scheduled for completion in 2018. The Northwest Seaport Alliance (Ports of Seattle/Tacoma) is reporting that August’s container volumes are up 6% year-over-year. Year-to-date, full import volumes were up 5%, the fourth-highest on record. The Seattle/Puget Sound region’s industrial market maintains elevated levels of growth on the back of warehouse supply helping it bounce back from last quarter’s negative absorption.
- There is still 1.1 million SF of industrial projects scheduled for delivery by the end of 2017. Another 3.8 million SF is slated for completion in 2018.
- 3.5 million SF was delivered during the first three quarters of 2017. 32% of the delivered buildings were in Kent Valley while 28% were in Pierce County.
- Seattle/Puget Sound warehouses continue to experience high demand displayed by high absorption. Throughout the region in 2017, warehouses have recorded over 1.5 million SF of net absorption, helping regional year-to-date absorption reach 727,259 SF.
- We continue to see decline in the manufacturing industry adversely affect absorption as it has decreased further to (259,063) SF in those properties. The decrease has slowed since last quarter, however.
- Prime industrial space will continue to come at a premium as the Seattle/Puget Sound market continues its steady pace. The industrial market bounced back this quarter as several top-tier tenants drove high absorption in the warehouse sector. With several million SF set to be delivered in the upcoming quarters, expect strong demand to continue. The Seattle/Puget Sound region shows no signs of slowing down despite continued decline in the manufacturing sector due to its supply of warehouse space.