The Seattle/Puget Sound retail market experienced similar conditions to Q2 and remains strong with vacancy at 3.7% and rent growth of 0.2%.
Vacancy rates remain at a 10-year low as a large amount of pre-leased supply hit the market this quarter. Downward trends in construction continue and rents are expected to keep marching up as a result. The influx of highly-skilled tech workers into the region continues to be a driver of retail demand in the market. Due to the migration of these workers, regional buying power continues to increase and has grown 25% since 2013. The Puget Sound region added 3,000 wholesale and retail jobs in Q3, an increase of 3.4%. Conversely, the nation saw retail job growth stumble by 0.2%. E-commerce has further dominated department store sales as online sales in the state grew by almost 11% since 2016 while in-store sales increased by only 3%. Total taxable retail sales have experienced an annual increase of 4.2%. Notable Puget Sound markets, Seattle and Bellevue, continue to insulate themselves from the fall of retail stores by boasting strong population and job growth. Washington State’s Employment Security Department projects retail trade to grow at an average of 2.9% per year from Q2 2016 through Q2 2018 in King County. Triple-net rates are quoted at $28.25/SF in Seattle and $25.50/SF on the Eastside.
- Seattle has seen over 1 million SF of new retail space over the last twelve months and about 150,000 SF of new supply will deliver during the final quarter of 2017.
- 908,602 SF has delivered thus far in 2017, a large portion of which is attributable to the new IKEA in Renton.
- Demand from retail tenants remains strong as population and job growth continue to explode in the market as Seattle shoots up the list of top technology hubs in the country.
- Although Q3 absorption was slightly negative due to Albertson’s moving out of nearly 100,000 SF, it is expected to increase again to close out the year.
- Vacancy continues to remain low and will likely drive rents higher in the coming quarters as they have seen a 3.3% increase from a year ago.
- A growing regional economy headlined by technology and e-commerce will have a bullish effect on rents in the future. 736,924 SF of retail space is currently under construction in the market, most of which is slated for completion in Q2 2018. Over 50% of this future inventory consists of The Village at Totem Lake, a lifestyle center that will expand the affluent Eastside market.