The Seattle/Puget Sound industrial market remained strong in the third quarter of 2018.
The Puget Sound’s vacancy rate dipped slightly to 3.8%, with the submarkets closest to Seattle ending the quarter with the least amount of space available in the region. This ongoing limitation of opportunity resulted in a further bump in these submarkets’ triple net (NNN) rates. E-commerce continued to factor into warehouse demand, with Q3 seeing Amazon move into 82,960 SF at Sumner Corporate Park in Sumner, among other move-ins. Amazon plans to open four separate, 2.5 million-SF warehouses in Oak Creek, WI, Garner, NC, Bakersfield, CA, and Brooklyn Park, MN. These centers, each four stories tall, surpass even Prologis Georgetown Crossroads, the first-ever three-story industrial development, which is nearing completion in Seattle’s Georgetown. With Prologis finalizing its $8.5 billion acquisition of DCT Industrial in late August, the company’s footprint in the Puget Sound has significantly expanded, supplemented further by its purchase of two of the largest properties to sell this quarter, Blair Logistics Center in Tacoma and Pepsi Beverage Co. in South Seattle, for a combined $183 million. On the Northend, announcement of a buyer for the 67-acre Mountain View Business Centre land looms, with plans for a new development likely to follow.
- 824,300 SF delivered in Q3, down 21% from the same period last year. North Auburn Logistics in Auburn was the largest property completed at 261,553 SF. Nearly 65% of that property has been pre-leased to Raymond Handling Concepts, which expects to move in at the end of December.
- Nearly 78% of Q3 deliveries were located in Kent Valley, with Panattoni Development Company owning all 641,078 SF of new warehouses in this submarket.
- Advancements in technology to reduce delivery times and ramp up production levels, environmentally friendly and sustainable features, and high ceiling heights have all become must-haves for warehouse tenants, and multi-story facilities gained further acceptance.
- The amount of industrial space in the Puget Sound Region will significantly increase by year’s end as several huge warehouses are set to be completed. Pierce County and Kent Valley will see the majority of those deliveries. Only 246,480 SF of the 2.3 million SF in the pipeline has been pre-leased, which leaves several large blocks available to tenants. Moreover, around 2 million SF of under construction projects are scheduled to deliver in 2019, which will help satisfy some of the pent-up tenant demand going forward.