The Seattle/Puget Sound industrial market is active going into 2018.
The regional vacancy rate increased to 2.9% as only 42,982 of new supply was added to the market in Q4. The average regional rental rate for industrial properties was $0.85, the highest recorded rate over the past six years. The largest project currently under construction is the IPT Tacoma Logistics Center, which is scheduled to bring in over 1.1 million SF to the market at the beginning of 2018. Amazon expanded its warehouse network in 2017, contributing to significant rate hikes for larger and smaller properties. The Kent Valley market was responsible for 67% of the overall negative net absorption for Q4, with warehouse having the most space to lease for tenants. Even though West Valley 182 was the sole delivery of Q4, there are another 4.8 million SF of projects scheduled for completion in 2018. The region has experienced steady sales activity and higher sales prices, showing promising results for the coming years. The amount of manufacturing and construction jobs in the region is projected to decline slightly through the end of 2018, according to the Puget Sound Economic Forecaster. However, unemployment for the region is expected to stay the same, even as the number of residents goes up year after year. The region’s industrial market continues to be strong, but scheduled construction should give tenants some options for growth.
- 1.5 million SF delivered in Kent Valley during 2017, accounting for 33% of all new supply for the year.
- The addition of 993,120 SF in Kent Valley during Q3 accounted for 35% of the 2.8 million SF of deliveries in 2017.
- Seattle/Puget Sound warehouses are experiencing low demand displayed by negative absorption. The market that had the largest impact on the decline in warehouse absorption for Q4 was Kent Valley with (410,241) SF of unoccupied space.
- Manufacturing properties recorded over 67,000 SF positive absorption for Q4, 249% of which occurred in the Seattle market.
- With large block leasing and construction activity decreasing, vacancy rates are on an upward slope going into 2018. With several million SF set to be delivered in the upcoming quarters, this should help increase the demand for industrial space. Rental rates, which went up nearly 7% in Q4, will continue to go up until more space becomes available to Seattle/Puget Sound industrial investors.