Industrial markets in the Pacific NW are adjusting to new parameters but remaining steady. Vacancy rates are hover­ing around 7% in the 6-county region along the I-5 corridor (Arlington to Vancouver, WA). Leasing activity slowed in the first quarter but started picking up as we progress through the second quarter. New construction is active with permitted proj­ects, but the regional project pipeline is diminishing, not due to demand, but due to high land price expectation, stabilized rental rates and continued high costs of new construction. We think this trend will continue well into 2025 leaving Develop­ers and Land Sellers frustrated. Regionally, large land parcels are difficult to find or assemble, leaving Developers looking at infill assemblages, land use changes or full site redevelopment. IOS specialized properties are slowing in demand from Tenants. Finally, we are seeing the small owner user facilities for sale or lease, and the demand from this user group level off.

Here are some statistics: Total Inventory at 398M SF, Current Vacancy rate 7% (27.8M SF) , Negative Absorption at 2.5 M SF, Market Asking Rates $1.12/SF/Mo., Sublease Space 20% of total vacancy (5.6 M/SF): New Construc­tion underway 9.9M SF. Demand for good quality product remains strong from Ten­ants, best exampled by the absorption of newer buildings offering 32’ to 36’+ CH, trailer parking, larger quantities of power available, strong security at the site. Landlords are being asked for turnkey Ti’s, and concessions are back in play for the most common available SF range.

Building Sales: The first six months produced 22 building sales above 25,000 SF. Of that 14 were investors and 7 were Own­er Users and 1 Government. SF Pricing averaged $213/SF, and Cap rates were mid 4’s% to just above 5%. Highest dollar sale: the recent purchase of Gayteway Business Park in Arlington, WA by EQT Exeter. This is a 365,000 SF four building project, priced at $193/SF included additional land for development. Next in line are Park East Business Park at $55 M (NWBC), Emerald Corporate Park Bldg. C at $45 M (Invesco) and Seattle Distribution Center at $44.5M (GID).

Vanessa Herzog

SIOR, CCIM

D  253.444.3020
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As we near the halfway mark of 2024, capital mar­kets activity in Seattle remains slow. The year has largely consisted of price discovery and waiting for interest rates to drop. With that said, the sales vol­ume for office assets has nearly surpassed the 2023 total. Four transactions over $30 million have occurred year-to-date, all of which are larger than any deal last year. These sales are emblematic of the type of deals that are driving investment activity, with three being owner-user acquisitions – Alaska Airlines, Costco, Seattle Housing Authority – and the fourth involv­ing a loan assumption. Distressed sales are occurring more frequently as well, with several buildings in downtown Seattle trading below $150/SF.

While it has yet to materially impact vacan­cy, there are signs of life in the leasing market. Pokémon recently signed a lease for 16 floors in The Eight, an under-construction tower in the Bellevue CBD. This is the largest lease in the mar­ket in three years. Other tenants, such as ByteD­ance and Snowflake, have signed leases larger than 100,000 SF, as a new wave of tech companies grow in the market. With the return to in-office work continuing and anticipated interest rate drops coming, we’re expecting capital markets activity to pick up in the second half of 2024 and 2025.

Candice Chevaillier

CCIM

D  206.773.2694
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Absorption still lags supply in the Seattle MSA con­tributing to higher vacancy and flat rents. In Q1 2024 3,000 units were delivered, yet only 2,800 were absorbed. Vacancy is stabilizing at 6.9% this Quarter and then trend down starting in Q3, finally allowing meaningful growth in rents.

Construction costs remain high and options for financ­ing limited, curtailing new development. This is cre­ating demand for existing value-add acquisitions. 2024 and 2023 sale volume in the Seattle MSA is still a trickle of what it was in 2022 and 2021, shifting Cap Rates slowly upwards. This trend is expected to be short-lived. As interest rates finally begin to fall, and rents begin to rise, investors who catch this inflection point will prevail from best pricing and benefit while more conservative capital sits on the sidelines.

Alex Muir

D  206.219.1283
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