By Kaden Eichmeier, Director, JLL Capital Markets
Strong economic fundamentals bolstered market dynamics in the Puget Sound over the past 12 months. This market is driven in part by significant amounts of capital targeting industrial, the availability of low-cost debt and strong tenant demand. There were 125 industrial transactions totaling nearly $1.9 billion closed last year, and the outlook for 2021 looks even brighter.
Competition has stiffened through the first quarter of 2021. Investors have increased allocation requirements, and the list of new entrants targeting the Seattle industrial market continues to expand.
With growing demand, the core market is growing geographically as supply constraints push investors and developers further north and south. For example, Panattoni recently announced it will build a 2.1-million-square-foot, five-story warehouse for an ecommerce company on a 75-acre site just south of the Arlington Airport. Northpoint Development also announced the 4.1-million-square-foot Cascade Business Park in
Kaden Eichmeier, Director, JLL Capital Markets
Arlington. To the south, Panattoni is also developing Big Freddy Logistics, a three-building park that will total 771,855 square feet, while Logistics Property Co. is developing the 352,801-square-foot Frederickson One speculative project.
There is currently nearly 7.5 million square feet under construction. This includes 3.2 million square feet in Pierce County and more than 1.5 million square feet either under construction or proposed in the Northend’s Marysville and Arlington regions.
Adding to the stability of Seattle’s industrial story, the Puget Sound market saw strong net absorption in 2020 to the tune of about 3.1 million square feet. Nearly a million square feet alone was absorbed in the fourth quarter — over half of which was concentrated in Pierce County.
Vacancy rates ended the year at a healthy 5.3 percent. Ecommerce companies drove most of the leasing activity as these companies have expanded their footprints in response to growing consumer demand. In Seattle alone, the metro population increased its online shopping by 67.3 percent since the start of the pandemic — the highest in the area.
The Puget Sound industrial market saw a brief lull in March and April 2020, but has otherwise performed well throughout the pandemic. We anticipate this momentum to continue throughout 2021. We also expect conditions to favor owners as low vacancy rates and strong tenant demand fueled by the ecommerce industry drive expansion throughout the region.