Aerospace, food and beverage industries remain strong.

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What area is your expertise?
Our team’s expertise is the industrial real estate market primarily in Western Washington along the Interstate 5 corridor. We also work nationally for clients who are expanding into other areas either for site/space acquisitions or investment opportunities.

What trends do you see presently in industrial development in your area?
Currently there is no speculative development occurring in our area. Sites of interest would be infill sites in mature markets and rail-served sites.
Risk is being priced back into the market with a significant pricing spread being evident between Class A and Class B properties — something we did not see during the high point of this past real state cycle.

What type of industrial product is doing well in your area?
Business parks accommodating the smaller to medium size users are doing relatively well. In addition, properties located near or in Seattle are doing well. The Kent Valley, due to its close proximity to Seattle and being composed or primarily business parks, is experiencing a decline in vacancy rates. In addition, rail served sites are a desirable commodity.

Who are the active industrial developers in your area?
Active national developers include: Panattoni, First Industrial, Opus, Prologis and Duke.
Active local developers include: Teutsch Partners, Tarragon, Benaroya and Schnitzer West.

Please name one or two significant industrial developments in your area. What impact will these projects have on the market?
Hawks Prairie, (111 Corporate Park, Lacey, WA) a 160-acre development, offers built-to-suit buildings for users of 25,000 square feet to 200,000 square feet for sale or lease. Developer and owner: Teutsch Partners. This development is in the direct path of development and will fill the demand for the owner–user market.
Panattoni’s new Snohomish River Industrial Park in Everett is one of the few remaining larger sites available in that area will meet the new demand of the aerospace industry and those companies moving further north from Seattle proper. This 20-acre property will support up to 350,000 square feet of industrial space.

What area do you expect to be the next big industrial development market? Why?
There are two key areas: Lewis county, which is business friendly and contains rail-served sites.
City of Everett and points north to meet the growth of the aerospace industry.

Please describe the industrial leasing activity in your area.
Leasing has slowed significantly, especially in the over 100,000-square-foot market.

Please describe the industrial sales activity in your area.
There remains high demand for investment product in this area. We are still seen as having some of the best economic drivers in the nation, which include: high job growth, expansion of the aerospace and technology markets, global trade, and quality of life.
Cap rates for Class A properties remain low, while Class B has seen a decline in pricing. In the past, vacant buildings would sell for almost the same price as fully stabilized building; this is no longer occurring.

Please give a measure of industrial vacancy rates and a measure of available sublease space.
Seattle Close-in 4.88 percent
Kent Valley 4.63 percent
Pierce County 10.86 percent
Eastside 8.19 percent
Northend 7.45 percent

What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year?

Due to the tightening underwriting standards that lenders are now using, borrowers are finding it much more difficult to get financing. There have been a number of deals that fell through due to financing issues. Due to inflationary pressures, we believe that interest rates will increase next year, however the increase will likely be moderate and gradual due to the Fed’s response to continuing weakness in the U.S. economy.

What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected?
As discussed earlier, we believe the aerospace industry will be one of our major drivers with Boeing and its suppliers ramping up production of the Dreamliner, and the possible Air Force Tanker contract (though the likelihood of Boeing winning the contract is looking less likely). The aerospace industry will most likely effect demand in the north Kent Valley and Everett areas. Also, the food and beverage industry will continue to expand and will likely be focused further south into Pierce, Thurston and Lewis counties.

Would you like to make any additional observations about the industrial market in your area?
Relative to other markets our area seems to be more resilient to economic downturns. While we are certainly not invincible, we have sufficient economic drivers that will keep us buoyant.

Submitted by Wilma Warshak, senior vice president with the Seattle office of Colliers International.

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