"There's virtually no new construction in the market because of the slowdown in leasing," says Hartzell, a fact borne out by CB Richard Ellis' recently published second quarter report on Puget Sound. Altogether, from Tacoma/Fife north through Snohomish County, there currently exists just shy of 200 million sf of product, and only 1.3 million sf under construction--the majority of which (780,000 sf) is in the Tacoma/Fife area.
That sub-market's growth strikes Hartzell as interesting, given that it is well out of Seattle's traditional industrial market--the Kent Valley, just south of Seattle. He attributes much of the attraction to the availability of land there.
More space has come back into the market because of the economic-slowdown and now-passé' dot-com meltdown, but still not enough to turn the market sour—-even with Web Van dumping more than 660,000 sf of space back into the market when it hit the skids.
CB Richard Ellis' report says the second-quarter average vacancy rate in Puget Sound rose only slightly to 4.67% from its 4.46% mark in the first quarter. Web Van space and all, Kent Valley (88.64 million sf) managed an even stronger number at 4.33%.
According to the report, the close-in Seattle market, with 68.37 million sf of product, has the lowest vacancy rate at 2.57%. Tacoma/Fife, its 13 million sf of product being hit with the negative absorption of 327,087 sf, came in second highest on the vacancy list at 11.2%. The worst rate hit one of the smallest markets. Snohomish County, with only 6.86 million sf of product pegged a sad 15.36%.
While Hartzell acknowledges that the high-tech free fall has had its impact on vacancy rates in the Seattle region, he says it isn't nearly as bad as in many other spots across the country. "The worst (average vacancy rate) I've ever seen here was about 7%," says Hartzell.
Bottom line? "There's a pretty good supply and demand equilibrium right now, and overall the market's healthy," says Hartzell. And, apparently investors agree. "We're still seeing demand to buy industrial properties from both institutional and private investors," says the broker. "They're looking for well-leased, well-built industrial assets and paying cap rates in the eights."
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