The push for tenant-friendly concessions was fueled in the first quarter of the year by an overall Puget Sound vacancy rate of 8.1%. This represents a 20.9% increase over the 6.7% rate for year-end 2001.
Grubb & Ellis says "nationwide economic slump combined with local job cuts in aerospace, technology and manufacturing" are having a negative impact on the demand for distribution/warehouse space in the market.
While negative absorption in the first three months of this year ran about one half million square feet, Grubb & Ellis says the "pace of weakening demand appears to be slowing"—welcome news to industrial landlords.
On the construction front, the report notes few speculative buildings in the pipeline as developers are taking the cautious track and waiting for signed tenants before putting hammer and nail to new projects. Grubb & Ellis speculates that the lack of new construction will play a positive role in the absorption of the nearly 10-million sf of space now standing without tenants.
Positive absorption won't come quickly enough for landlords that have charted steady vacancy increases since 2000. At the end of the third quarter that year, the rate had fallen to a tight low of 2.5%. By the end of the first quarter 2001, the number had jumped to 4.3%.
Across the sound, the lowest rates measured at the end of the second quarter 2002 were in the 3.8-million sf market of Woodinville, with 3%--and the 9.8-million sf Tukwila market, the vacancy rate there having measured 3.6%. The hardest hit Puget Sound market was the 8.5-million sf in Pierce County. There the vacancy pegged 20.7%--or 1.75 million sf. The largest industrial market, Kent valley with 33.4
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