Five of the region's 11 submarkets posted third quarter vacancy rates above the overall average. The highest vacancy rate, 14%, was posted in the 8.2-million-sf 217 Corridor/Beaverton submarket, followed by the Sunset Corridor (20 million sf; 12.9% vacancy), NE/Columbia Corridor (21.3 million sf; 10.7% vacant), Clark County (12 million sf; 10.6% vacant) and Swan Island/Close-In NE (2.9 million sf; 10.4% vacant).
The submarket with the region's lowest vacancy rate, 4.2%, is the Port's 9.9-million-sf Rivergate Industrial District, which not coincidentally also has the most speculative construction underway. Trammell Crow is building nearly 500,000 sf there on behalf of Multi Employer Property Trust, which invests union pension fund dollars. MEPT also recently tied up another 26 acres at Rivergate that will become 600,000 sf of distribution space.
There is little speculative construction flooding other markets, however, creating the potential for a speedy recover when the economy finally turns up, according to the report. Of the 2.03 million sf of completed construction so far in 2002, 1.40 million sf (70%) can be attributed to owner uses and build-to-suit projects.
Breaking the market down by building type, the region's 78 million sf of manufacturing, warehouse and distribution space saw about 46,000 sf of positive net absorption during the third quarter and posted a vacancy rate of 9.3%, while the 34.3-million-sf R&D/flex market saw more than 262,000 sf of negative net absorption and posted a vacancy rate of 11.3%.
Looking forward, Grubb & Ellis says: "The industrial market is not expected to suffer further massive blows, statistically speaking. However, it is important to note that these elements can sometimes disguise a more severe market reality, which clearly remains challenging and in many respects painfully uncertain. The good news is that there is still a substantial amount of large user activity in the market, just waiting for the right time and place to make something happen."
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