Newer South-End Warehouses Filling Up; More on the Way

SUMNER, WA-One year ago, there was 2.5 million sf of large-format warehouse-distribution buildings under construction or planned. Many working in the industry were anticipating a bloodbath of competition for deals in the market. “Quite the reverse has happened,” Pacific Real Estate Partners industrial broker Les Boudwin tells GlobeSt.com. “We stand here today and every building has been leased, and we see this continuing.”Indeed, conversations with industrial brokers reveal unprecedented large-block leasing activity in the past two months. As well, they say the demand is expected to continue, which has prompted developers break ground on at least another 1.6 million sf of large speculative warehouse-distribution buildings that will be delivered in late 2005 and early 2006.The flurry of large leases over the past two months include Coca Cola Enterprises subsidiary Western Container leasing a new 346,000-sf building this week at Northwest Building Corp.’s Fife Commerce Center in Fife; Alaska Distributors leasing a new, 440,000-sf building last week at Segale Properties’ Pacific Gateway Business Park in Kent; Expeditors International leasing the new 427,628-sf Building A at Opus’ Sumner Landing North in Sumner earlier this month, and; American Port Services leasing a new 355,000-sf building at Panattoni’s Rainier Park of Industry in early May. “I’ve been doing this for 15 years and I’ve never seen anything like it,” says Mike Roy of Neil Walters Co., who represented Western Container in its lease negotiations. “The number of large deals being done is much greater than has historically taken place in this market.”Boudwin, who also describes the recent activity as “historic,” tells GlobeSt.com the demand is being driven by a combination of increasing imports from China and other Asian markets and the struggles of shippers to find dock space in Southern California. With so little space available at ports in Los Angeles and Long Beach, shippers are looking to the Port of Tacoma and the Port of Seattle to handle the overflow, hopefully for the long term. “As long as consumers in the US continue to buy products made overseas, we see this demand for warehouse and distribution space continuing,” Boudwin says. Boudwin has the leasing assignment for Sumner Corporate Park, where after 700,000 sf of leasing in the past year filled 80% of its space there construction is starting this month on the 401,200-sf Rainier Building. It will be the third building at the park. New buildings also are under way or nearing their start at Segale’s Fife Commerce Center, Opus’ Pacific Coast Corporate Park, Panattoni’s Sumner Central and the Andover Co.’s Auburn North. At Fife Commerce Center, Segale is developing the 450,000-sf Building B. At Pacific Coast Corporate Park, also in Fife, Opus’ will start next month on 385,000 sf in two buildings. Sumner Central, Panattoni started moving dirt this week for a 427,253-sf building. At Auburn North, Andover is having Panattoni develop a 400,000-sf building.”This to me will be the interesting round,” Roy says. “No one thought that the first round would all be leased up upon completion; if they all build again, it will be interesting to see whose left standing. We just don’t know the depth of the market for these [larger] buildings. With that said, it’s been proven time and time again that you’ve got to build it, otherwise you won’t have a chance” to land the tenants who use them.Roy adds that there are also a lot of users in the market with requirements closer to 100,000 sf. Not wanting to miss that market, many of the developers of the larger buildings are also setting aside land in their developments for smaller buildings on both a build-to-suit and speculative basis. “It’s going to be a good summer,” he says.