Industrial development has spiked in greater Seattle, but it isn’t enough to satisfy demand. PPR real estate economist Donald Hall tells us what to watch for.
1) Mid-sized is king...
Goldilocks was right. Mid-sized buildings saw the most demand among warehouse and distribution space. Assets between 100k SF and 250k SF hit 600k SF of positive net absorption in Q1 '14 and 1.25M SF in the last year, Donald says. (Absorption of comparable space was only 300k SF in Q1 2013.) Above, he's snapped winter mountaineering on Mt. Washington in New Hampshire. (Looks like Rainier isn't the only legit winter mountaineering in the lower 48. Who knew?)
2) ... and that's where development action is.
Vacancies in the mid-sized segment are 4.5%, which is 3.1% below their long-term average and even lower than the already tight overall Seattle industrial market, which is at 5.7%. Developers have noticed—four spec mid-sized buildings were delivered in Q1. These new assets shouldn't have any trouble leasing up, and more are probably on the way.
3) Bigger boxes aren't feeling the love.
Larger projects are coming out of the ground more slowly, since demand for large spaces isn't quite as brisk as at other West Coast ports. With a few vacant blocks that size already in the market, and only about two move-ins between 250k SF and 750k SF coming on line per year, there won’t be too many big box deliveries for a while, Donald says. (For now, those looking for large, open spaces, may be forced to go... outside.) Overall, even with the majority of construction spec, Seattle’s broad-based demand is likely to push vacancies a little tighter.
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