Why Seattle Industrial Thrives Despite The Panama Canal
Now that the Panama Canal's been widened, how will that affect cargo traffic through the Pacific Northwest, and Seattle's industrial market, which has been growing briskly? Perhaps not as much as feared.
BKM Capital Partners director of acquisitions Brett Turner tells us "the expansion of the canal will affect container traffic, as larger ships can now make their way through the Asian trade routes. Major industrial markets like Seattle will likely benefit, as their ports will see an increase in incoming containers."
Indeed, working together, the ports of Seattle and Tacoma have been able to upgrade their facilities to improve efficiency and accommodate ships too large even for the new canal.
Seattle’s industrial market continues to shine, Brett says, as operating fundamentals accelerate. Vacancy dropped to a historical low of 3.1% in Q2, down 60 basis points from the previous quarter. Also, market rents have increased nearly 9% over the past 12 months. "Overall, Seattle's industrial demand remains strong relative to other West Coast markets," he says.
Recently BKM, an institutional fund manager with a niche focus on value-add, light industrial investments, acquired the Tukwila Commerce Center, a 27-building, 476k SF light industrial park in the Kent submarket of Tukwila for $45M. “Kent's the third-largest industrial area in the US and one of the fastest-growing markets,” says BKM CEO Brian Malliet. "We're capable of identifying what an asset can be rather than what it is now."
BKM plans nearly $8M in upgrades to the interior and exterior of the buildings. Planned improvements include creative upgrades to the paint, landscape, exterior façades, tenant and monument signage, and common areas, among others.
Brian says the Kent Valley submarket boasts 97.4% industrial occupancy with "extremely high barriers to entry, providing a strong opportunity for long-term demand and rent growth." Despite its lack of newer amenities, Brett says the asset has historically demonstrated strong tenant retention. About a third of the tenants have occupied the location for more than 10 years.