Industrial Growth Heading Southward

BY LESLIE R. BOUDWIN
Cushman & Wakefield

If Horace Greeley suddenly found himself in the 1990s, standing amid the acres of warehouses in the Kent Valley dispensing advice to developers lusting for land, the oft-quoted newsman of yesteryear would likely utter two words: "Go South."

Even without Greeley around to direct the flow toward new frontiers, the developer and user crowd is, indeed, going south from the Kent Valley and discovering that opportunity beckons from the farm lands of Sumner to the industrial parks of Fife.

• Northwest retailing giant Fred Meyer recently opened a huge, 600,000-square-foot distribution center on the edge of Puyallup and Sumner; not far from there an old sod farm is being converted into a 139-acre industrial park called Valley South Corporate Park.
  
• In the last 12 months, development in the Fife/Port of Tacoma industrial market has approached the bustle of the Kent Valley, resulting in a projected 1.4 million square feet of new warehouse space for 1996.
  
• Pierce County's coup, of course, was wooing Silicon Valley giant Intel and its computer-chip operation, expected to employ thousands in the next few years in the once quiet little burg of Dupont.

For companies already in the greater Puget Sound area, the southward migration is a predictable outgrowth of a decade or so of frenzied industrial development in the Kent Valley that has nearly exhausted what once was a plentiful supply of wide open spaces.

By late 1994 there were indications that diminishing options in the Kent Valley caused some Fortune 500 users to take a look at Pierce and Thurston counties. Events of 1995 only hastened that trend: Construction of the Supermall in Auburn gobbled up 140 acres of industrial land while the go-ahead on the Emerald Downs race track meant nearly 200 acres of land zoned for industrial uses would be removed from the dwindling inventory.

There is still land available in the Kent Valley, but it is going quickly. Cushman & Wakefield of Washington, Inc.'s statistics project 2.3 million square feet of new product available in the remainder of 1996, consistent with the historical average.

What is not consistent with historical averages is the whopping 1.4 million square feet of new product anticipated in Fife/Port of Tacoma. Even after accounting for pre-leasing activity that has already occurred, I expect over one million square feet to be available throughout 1996.

Attention to this area is not just local. Cushman & Wakefield's Real Estate Outlook published by Valuation Advisory Services cites surveys of investors that assign the Northwest a "Most Favorable" ranking in the industrial property category, just behind Georgia and the Carolinas. In fact, our corner of the country was the only region to appear in the top two in all categories: Urban Office, Suburban Office, Industrial, Retail and Apartments.

Taking a look at the history of development of the region, it started in the 1850s when the first arrivals abandoned their early settlement at Alki for the deeper waters of Elliott Bay. Anyone who has watched the huge cargo vessels plying the Duwamish realizes the decision by those first citizens was a fortuitous one.

But as Seattle grew, commerce claimed downtown and neighborhoods took over the edges. Industrial activity in Seattle's southwest quarter was bulging at the seams and the movement into the city's peripheries began -- south to Tukwila in the 1970s, southeast to the Kent Valley by the early 1980s.

There's been some movement to the north, with developments by Intracorp and Quadrant shooting up around Paine Field, but rents there are still higher than their southerly counterparts and the location works for a smaller number of users. While there's lots of land north of Everett and on into the Skagit Valley, developers and users often grimace at getting that far away from the comfort zone of Seattle.

To the northeast there's been some industrial development in the vicinity of Woodinville, albeit on a modest scale due to constraints on available industrial-zoned land. Due east on Interstate 90 toward Preston a little industrial enclave has sprouted in recent years, but the space is pricey and nearly fully leased at that. Westward expansion is obviously not an option.

So for a lot of pretty solid reasons, Pierce and Thurston Counties look increasingly attractive. In fact Fife, with its quick access to Interstate 5 and a vibrant port right next door, has suddenly become the prettiest girl at the dance. It's a hot spot reminiscent of the Kent Valley a decade ago. With a large existing workforce to draw from in Puyallup and Tacoma, there are also some benefits employers can use to recruit from a wider pool, not the least of which are residential real estate prices that put starter homes in the $125,000 range.

Regal West Corporation found what it was looking for in Fife. Already established in its own 100,000-square-foot distribution facility, Regal nevertheless leased an additional 50,000 square feet in the area, and 110,000 square feet in Auburn. Operating primarily through the Port of Tacoma, Regal recognized the logic of consolidating its short-term facility needs into a new long-term lease of 214,500 square feet at Trammell Crow's new development, Rainier Corporate Park, Phase II.

Even a casual observer can pretty easily grasp why the Fife/Port of Tacoma locale makes sense as the latest hotbed of industrial development. If "Location, Location, Location" doesn't say it, try "immediate I-5 access."

But Sumner?

On a recent market tour for the local chapter of National Association of Industrial and Office Parks (NAIOP), three busloads of participants visited sites all up and down the industrial valley from Tukwila to Puyallup. Questions as to why we were touring such rural areas as Puyallup were immediately silenced upon visiting the new Fred Meyer Distribution Center located on 54 acres in NorthWest Building Corporation's development called Park in Puyallup.

After seeing Tarragon Development's 139-acre land development two miles away in Sumner, we heard reactions similar to that of Mark Weed, president of Fisher Properties, a developer with projects from Kent to Lynnwood: "I wondered why we were going all the way down here," he told me, "and I simply would not have believed it if I hadn't seen it today."

In a quiet moment the other evening, I reflected on this hotbed of activity in south King and Pierce counties as I tried to convince my four-year-old daughter, Kelley, that I am not a dentist who works with a screw driver. Just as in that favorite children's book by Mike McClintock, "A Fly Went By," where the fly ran away from the frog, who ran from the cat, who ran from the dog, I explained: The investor chases the user demand, who chases the developer, who chases the land.

Leslie R. Boudwin is an industrial sales and leasing specialist with Cushman & Wakefield, an international real estate firm with local offices in Seattle and Bellevue.

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