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May 25, 2016
The effects of Seattle's booming economy are being felt outside the city limits — all the way down to Tacoma and Pierce County.
Rents for office, retail, industrial space and housing are rising but the area remains a good option for Seattle businesses and people who are looking to save money.
The rate of population growth in Pierce County is expected to exceed King County's in the future, John Bauder of CBRE said at a forum yesterday put on by the Washington chapter of NAIOP and Commercial Real Estate Women Seattle & Sound.
Dynamic cities like Seattle have seen most of the job growth in recent years, Bauder said, because they are where people want to be.
“People are moving where they want to go,” Bauder said, “and the jobs are following the people.”
The tech industry is leading the growth here and nationwide. In 2011, tech made up 11 percent of leases nationwide; in 2015 it was 18 percent.
But all this growth has led to an increase in housing costs and strained Seattle's transportation system.
Tacoma and Pierce County could be the beneficiaries of this strain on Seattle. Land costs are lower and there isn't nearly as much competition for all types of development. For example, there are 705 apartments under construction in Tacoma, and approximately 1,400 units in the pipeline, said Jim Jensen of Berkadia's Tacoma office.
The vacancy rate is 4.4 percent in Pierce, Thurston and Kitsap counties, and rent growth was more than 36 percent over the last five years. Despite this, units in Tacoma are a lot less expensive than in Seattle, Jensen said, and make a good option for renters priced out of Seattle.
The wave of new development means there are few sites left for apartments in Seattle, Jensen said, so developers are starting to look at Tacoma and nearby cities.
“Down south, there have been deals on the market for years that haven't sold and haven't been picked up, but we are starting to see interest in them from some pretty big groups,” Jensen said.
McMenamins has been a force in downtown Tacoma. It is turning Tacoma Elks Lodge into a hotel and several restaurants and bars, and has a similar plan for Tacoma's old City Hall, which was built in 1892.
Bauder said two of the biggest projects in Tacoma are moving forward. Wuhan Boshengshiji Real Estate Development is planning about 360 apartments and 200,000 square feet of office and retail on a 6.4-acre site bounded by South 21st and 23rd streets, and Jefferson and Tacoma avenues. That project could break ground this fall or next year.
The other big Tacoma project is a $150 million hotel and housing complex next to the Greater Tacoma Convention and Center, developed by Yareton Investment and Management, a local subsidiary of Shanghai Mintong Real Estate Co. Construction on the 300-room hotel could begin late this year. The second phase of about 200 housing units could start in 2018.
On the industrial side, Pierce County has some of the area's hottest real estate in places like Sumner and Fife. Kent Valley is another major hot spot, as is south Seattle. Travis Hale of Panattoni Development said land and construction costs are rising, but rising rents are keeping the market in a good place.
“These lease rates are definitely bailing us out as they are even higher than we expected, but I see them still going up,” Hale said.
The industrial market, Hale said, is moving south. He expects DuPont, Frederickson, Lacey and Tumwater to see more action, with the possibility of demand moving all the way down to Centralia and Chehalis for companies that want to be near both Portland and Seattle.