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June 28, 2018
Industrial warehouse product in Tacoma and close-in surrounding Pierce County markets has proven to be a goldmine for merchant developers and institutional investors. With 11 projects in the development pipeline totaling over 3.3 million square feet of Class A distribution facilities, the numbers speak for themselves.
Pierce County alone has about 55 percent of the total construction volume for the entire Puget Sound region. Bullish investors and developers are aggressively picking up industrial buildings and raw land sites, with a focus on long-term hold and capital gain.
Limited availability of product on the market both for sale or lease, combined with ever-increasing per-square-foot rental rates and sale prices, show that the Tacoma and greater Puget Sound region is here to stay for the long haul.
Even with millions of square feet of competing deliveries on the horizon, leasing activity remains strong throughout the region.
Total vacancy consistently hovers at around 3.3 percent, much below the national average of 4.9 percent. Leasing strength in the market can be attributed to some large “blue chip” leases in new development projects, including UPS’s leasing of approximately 770,000 square feet at the Prologis Park Tacoma, or SBS Logistics’ leasing of 444,000 square feet at the Tacoma Logistics Center.
A portion of the success seen by Tacoma is derived from the synergy created by the Northwest Seaport Alliance. Combining the ports of Tacoma and Seattle has proven to be a successful venture, creating one of the largest ports on the West Coast.
In early February, the Port of Tacoma received four super-post-Panamax cranes, designed to offload the largest container ships in the world. With an additional four super-post-Panamax cranes to be delivered in 2019, the Northwest Alliance is confident in the strength of the local industrial market.
Most of the vacant land sites in the close-in Tacoma markets are either too small to meet developers’ underwriting criteria or zoned incorrectly for warehousing/industrial users. Developers are starting to look towards outlying markets such as Frederickson and Lacey as the next vein of construction, largely due to site size and zoning.
Ty Clarke, Kidder Mathews vice president, specializes in industrial leasing and sales in the Port of Tacoma, Pierce County and the Kent Valley.