The completion of Columbia Bank Center last year stalled absorption in Tacoma’s office market.

After a quiet conclusion to the year 2001, the Tacoma commercial real estate market appears to be clicking again in 2002.

“It was like a new page in a book was turned,” says Bill Stegeman, a vice president in the Tacoma office of Insignia Kidder Mathews. “The month of January was very robust.”

Stegeman says 2001 had been shaping up as a solid year — until Sept. 11.

Stegeman

“There was a lull associated with that,” he says. But the lull was short.

Stegeman says he never expected activity to rebound so fast. “I’m surprised,” he says. “I’m as busy as I’ve ever been.”

For example, Stegeman and his firm recently closed the sale of the 1149 Market Building in Tacoma — a 43,000-square-foot building with a 480-stall parking garage — to the Franciscan Health System.

That said, little if any absorption occurred in 2001 as vacancy rates hovered around 10 percent for office space and 15 percent for industrial, notes Stegeman. “Our vacancy rates climbed in 2001 to levels we hadn’t seen in years, but the activity level remained very good,” he says.

Helping to stall absorption in Tacoma’s office market were the completion of the Columbia Bank building and the departure of Weyerhaeuser. Together, those two actions created more than 350,000 square feet of space, causing plenty of movement within the market but little migration from outside, says Stegeman.

What about the dot-com flameout? “We had some of those startup companies that failed, but as a percentage of the market it was certainly a lot less than King County,” he says.

Along with relatively high vacancy rates came a dip in rents of about 15 percent, says Stegeman. Nevertheless, office buildings in the Tacoma market were — and remain — hot commodities for investors.

Why? “Interest rates,” says Stegeman. “A lot of people who couldn’t do things before are now doing them.” The challenge, says Stegeman, is finding available properties. “There are a lot more interested buyers than interested sellers,” says Stegeman.

According to Stegeman, investors snapped up a lot of properties in 1999 and 2000, significantly decreasing the current supply as well as driving up prices. Now, potential buyers who expect to find bargains will be disappointed, says Stegeman.

“All of the cheap buildings are out of the equation,” he says. “Things are pretty fairly valued. They are higher than they were, but they were definitely depressed before.”

Stegeman says Tacoma’s industrial market is under less rate pressure and continues to mature. Five years ago, a 10,000-square-foot deal was noteworthy. Today, it takes a 50,000-square-foot deal to elicit the same excitement. He says several “significant players” currently are shopping for space in the Tacoma market.