Seattle Industrial Market Report

4th Quarter 2021

Posted In — Market Research | Market Report

The region’s industrial market ended the year with record high net absorption of just over 13 million SF, 4.1 million SF occurring in the 4th quarter. The previous high was 6.8 million SF in 2006. Construction remains very active.

Here are the numbers for the region for the past three months.

– 3.15 million SF was added to the total supply (net of demolition of older product). The region now totals just over 358 million SF.

– Projects under construction total nearly 9.5 million SF (62% is pre-leased), led by the Northend (3.8 million SF) and Pierce County (3.3 million SF).

– Positive net absorption of 4.1 million SF, led by Pierce County (3.0 million SF).

– Vacancy rate for the region decreased from 4.7% to 4.4% as absorption outpaced deliveries.

– Average asking rental rate increased $0.09/SF/month to $1.05/SF/month.

– Sales volume set a record this year with $1.8 billion sold, eclipsing the previous record of $1.2 billion in 2019. A list of notable sales is below.

– One large redevelopment play this quarter is Alexandria’s $77.5 million purchase of the 12th Place Business Park (5.2 acres) in Bellevue, located blocks from Spring District. This is the life science firm’s first investment in Bellevue.

The growth in the industrial market continues from strong on-line shopping which has resulted in a higher demand for fulfillment/distribution facilities. Employment growth has been good. Over the past 12 months (November 2020 to November 2021), the region has added 90,800 jobs, a 4.3% increase. Total regional employment now stands at 2,180,000. While still not at pre-Covid levels, the region has recovered 204,300 of the 240,600 jobs lost. The employment sectors impacting the industrial market include manufacturing, construction, wholesale trade and transportation & warehousing. Over the past year, each of these sectors have shown gains with Construction (+3,000 jobs) leading the way, followed closely by Transportation & Warehousing (+2,800 jobs). Manufacturing saw a gain of 1,000 jobs overall, despite the loss of 2,400 jobs in aerospace.

Looking ahead at 2022, there is continued optimism.

– The Puget Sound Economic Forecaster’s December 2021 report forecast employment growth in 2021 at 2.6%, unchanged from their prior estimate. They also expect 2022 to be much higher at 5.7%. Sectors with the expected growth include manufacturing, wholesale/retail trade, and professional/business services as well as other services.

– The Northwest Seaport Alliance reports that Seattle and Tacoma volumes in November, were up 7.8% compared to November 2020. Full imports increased by 7.5%, while full exports decreased 18.4%. Phase one of the two-phase modernization project at Terminal 5 in the Seattle Harbor is slated to open in January 2022. When complete, the 18.5-acre terminal with on dock rail will handle the largest vessels in the transpacific trade.

– Leasing continues to be strong with 7.6 million SF. leased and scheduled to move in over the next 9 months.

There are some concerns that we continue to monitor. These include:

– Construction costs have skyrocketed with significant increases in lead times and developers have been mostly successful increasing rents to offset these higher costs, but shortages continue to exist.

– More businesses have opened to greater capacity but we are seeing a rise in positive cases of the Omicron and Delta variants of COVID-19. Masking up has been a requirement for indoor activities.

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