“The Puget Sound industrial market is thriving at record levels and tenant demand is robust. With a vacancy rate of approximately 3% and a lack of big land sites left in the core markets, we expect vacancy to continue to trend downward with rents continuing to rise. The fundamentals of the market look extremely strong, with annual absorption outpacing the development pipeline. Combine all of this with the overall job growth in the region and the impact of the booming technology sector, and we anticipate this market to continue to be an attractive place for industrial companies to expand and grow their businesses.” — Bill Condon, Executive Vice President & Managing Director | Seattle

Key Strengths

Situated in the economic powerhouse of the Pacific Northwest, Seattle is one of the fastest-growing cities in the nation, making it a popular industrial market for both regional and last-mile distribution. The Puget Sound industrial market boasts a historically low vacancy rate and a short supply of large, close-in industrial sites. With insatiable demand, the Puget Sound market is poised to continue its current pace and see an increase in re-developments and be an epicenter of multi-story warehouse development in the coming years.

Logistics Driver

The Northwest Seaport Alliance, which includes the ports of Seattle and Tacoma, is North America’s fourth-largest container gateway. The Northwest Seaport Alliance delivers less congestion compared with its California counterparts, closer proximity to Asia and deeper ties to Alaska, as well as award-winning ease of doing business. The area’s natural deep-water harbors and ability to handle a wide range of cargo make the Puget Sound market ideally suited to meet the growing needs of Pacific Rim trade.

Vacancy

After peaking at almost 9% at the start of 2010, the Puget Sound industrial market has enjoyed steady year-over-year drops in overall vacancy. Today, vacancy stands at under 3% as new developments are being gobbled up by large users while existing tenants continue to extend their leases — resulting in one of the tightest industrial markets in the country.

Absorption

The Puget Sound industrial market has tallied more than 3.4 million square feet of annual absorption in five out of the six years since 2011. Regional net absorption has averaged 2.1 million square feet annually since 2007 and has far outpaced new supply. From 2015–2016, 8.9 million square feet were absorbed, yet only 6.5 million square feet of new industrial product were delivered to the market.

Development

From 2014–2016, the Puget Sound region added 11.6 million square feet of industrial inventory, yet the region has absorbed 12.8 million square feet during that same time. With demand continuing to exceed supply, developers are still commencing speculative construction. At the end of 2016, 4.7 million square feet of industrial space were under construction — almost 2% of the region’s existing inventory.

Asking Rents

With the Puget Sound area’s current fundamentals, industrial asking rental rates are expected to continue increasing roughly 10%–15% per year for at least the next two years. With such strong leasing levels and elevated rental rates, Puget Sound industrial properties will remain solid investments for years to come.

For more insights, learn about the top 10 U.S. industrial emerging markets positioned to experience the most robust increases in demand from occupiers and owners. And stay tuned for more U.S. Industrial Market Spotlights!