A new tenant is moving into a recently renovated 158,000-square-foot industrial distribution building in Kent, a southern suburb of Seattle. Amazon Fresh, an online grocery shopping service of the retail giant Amazon, has fully occupied the facility located at 20280 84th Avenue South.
The e-commerce firm signed a lease with San Francisco-based Terreno Realty Corporation beginning September 30 that will expire the end of January 2024. Last December, Terreno acquired the 8.2-acre property from Office Max for $14.9 million, or approximately $94 per square foot, with an estimated stabilized cap rate of six percent, according to a press release. Tony Kusak, a senior director for Cushman & Wakefield in Seattle, and his team listed the building the lease and worked with Terreno in finding its new tenant. However, Kusak did not confirm who the tenant was and declined to comment.
It’s really good for Terreno, and it’s great for Kent Valley because Amazon’s main distribution center is just down the street
“It’s really good for Terreno, and it’s great for Kent Valley, because Amazon’s main distribution center is just down the street,” said Taylor Hoff, a partner and industrial real estate specialist with NAI Puget Sound Properties. “Amazon Fresh is going to bring a lot of jobs to the area. The City of Kent is smart, they know where the jobs are and it’s with Amazon.”
Hoff continued on to say that Terreno showed good foresight in its decision to purchase the single-tenant property, knowing that it was a good piece of real estate. The timing was also right for Amazon Fresh, Hoff added, who was ultimately forced to relocate due to recent construction of the Spring District in Bellevue.
The distribution facility offers 22 dock-high loading positions. Renovations will include an additional paved yard for loading and trailer storage, as well as updates to the building’s façade and office. In order to make the distribution facility work for Amazon Fresh, the building will need to undergo further changes to accommodate storage for fresh produce.
As Seattle continues to densify, finding industrial property to purchase or lease has not become an easy task. An even harder task is finding space to build new product. Hoff says much of what used to be activity in the SoDo neighborhood of Seattle is now pushing down into Kent.
Being strategically positioned between both Seattle’s and Tacoma’s ports, Kent has added appeal, Hoff said. The cost of living for employees in towns such as Sumner and Auburn is more affordable and traffic is not as bad as it is in Seattle. The taxes in Kent are also lower than they are in Seattle, which adds additional appeal to property owners. Hoff says all of these things added together have contributed to Kent’s vacancy rate of 3.5 percent, which is the lowest it has ever been.
As the vacancy rate is at an all-time low, rental rates are rising. Hoff says a space in Kent that will now rent for $0.58 per square foot annually was once around $0.38 only a year ago. “The rent growth has just been staggering,” Hoff added.
According to NAI’s Seattle Industrial second quarter 2016 report, those who are at the end of lease terms are facing 50 to 80 percent base rent increases, compared to four to five years ago. The report concludes that those discussions are now turning toward looking at moving from Seattle further south into Renton, Des Moines, SeaTac, Tukwila and Kent.