By Meghan Hall
The realm of e-commerce has transformed the region’s industrial product, as online retailers snap up available warehouse and storage space close in to major population centers to decrease transportation costs and times. As Seattle itself has urbanized, new and modern warehouse space has become increasingly scarce, requiring developers and tenants to adjust to new types of industrial inventory. For Amazon, this has meant taking nearly 500,000 square feet of space in Prologis’ Georgetown Crossroads in South Seattle, according to industry reporting. Home Depot is expecting to lease the remaining 90,000 square feet.
Prologis declined to comment beyond what had already been published publicly, citing confidentiality agreements.
Located at 6050 East Marginal Way South, the 590,000 square foot industrial warehouse features truck lamps leading to second and third floor loading docks, freight elevators and more. The first two floors are described on Prologis’ website as fulfillment spaces, and are divisible into 75,000 square foot and 45,000 square foot segments and can include built-to-suit offices. The third level is defined as a maker’s space, and can be divided into smaller, 10,000 square foot segments and are suitable for light manufacturing, creative offices, laboratory and production. Common area amenities include restrooms with showers, conference rooms and an amenity center. The development was completed in 2018.
Prologis is not the only developer building up; Avenue 55 is in the midst of constructing a four story, 212,516 square foot industrial project, also in SODO. When complete, Avenue 55 hopes that the project will appeal to a wide range of tenants, including those in storage, distribution, manufacturing, research and development, and assembly.
“From a cost perspective, it hasn’t made common sense to go high,” explained Joe Blattner, Avenue 55’s founder and president in an April interview with The Registry, when Track 6 received its Master Use Permit. “But as prices and rental rates have increased, it has made economic sense to go ahead and develop up rather than out. Seattle, in particular, is a very tight market. It has water on one side, mountains on the other, so it is very hard to find property and certainly everything close-in has been developed out.”
South King County currently has four buildings, totaling 851,876 square feet under construction, according to a second quarter report released by Kidder Mathews. While the South King County industrial market is one of the most active throughout the region, Snohomish and Pierce Counties are also seeing their industrial markets expand. Pierce County currently has the most active buildings under construction; together, they total almost 2.7 million square feet.
San Francisco-based Prologis has a second development soon coming to market: Prologis Park Summer. The development totals 263,168 square feet and its anticipated delivery is the first quarter of 2020. The project is located at 3603 142nd Ave. E. The company owns numerous other industrial sites throughout Tacoma and Seattle, including Prologis Park Renton, Prologis Park Tacoma and Prologis Park Kent. All are larger than 100,000 square feet.
Throughout the Puget Sound, warehouse lease rates ranged between $0.60 to $0.70 per square foot per month, triple-net with closer-in submarkets posting garnering higher rates. Office space in newer developments are coming in at between $1.35 to $1.40 per square foot.
Additionally, companies are continuing to snap up large blocks of space. Ashley Homes leased the DCT Blair Distribution Center Building B, a total of 428,228 square feet, while Samsung leased DCT Blair Distribution Center’s Building A, which totals 340,000 square feet. In another large second quarter lease, Youngs Market took up 287,832 square feet of space at the Auburn 18 Distribution Center.
Kidder Mathews predicts that the region’s industrial market will only continue to grow, and premiums will continue to be placed on product closest to the region’s population centers. With nearly four million square feet of backlogged leases signed, industrial product will continue to perform well.