Newport Beach, Calif.-based investor and developer, Bixby Land Company, bought its third industrial asset in the Puget Sound region from Panattoni Development Company Inc., also based in Newport Beach, just weeks ago. The building sold for $24 million, or $116 per square foot, says Brett Hartzell, a senior vice president in investment sales and industrial for CBRE in Seattle, and one of the brokers who arranged the transaction. Other sources familiar with the deal say the cap rate was at 4.3 percent.
According to Hartzell, who was also involved with the two previous acquisitions, Bixby is a great buyer that is looking to increase its holdings in Seattle’s industrial market. The firm has been successful in the market and is performing well, says Hartzell. The new asset is operating at full occupancy with long-term tenants Domestic Corporation and Marine View Beverage. Earlier this year, the firm purchased a 63,768-square-foot building located at 14513 32nd Street East in Sumner where Omada International, an aerospace supplier, is the tenant. Bixby also acquired a 34,435-square-foot building located at 1417 West Valley Highway North in Auburn, where Tellwork Communication is the tenant. The two buildings were acquired for a total of $12.4 million earlier this year. With this third acquisition, Bixby has expanded its Seattle industrial portfolio by 304,666 square feet in less than a year.
Rental rates are also increasing rapidly
“Bixby Land is firmly committed to expanding its footprint in the Seattle market,” said Mike Severson, the senior vice president of investments, in a press release issued last Thursday. “This is our third industrial acquisition in the last six months in Seattle, and we are looking to add to our investment portfolio there. This purchase furthers our investment activities in core industrial properties in primary West Coast markets, Arizona and Nevada.” Panattoni was unavailable for comment.
The Steele Building, located at 1565 Fryer Avenue in Sumner near Highway 167, is a 206,463-square-foot warehouse and distribution facility. It is a brand new state-of-the-art Class A and LEED Silver building developed by Panattoni, says Hartzell. “It’s in a great submarket, specifically in Sumner, in part due to its location and proximity to the transit center, restaurants, coffee shops and shopping centers,” said Hartzell.
Hartnell continued on to say that industrial demand in Seattle’s Kent Valley is outpacing supply, and land values are increasing rapidly. “Rental rates are also increasing rapidly, for instance, in this building they have increased in the last six months,” added Hartzell. “Since the leases were signed, in November and January, the rates have increased about ten percent. So, they were already below market.”
According to a Seattle industrial market 2016 first quarter report by Bellevue-based office of commercial real estate firm Transwestern, the Puget Sound industrial market continues to push forward with strong tenant activity and an elevated development market that looks to pick up in the coming quarters. Port activity bounced back in 2015 and into 2016, which was welcomed after the region lost $770 million during the dock slowdowns in 2014 to 2015. The report says that economic conditions are projected to remain strong, but slightly behind 2015 levels as global uncertainty continues to impede further expansion.
Businesses remain active, however, with little existing space available developers will need to increase construction totals in order to meet demand, says Transwestern’s report. New development is occurring, but well off pace from the four million square feet provided in 2007 before the recession hit. Exports have been a concern over the past few quarters and will continue to be a headwind on a more robust growth until global trade partners can stabilize their economies, states the report. Eyes will be on Boeing as it looks to trim its workforce by 10 percent in 2016, starting with 4,000 jobs at its Washington production facility. This attrition is due in large part to streamlining their business to maintain a competitive edge with rivals. The yearly outlook is promising as Boeing is set to open its new $1 billion 777X wing factory in Everett, says the same report.