Strong performance of the Puget Sound real estate market continues late into the year, this time with another industrial site in Tacoma selling and readying for a massive redevelopment, which when completed will deliver 1.2 million square feet of office/warehouse and industrial space along with 720 parking spots on a 52.9-acre property zoned for Port Maritime Industrial use. The company planning to deliver this is the Denver-based DCT Industrial Trust, which is calling its development the DCT Blair Logistics Center.
The industrial REIT paid on December 2nd, 2016, $28 million to acquire two lots in Tacoma located at 3320 Lincoln Avenue. The seller was SSA Tacoma, Inc., which had owned the property since 2006 when it acquired it for $11.7 million.
It’s very rare for us to find an entitled piece of land within the Port of Tacoma for an industrial project
“We are very excited about this new development opportunity. It’s very rare for us to find an entitled piece of land within the Port of Tacoma for an industrial project. It’s our long-term intent to develop a project that will eventually total one million square feet,” says Patrick Gemma, a senior vice president with DCT in its regional office in Seattle.
He would not comment at this time on the total planned development cost for the project, but he stated that the initial phase of the project will be started sometime in 2017 and will total around 540,000 square feet. This part of the project should take 10 to 12 months to complete.
DCT is fully prepared to start the development on a spec basis. “We think that there is currently enough strong demand and limited competition for us to start the development on a spec basis. Current vacancy in the Tacoma industrial market is now at around 5 percent. This market has seen really spectacular rental rate growth over the past 12 months. This has been to the tune of rate growth of 5 percent to 10 percent over that time frame,” said Gemma.
The site contains existing buildings, pavement and utilities. All existing structures, pavement and surface improvements will be removed for redevelopment of the site, stated the company’s proposal to the city. Existing underground utilities will either be removed or left in place, sealed/filled with control density fill and abandoned. New improvements will include new building construction, paved parking and truck maneuvering areas, landscaping, storm water quality treatment system and stormwater conveyance to existing systems that discharge to Blair and Hylebos Waterway, water and sanitary sewer extensions, franchise utility improvements. Traffic mitigation measures for Taylor Way and Lincoln Avenue are anticipated.
DCT will be developing the location for a warehouse/distribution usage. The design of the development is flexible so that it could accommodate from one to four tenants. The sale was brokered by Kidder Mathews’ team of Todd Clarke, senior vice president and managing partner in the company’s Tacoma office, Matt Wood, senior vice president and managing partner who works out of the firm’s Seattle office, and Ty Clarke out the Tacoma office. The leasing efforts on the development will be led by the Kidder Mathews team, as wel. The expectation is that the tenants in the project will move their product around on a regional and national basis.
DCT will continue to look for both development and acquisition industrial opportunities in the greater Seattle market. The public REIT currently favors development transactions, however. “Investing capital in new development projects offer much more attractive returns than do buying existing assets. The difference in returns in development versus buying existing assets can be anywhere from 150 to 250 basis points,” said Gemma.
The sale comes just days after another massive sale closed almost next door at the 58-acre former sawmill in Tacoma. The seller was Interfor, a Vancouver, B.C.-based lumber company, which sold the site for $32.4 million. The buyer was Industrial Property Trust (IPT), which purchased the property to develop the IPT Tacoma Logistics Center. The new development will include two industrial buildings totaling approximately 1.1 million square feet.
The Kidder Mathews third quarter of 2016 industrial real estate market review stated that Pierce County led the way in both leasing and development. On the leasing side, the market achieved 1,165,913 square feet of positive net absorption. With only one delivery (312,795 square feet), the vacancy dropped from 6.87 percent to 5.66 percent. On the development side, eight projects totaling 1,158,060 square feet are underway. Notable projects include the Chinook Building in Sumner (251,437 square feet), Fife I-Commerce Center (250,490 square feet), and Logisticenter 167 in Fife (225,972 square feet). With an ample amount of land still available in Sumner, Port of Tacoma/Fife, and Dupont, there is another 4.3 million square feet in the pipeline for future development.
Notable sales closing during the quarter include LBA Realty’s acquisition of the Titan and Apollo Buildings in Sumner from LaSalle Investment Management for $48,050,000, or $112/square foot. Bixby Land Company out of California purchased the Steele Building in Sumner from Panattoni for $24 million, or $116/square foot. One notable lease over 100,000 square feet was Mobis Parts (180,718 square feet) at the Cascade Building in Sumner. Several other leases above 100,000 square feet were signed but will not take occupancy until later this year or early 2017, the report stated.