By Jon Peterson
Denver-based DCT Industrial Trust paid $9.85 million to buy an empty industrial building in Fife located at 5555 8th Street East, according to the company’s fourth quarter 2015 supplemental report.
“This property is located in a market that we are very familiar with and believe has very strong infrastructure in place to help our future tenants move their products around. The transportation features include I-5 and The Port of Tacoma,” said Patrick Gemma, a senior vice president for DCT. He works out of the company’s regional office in Seattle.
“This market remains a very challenging one to add new space”
The property DCT bought totals 103,000 square feet. The buyer is planning to invest over $1 million to make improvements to the property. It plans that the anticipated yield on its investment will be 5.6 percent once the property becomes stabilized. DCT figures that the improvements done to the property will be completed by the third quarter of this year. The asset has one building and covers six acres of land.
DCT currently has over 500,000 square feet of industrial product in the Fife market that it is in the process of getting leased up. “This market remains a very challenging one to add new space. There is very little land left to build on, and in many cases the only way to add new product is to buy an existing property and renovate or redevelop it,” said Gemma. Most of the company’s tenants look to distribute their products around the Puget Sound region.
The Fife industrial market is very tight and continues to be in high demand for space from tenants. The overall industrial market in Fife totals approximately seven million square feet and has a current vacancy of somewhere in the range of three to four percent.
This tight and high demand market has led to a significant amount of rental rate spikes in recent years. “We have seen that rental rates have gone up by 10 percent over the past year. I don’t think that this kind of growth is sustainable over the long term. For this year, I would suspect the rental rate growth would be somewhere in the range of three to seven percent,” said Gemma.