Just weeks ago, San Francisco-based Prologis Inc. filed a land use application with the City of Seattle to build a four-story 196,500-square-foot building that will have warehouse, manufacturing and research development space, according to public records. In August of 2015, the global industrial giant paid $8.1 million for the property, located at 646 South Holgate Street.
San Francisco-based Prologis is a publicly traded REIT with $59.5 billion in total assets under management and approximately 669 million square feet owned, managed or under development. It has an operating portfolio of 3,203 industrial properties in 20 countries across the Americas, Europe and Asia. The firm was not available for comment.
The industrial buildings in South Seattle are older and there isn’t a lot of land for new industrial development, unless something is demolished
According to Kidder Mathews 2016 First Quarter Seattle Industrial Report, leasing activity slowed down for this area of Seattle over the first three months of 2016, leaving a net positive absorption of 3,948 square feet. The market remains very tight with vacancy at 1.57 percent, a slight decline from the prior quarter, with an additional 19,000 square feet removed from the total supply. With the low vacancy, asking rental rates on average were up $0.04 per square foot during the quarter, according to the same report.
“The industrial buildings in South Seattle are older, and there isn’t a lot of land for new industrial development, unless something is demolished,” said Randy Gilliam, a senior vice president for Kidder Mathews’ Valuation Advisory Services for both the Bellevue and San Francisco offices. “One of the challenges for this area has been that with raising land prices it makes it tough for developers, because the rents that they would need to charge just to cover their costs and for the land would be pretty high.”
The forecast for the next six months is for lease rates to see some increases, ranging from $0.60 to $1.50 per square foot, according to Kidder Mathews’ report. Tenants are increasingly frustrated by the lack of product, and demand for sale properties continues to remain high with a very limited supply. Better quality buildings will sell between $140 and $190 per square foot due to the scarcity of industrial space in this area, says the report.
With several projects completed in the first quarter, there are seven projects totaling 1,079,596 square feet still under construction. This does not reflect a slowdown, but more of a breather, says the report. Fourteen projects totaling nearly 1.2 million square feet are slated to break ground in 2016, with the majority in Pierce County (934,000 square feet), and Snohomish County (169,000 square feet). Overall, there is nearly 8.7 million square feet in the pipeline, according to the report.
