By Meghan Hall
In recent months, companies have been closely looking at their supply chains as shipping backlogs and product shortages continue to disrupt e-commerce. As a result, companies are increasingly looking to hold more of their inventory near major U.S. commercial centers, and already-tight industrial markets continue to compress. In Seattle, the shortage of both available industrial space and developable land has presented an interesting quandary for developers. However, GTIS Partners and Ryan Companies have recently broken ground on a new project: a four-story logistics building at 65 S. Horton in Seattle.
The project team hopes that the development will buck traditional standards of industrial development in the face of major hurdles like land and product scarcity. The Class A-project will operate as a last mile industrial and urban logistics facility one mile south of downtown Seattle and adjacent to the Port of Seattle itself. The project team was initially drawn to the project site since much of the existing industrial stock in the area was dated and “functionally obsolete.”
“SODO is a highly sought after area for industrial development, said Ryan Companies’ Kate Suski, director of development and Marc Gearhart, vice president of development. “Expanding Ryan’s presence as developer and contractor in the industrial sector in this particular location aligned perfectly with our business strategy, and we were fortunate to source GTIS as our JV partner who saw value in developing an innovative multi-story project.”
Additionally, Ryan Cos. and GTIS added, there has historically been very little institutional investment into the market, offering companies such as GTIS and Ryan Cos. room to grow. For GTIS specifically, the project is the company’s first investment in the Seattle metro area, and also the firm’s first into a multi-story, last-mile logistics facility.
In all, the project will total 126,646 square feet. The ground floor of the project will feature a loading dock, 10 covered docks, parking, and shipping and receiving space. Dual freight elevators will provide access to floors two, three and four. Office suites will occupy the top level of the building.
“With 65 S. Horton we are introducing an innovative, stacked warehouse design that will give way to a new approach to parking, truck loading, shipping receiving, and material handling,” explained Ryan Companies. “The building will stand four stories tall and include both office and industrial space. Floor one will feature a 14-foot clear height with a dedicated loading dock and shipping receiving bays for each suit in the building. Two freight elevators will enable tenants to easily move product from trucks to their premises on the upper floors. Floors two through four will have 18-foot clear heights with a 175-pound floor loading.”
Ryan Companies originally acquired the site in 2019 for $4.9 million, according to public records, and has since been planning the property’s redevelopment. Now that construction has started, the project is expected to cost about $42.5 million to build, according to the project team. The property has not yet been leased.
“We are actively pursuing full building R&D, industrial manufacturing and last mile logistics tenants in addition to pursuing a multi-tenant strategy,” Gearhart and Suski explained. “We’ve hired a listing team at Colliers to help us source in-city R&D prospects and traditional industrial tenants.”
The idea of multi-level warehouses is still fairly new. Prologis built the nation’s first multi-level warehouse, Georgetown Crossroads, in Seattle, in 2018. The development totals 590,000 square feet and was subsequently leased to Amazon. The success of Prologis is beginning to spur other similar projects, as well. In 2019, developer Avenue55 began formulating its plans for Track Six, in SoDo. The new, four-story industrial building will rise on the old Compton Lumber site and total 212,516 square feet.
And this year, in June, the Port of Seattle announced its plans to redevelop Terminal 106 into a 700,000 square foot, two-story industrial property. The Port will partner with Trammell Crow Company to complete the project, which will be catered to support the e-commerce, logistics, manufacturing and maritime industries.
Vacancy for industrial assets continues to decline as available space “dwindles” according to a third quarter report released by Colliers. At the end of Q3, vacancy sat at 5.2 percent, down from 6.8 percent the previous quarter, and absorption passed three million square feet. Demand, notes Colliers, remains at an all time high. Of the 7.1 million square feet of space under construction across the Puget Sound, a healthy 60 percent is already pre-leased. Demand is expected to remain heightened–and outstripping supply–in the near future, prompting developers and landlords to get creative with their projects, and tenants to compete hard for space.
“The core valley and South Seattle market will continue to tighten up, pushing rental rates,” said Suski and Gearhart. “There is an incredible supply constraint with very few sites and increasing demand, especially coming from e-commerce which will continue to drive demand for proximity-driven industrial projects.”