Market Report 2Q 2016 Kent Valley Insider Arie Salomon, SIOR, CCIM Principal +1 425 586 5636 asalomon@nai-psp.com Jeff Forsberg, CCIM Principal +1 425 586 5610 jforsberg@nai-psp.com Taylor Hoff, SIOR Partner +1 425 586 5634 thoff@nai-psp.com Kent Channing Associate Vice President +1 425 586 5628 kchanning@nai-psp.com Al Robertson Senior Vice President +1 425 586 5626 arobertson@nai-psp.com Connor Powell Associate +1 425 586 5642 cpowell@nai-psp.com
2Q, 2016 Kent Valley Insider Quick Stats VACANCY 3.63% LEASE RATES $0.437 TOTAL ABSORPTION Average Shell Asking Rates CLASS A Change from last CURRENT Yr. Qtr. 179,631 UNDER CONSTRUCTION 5,718,480 CLASS B 5,000-15,000 SF $0.565 $0.531 15,001-30,000 SF $0.528 $0.491 30,001-60,000 SF $0.491 $0.441 60,001+ SF $0.462 $0.429 Absorption Trends 4Q 3Q 2Q 1Q 2016 - - 179,631 907,502-2015 491,929 1,719,364 192,739 1,455,654 3,859,686 2014 675,112 739,612-168,572 1,646,923 2,893,075 2013 555,545 115,297 694,110 106,982 1,471,934 What a wacky world we live in. Cleveland ends a 50-year drought and wins a basketball title. The runner up, Golden State, just set a record for most wins in a season yet this off season they add one of the top three players in the world. England, in a perplexing rash judgment based off of misinformation and xenophobia, voted to leave the European Union yet we just hit a new record for stocks. We somehow have propelled one of the most decisive and unpopular politicians ever to run for president, yet she is the sane choice in comparison to her reality show rival. And the most popular activity in the world? Looking at your phone and chasing imaginary monsters. Seriously, what have we become? Somewhere our forefathers are rolling around in their graves. Yet despite all this wackiness our market continues to defy reason. Vacancy rates remain down at 3.63%. Remember when we all mocked the 4, 6, and 9 percent gains stated in investment packages as being laughingly optimistic? Well, it turns out those projections were too conservative. Shell rates in selective properties in northern Kent Valley are hitting Submarket Total RBA (SF) Direct Vacant (SF) Direct Vacant (%) Sublease (SF) Total Vacant w/ Sublease Total Vacant w/ Sublease RENTON 9,125,387 316,214 3.47% - 316,214 3.47% SEATAC 3,503,475 149,411 4.26% - 149,411 4.26% TUKWILA 11,836,049 276,142 2.33% 10,400 286,542 2.42% KENT 47,987,008 1,408,335 2.93% 103,484 1,511,819 3.15% AUBURN 21,322,688 464,436 2.18% 56,000 520,436 2.44% SUMNER 17,096,287 1,413,102 8.27% - 1,413,102 8.27% TOTAL 110,870,894 4,027,640 3.63% 169,884 4,197,524 3.79%
Lease Activity $0.60 per square foot on space between 5,000 to 10,000 square feet and are at $0.50 for larger newer product. Three newer Panattoni buildings in Sumner recently traded for over $112 per square foot at CAP rates in the low 4s. The market could not be hotter. You know what is even crazier than that is that we don t think we are through. The market has been hit with a string of bad news in the past year - plunging oil prices, falling corporate earnings, fear over rising interest rates, slowing growth in China. But there has always been another rush to buy or build in our market. Our construction report shows this in greater detail but we currently have 19 buildings under construction in our market that will add 5.7 million square feet next year. On top of that, we have another 16 planned projects for 2017-2018 that will bring another 5.6 million square feet to the market. Recent Lease Transactions Property City Tenant Lease or Renewal Size (SF) VAN DOREN'S - PROGRESSIVE BLDG Kent Graebel Quality Movers Inc. Lease 228,356 DES MOINES CREEK BUSINESS PARK Des Moines AmerisourceBergen Lease 224,633 SUMNER CORPORATE PARK - CASCADE Sumner Mobis Parts America Lease 180,718 SEAPORT LOGISTICS CENTER Sumner Helly-Hansen (US), Inc. Lease 172,000 SEAPORT LOGISTICS CENTER Sumner Smart Warehousing Lease 161,180 DES MOINES CREEK BUSINESS PARK Des Moines Partners A Tasteful Cracker Lease 149,600 REXAM BUILDING Kent Rexam Beverage Can Company Renewal 128,622 KENT 167 DISTRIBUTION CENTER Kent OHL Global Lease 111,851 KENT WEST CORPORATE PARK Kent Exotic Metals Forming Co. Lease 110,110 KENT EAST CORPORATE PARK Kent Bryght Furniture Lease 70,952 VALLEY CENTRE CORPORATE PARK Auburn LOUD Technologies Inc. Renewal 63,000 NORTHWARD BUSINESS PARK Kent Grand JK Cabinetry, Inc. Lease 51,102 OAKESDALE COMMERCE CENTER Renton Schwartz Brothers Renewal 45,422 SALMON CREEK CORP PARK Sumner DHL, GBS Real Estate Americas Lease 42,900 DCT ROYAL DISTRIBUTION CENTER Fife GlobalTech Plastics, LLC Lease 42,661 NW CORPORATE PARK - RENTON Renton Ferguson Fire & Fabrication, Inc. Renewal 39,600 ALDARRA CORPORATE PARK Kent SBI Lease 39,013 PORTSIDE INDUSTRIAL CENTER Fife Stoneway Roofing Supply, Inc. Lease 37,827 SHEPHARD PARK Kent Macrina Bakery Lease 36,541 PORTSIDE INDUSTRIAL CENTER Fife Mud Bay Lease 30,000 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE, WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE.
Southend Industrial Team Local Knowledge, Global Reach Let us show you what we can do! While we are experts in the local Kent Valley industrial market, we have a national and global reach through the NAI Global network that can tackle any commercial real estate need. 183,435 SF Fernley, NV 180,608 SF Ontario, CA 7,500 SF San Diego, CA 19,320 SF Denver, CO 36,459 SF Bensenville, IL 110,660 SF DeSoto, TX 33,440 SF Romulus, MI 396,000 SF Brownsburg, IN Sale Lease 135,890 SF Hazelton, PA For those in other markets this narrative might be hard to believe, but the Seattle Industrial Market versus the majority of the nation is really a tale of two Americas: the national average and then Seattle. The averages certainly don t tell the whole story. We have Amazon. The tech giant continues to dominate the e-commerce world. Amazon alone accounted for 60% of total U.S. online sales growth last year and that market is growing 20% annually. A recent survey of 5,000 shoppers showed that 51% of their purchases were done online compared with 48% in 2015 and 47% in 2014. Millennials make 54% of their purchases online, the rate of adoption by older people is growing at a faster pace. Non-millennials made 49% of their purchases online according to the survey, compared with 44% in 2014. 9,404 SF Honolulu, HI Our clients choose us for their national business because they trust our ability to manage the sale or leasing process. We ask the right questions, and we interview to find the right local broker to help; we put our client s long-term interest above our own. We are still a local, independently-owned firm, but with our NAI Global platform, we are part of something much bigger. The shift toward e-commerce is changing how the retail and logistics industries are operating. There is a broad range of e-commerce business models, varying in ways such as the size of the operation, product focus, product value and retailer model. That is why the older South Seattle industrial buildings and the newer larger projects with trailer parking both are so coveted today. They each service a different niche in our ever expanding e-commerce market. You know there will eventually be another recession or slowdown. If we had to pick a date it would be 2019 or 2020. We are slightly
leery that our market s rent growth will force companies to expand or grow in other less expensive markets (we have seen that now on a couple of occasions). Also, we should see a series of rate hikes through 2017 and 2018, in large part because the U.S. economy is closing in on full employment. But those seem to be 2017 s problems. It is summer. Relax and enjoy the weather and your time with family and friends. We here at the Kent Valley Insider don t judge, so grab your phone and chase a Pikachu if that s what you are into. Sale Activity West Valley Business Park Recent Sale Transactions Sale Date Sale Price Property Name City Building Size Year Built Buyer Company 07/01/2016 $24,000,000 The Steele Building Sumner 205,850 2015 Bixby Land Company 06/28/2016 $13,653,949 Apollo Building Sumner 121,652 2014 LBA Realty 06/28/2016 $34,396,051 Titan Building Sumner 306,457 2014 LBA Realty 06/22/2016 $12,300,000 Red Dot - Bldg A Tukwila 113,980 1974 LBA Realty 05/31/2016 $8,642,256 Aldarra @ 212th - Bldg B Kent 62,544 2016 La-Z-Boy Distribution Center 05/22/2016 $9,500,000 South Seattle Business Park Seattle 97,673 1953 SCG South Seattle BP LLC 05/13/2016 $5,827,832 Former SCS Facility Seattle 71,718 1969 Westcore Properties 05/13/2016 $4,740,500 Former Pepsi Vending Seattle 24,291 1954 Terreno Realty Corporation 04/26/2016 $22,347,128 West Valley Business Park Kent 188,100 1981 Industrial Property Trust 04/26/2016 $4,248,245 Mountain Coin Building Auburn 50,000 1988 Strategic Industrial Properties 04/22/2016 $7,400,000 Lund Industrial Park Auburn 71,300 1999 Terreno Realty Corporation 04/11/2016 $6,234,767 Roy Ricketts Building Seattle 54,171 1969 Prologis 04/06/2016 $21,908,754 Opus Park 167 Auburn 173,897 2003 Industrial Property Trust 03/30/2016 $9,254,871 West Valley Commerce Ctr Kent 78,195 1978 Industrial Property Trust THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE, WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE.
Construction Report 17,609,019 SF Completed City Developer Project Type Year Project Size (SF) Available SF AUBURN Panattoni Development, Inc. Auburn West Valley Spec 2015 45,235 - DUPONT Griot s Garage NW Logistics - Phase I Spec 2015 225,000 225,000 FedEx Benaroya - Fife BTS 2016 300,000 - DCT Fife DC - Bldg A Spec 2016 239,805 - FIFE DCT Industrial DCT Fife DC - Bldg B Spec 2016 152,325 69,080 Fife 45 - North Site Spec 2015 79,284 - Fife 45 - South Site Spec 2015 63,550 - LBA/Davis Properties Portside Business Center Spec 2015 485,000 69,400 KENT Panattoni Development, Inc. Aldarra @ 212th Spec 2016 79,544 - IDS Real Estate Group Stryker Business Center - 2 BTS 2015 893,420 - LAKEWOOD PUYALLUP NW Building Corp International Airport Centers Lakewood Industrial Park - Bldg 27 Spec 2015 136,300 99,100 Lakewood Industrial Park - Bldg 28 Spec 2016 268,300 268,300 IAC Port 167 - A Spec 2016 398,753 125,919 IAC Port 167 - B Spec 2015 254,176 - Avenue 55 / Cabot Puyallup West Distribution Center Spec 2016 170,592 170,592 RENTON PACCAR PACCAR Warehouse BTS 2016 183,500 - SEATAC Panattoni / Metlife Des Moines Creek BP - Phase I Spec 2016 535,958 23,313 DCT Industrial DCT White River - Sockeye Spec 2015 62,895 - Panattoni Larsen Building Spec 2015 62,212 - Bob Stobie Riverside - Aaron Pckg BTS 2015 30,050 - Riverside - Surface Solution BTS 2016 45,272 - SUMNER Tarragon Salmon Creek - Bldg A Spec 2015 134,600 - Salmon Creek - Bldg B Spec 2016 133,100 69,045 SeaPort Logistics Spec 2015 333,180 159,926 Prudential / Michelson Knapp Sumner CP - Cascade Spec 2015 394,000 197,000 Avenue 55 Sumner West Spec 2016 120,900 - Panattoni Tamarack Building Spec 2015 150,190 - Panattoni / Metlife The Steele Building Spec 2015 205,850 - TUKWILA A&B Properties Interurban Development Spec 2015 60,705 2,291 TOTAL 6,243,696
In Planning FEDERAL WAY City Developer Project Type Year Principal Financial Group / KG Investments Project Size (SF) Available (SF) Weyerhaeuser Spec 2018 721,340 721,340 Avenue 55 Ave 55 - Fife Development Spec 2017 50,000 50,000 FIFE DCT Industrial DCT Blair Logistics - Bldg B Spec 2018 426,447 426,447 IPT Interfor Sawmill Site Spec 2017 1,250,000 1,250,000 Trammell Crow Trammell Fife Business Park Spec 2017 174,085 174,085 CenterPoint CenterPoint Kent Yard Site Spec 2017 220,800 220,800 KENT Exotic Metals Exotic Metal BTS BTS 2017 127,163 - O Keefe / Terreno Tri State Site Spec 2017 208,000 208,000 Ever-West West Valley 182 Spec 2017 43,492 43,492 PUYALLUP Latitude Development Todd Bldg BTS BTS 2017 118,000 118,000 SEATTLE Prologis Prologis Seattle (3-story) Spec 2018 567,000 567,000 DCT Industrial DCT W.Valley Hwy Spec 2017 362,616 362,616 IPT IPT Sumner South Warehouse Spec 2018 224,900 224,900 SUMNER Tarragon SeaPort Logistics - Bldg B&C Spec 2017 450,000 450,000 Prudential / Michelson Knapp Sumner CP - Glacier Spec 2017 53,000 53,000 Principal Financial Group Sumner Golf Course Spec 2018 650,000 650,000 TOTAL 5,646,843 Under Construction City Developer Project Type Year AUBURN Project Size (SF) Available (SF) - Laredo Industrial Park Spec 2017 112,040 112,040 American Realty Advisors Northcreek Spec 2017 248,533 248,533 FEDERAL WAY Preferred Freezer Preferred Freezer Bldg BTS 2017 250,000 - DCT Industrial DCT Blair Logistics - Bldg A Spec 2017 535,941 535,941 Panattoni Enterprise Center Fife Spec 2016 171,620 171,620 FIFE Dermody LogistiCenter @ 167 Spec 2016 225,972 225,972 Prologis Prologis Park Tacoma - 1st phase Spec 2017 539,600 539,600 Prologis Park Tacoma - 2nd phase Spec 2017 1,088,800 1,088,800 KENT Segale Pacific Gateway Spec 2017 200,000 200,000 Morgan Stanley / Tyler Higgins South 234 Spec 2017 124,000 124,000 PACIFIC Davis Properties The Pacific Building Spec 2017 220,309 220,309 PUYALLUP Davis Properties Summit Business Park Spec 2017 87,153 87,153 RENTON Group Health Longacres - South BTS 2016 250,000 - SEATAC Panattoni / Metlife Des Moines Creek BP - Phase II Spec 2016 495,425 121,192 Naylor Group WDS Cold Storage Bldg BTS 2017 240,000 - Carpinito Brothers Carpinito Sumner - Bldg A Spec 2016 267,650 267,650 SUMNER DCT Industrial DCT White River - Chinook Spec 2016 251,437 251,437 Davis Properties Penny Salsa BTS BTS 2017 60,000 - TACOMA NewCold Orchard Industrial Center BTS 2017 350,000 - TOTAL 5,718,480 THE INFORMATION CONTAINED HEREIN HAS BEEN GIVEN TO US BY THE OWNER OF THE PROPERTY OR OTHER SOURCES WE DEEM RELIABLE, WE HAVE NO REASON TO DOUBT ITS ACCURACY, BUT WE DO NOT GUARANTEE IT. ALL INFORMATION SHOULD BE VERIFIED PRIOR TO PURCHASE OR LEASE.
Arie Salomon, SIOR, CCIM Principal +1 425 586 5636 asalomon@nai-psp.com Jeff Forsberg, CCIM Principal +1 425 586 5610 jforsberg@nai-psp.com Taylor Hoff, SIOR Partner +1 425 586 5634 thoff@nai-psp.com Kent Channing Associate Vice President +1 425 586 5628 kchanning@nai-psp.com Al Robertson Senior Vice President +1 425 586 5626 arobertson@nai-psp.com Connor Powell Associate +1 425 586 5642 cpowell@nai-psp.com NAI Puget Sound Properties Commercial Real Estate Services 600 108th Avenue NE Suite 340 Bellevue, Washington USA 98004 +1 425 586 5600 nai-psp.com