Published January 2002

Experts predict stable year ahead for county market

By John Wolcott
Herald Business Journal Editor

SEATTLE — The commercial real estate market for office and industrial space in Snohomish County will see slower growth in 2002, but the county will continue to enjoy a growing competitive advantage over King County, top executives at Cushman & Wakefield Real Estate Services said recently.

During fourth-quarter and year-end reviews in mid-December, the firm’s leaders predicted Snohomish County would attract growing attention from biotech firms and companies in King County looking for better locations and lower rents.

Cushman & Wakefield Director Gary Bullington called Bothell a “hot spot” for biotech activity, noting a recent increase in activity among biotech companies wanting space in Canyon Park.

Bullington, with offices in Cushman & Wakefield’s Bellevue office and 19 years with the company, offered some historical perspective for the Snohomish County market.

“By comparison (to King County), the Snohomish County and north King County market is very small. If you look at the office vacancy rate of 7.1 percent 18 months ago, today’s 20.45 percent rate seems like a tremendous shift. But it helps to put it into true perspective to realize that the new Cosmos building in Lynnwood and the Quadrant I-5 Center in Lynnwood, vacated recently by Boeing, account for 380,000 square feet, most of today’s vacant office space in the county,” Bullington said.

Major developments under way include the Opus Northpointe office center off 164th Street SW in Lynnwood, which already has Cyprus Semiconductor slated as a major tenant. Also, at Intracorp’s 1 million-square-foot Industrial Center on Seaway Boulevard, the newest announced tenants include a unit of TRW’s aerospace division and Iron Mountain, a financial-records storage company, Bullington said.

The north end is emerging as a “white-collar engineering center,” which has been less affected by the technology bust than the rest of Puget Sound, Bullington said.

He said he expects the big story for the county to be “lots of product” planned for 2002 and thereafter.

“That area is going to become a receiver market for a lot of people looking at lower price alternatives,” he said.

The coming year should be a fairly stable market, he said, with only 340,000 square feet of new construction due on line in the county, including Northpointe’s first 70,000-square-foot building, and growing demand for space in the southern areas of the county.

In the fourth quarter of 2000, the vacancy rate for office space in Snohomish County was 11.4 percent, with 337,000 square feet available, according to the Cushman & Wakefield report, rising to 15.7 percent in the third quarter of 2001, with 475,000 square feet in the market, and 20.2 percent in the fourth quarter, with the volume of available space up to 675,000 square feet.

However, the county remains competitive for 2002, with rental rates for Class A office space of $24.88 per square foot per year in the fourth quarter of 2001, compared to $27.34 in the Eastside suburban office market in King County. The Eastside’s 7 percent vacancy rate in the fourth quarter should also help to move business growth north into Snohomish County.

Vacant industrial space in Snohomish County in the fourth quarter of 2001 amounted to 1.4 million square feet, plus 35,268 square feet of sublease space, producing a 10.2 percent vacancy rate. By comparison, in King County’s Eastside market, the fourth quarter showed a 9.6 percent vacancy rate, with 2.3 million square feet of space available, plus 1.1 million square feet in sublease space.

Industrial construction and absorption figures in Snohomish County show 227,085 square feet of construction in fourth quarter 2001 and a net absorption of 10,589 square feet.

Solectron Corp. announced Dec. 19, the day after the Cushman & Wakefield conference, that it would close its Everett plant in April, putting its 179,000-square-foot facility in the Seaway Center industrial park on the market. That additional empty space will significantly increase the vacancy rate in the county’s inventory of high-tech industrial facilities next spring.

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