Published May 2003

Report: Market for office, industrial space still flat

By John Wolcott
SCBJ Editor

The market for office and industrial space in Snohomish County, like much of the Puget Sound area, is relatively flat this spring, according to the first-quarter report by Cushman & Wakefield Real Estate Services in Seattle.

Brokers at the firm say the county’s overall vacancy rate for office space was 18 percent at the end of the quarter, compared to 20 percent at the close of 2002 and 8.5 percent at the end of the first quarter of 2000.

There is 600,398 square feet of office space on the market, down from the 701,962-square-foot peak at the end of the first quarter of 2002 but little changed from the end of 2002, when available office space totaled 652,299 square feet.

Rental rates for office space, however, remain stable, with Class A space going for $24.31 at the end of this year’s first quarter, compared to $23.93 at the end of 2002 and $24.88 at the end of 2001.

Available industrial space in the county stands at 2.7 million square feet, representing a vacancy rate of 17.4 percent, compared to only 7.3 percent at the end of the first quarter of 2000, when the marketplace saw 837,307 square feet available, according to the Cushman & Wakefield report.

Cushman associate Brian Toy said the northend office market is challenged by excessive inventory and sluggish economic conditions. Out of the 2.7 million square feet of office space available in the county, more than 1.5 million square feet of that space is located in three sites: the recently vacated Boeing Co. space at the Bomarc Business Park in southwest Everett, the Wired Zone high-tech building in Mukilteo and the empty high-rise building in the Quadrant I-5 Business Park in Lynnwood.

“Boeing is the big wild card. When Boeing is going through a big adjustment, as they are now, you’re seeing very large increments of space they’re putting into the market, acting as their own landlord,” said Cushman Director Gary Bullington.

“The big question right now is what will happen with Boeing’s new 7E7 program. Will it be assembled here or somewhere else? If it’s built here, you’ll also see a lot of tier-one and tier-two vendors come to Snohomish County to be close to Boeing. By the end of the year the board of directors could decide that issue,” he said.

Even though today’s real estate market for office and industrial space continues to be sluggish, Snohomish County is preparing well for the time when an upturn in the economy signals new growth, Bullington said, praising the Snohomish County Economic Development Council for its April program and tour of county properties for King County developers.

“It’s good that they’re focusing on getting brokers familiar with the northend (Snohomish County) market,” Bullington said. “A lot of King County and Eastside real estate developers simply do not know that market. They’d be amazed at the new construction and what has been successful there over the last three to four years.”

The city of Lynnwood also drew praise from Bullington for its master planning to create a downtown city center that includes high-rise office buildings, saying the site is in an ideal transportation and market location.

“It reminds me of the critical change in zoning in Bellevue (20 years ago) when they went to master zoning with segments of low-, mid- and high-rise buildings, which enabled them to manage the growth that’s happened since. Similarly, Lynnwood’s pre-planned city center will be a catalyst for its future growth,” he said.

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