Published November 2000

Report: New construction on record pace

By John Wolcott
Herald Business Journal Editor

Snohomish County’s office and industrial space doesn’t compare with King County by any stretch of the figures, but the county’s importance as a haven for new and expanding businesses is growing rapidly as accommodations in King County shrink and costs rise, according to a recent report by Kidder Mathews & Segner.

The Mid-Year 2000 Market Forecast for the Puget Sound area, distributed last month, tracks all commercial properties of more than 10,000 square feet, with the Seattle company’s 87 brokers providing six-month predictions for the market.

In the overall office-space market for Snohomish, King and Pierce counties, new construction and net space absorption are occurring at all-time record levels, according to the report.

“Nearly all of the office market activity is occurring in and around the Seattle central business district and in the Eastside cities of Bellevue, Kirkland, Redmond and Bothell,” the report states. “In 1999, there were record levels of new construction, totaling 5.3 million square feet and a net absorption of 4.2 million square feet. … At the midpoint of 2000, the market appears poised to exceed its 1999 record levels.”

The strong demand for space appears to have no immediate end in sight, since it’s being supported by “a strong local economy; the global rise in economic importance of intellectual, communications and entertainment products; and a preponderance of those (types of) growth firms in the local area,” the report states.

The office space market in Snohomish County amounts to 2.8 million square feet, far less than Seattle’s 26 million square feet, east King County’s 25 million square feet and south King County’s 8.3 million square feet, but more than Pierce County’s 2.7 million square feet.

In Everett and Lynnwood, vacancy rates have dropped slightly in the first six months of this year, the report states, but “leasing activity is brisk as more companies seek alternatives to high leasing rates” in King County.

As for more office space, the report mentions that OPUS plans to develop nearly 700,000 square feet of new space in its Northpointe project at 164th Street SW between Everett and Lynnwood and that Quadrant recently completed the second 71,000-square-foot building in its I-5 Corporate Park near 128th Street SW in south Everett.

Although not specifically mentioned in the Kidder report, two recent and significant office-space projects include Olympic Capital Group’s Corporate Center II, with 70,000 square feet under construction in Lynnwood, and the 203,532-square-foot Cosmos Lynnwood Center being built by Cosmos International near the Alderwood Mall.

As for office-space rates in Snohomish County for the remainder of this year, Kidder agents predict a range of $20 to $22 per square foot for Class “A” space and strong net absorption as more companies move into the area.

The county’s 2.8 million square feet of office space includes 178,688 square feet available, a vacancy rate of 6.38 percent, compared to January 2000, when 205,081 square feet of space was available, with a vacancy rate of 7.41 percent. At the time of the Kidder report, the end of July, there was 88,832 square feet of office space under construction in the county with a net absorption of 57,593 square feet anticipated.

The vacancy rate for the overall Seattle region, the tri-county area, at the end of July was 3.32 percent, down from 5.22 percent at the end of 1999.

Industrial space continues to be in high demand, too, in the Puget Sound area and in Snohomish County, according to the Kidder report. During 1999, the area absorbed more than 5.76 million square feet of industrial space, and another 3.47 million square feet was leased during the first half of 2000.

Vacancy rates for industrial space in Snohomish County rose dramatically this year, the report states, because of Boeing moving out of 455,000 square feet of office space, but Kidder agents report “market activity has been brisk in recent months, and large blocks of space may soon be leased.”

Rates forecast for the county’s industrial space through the end of the year are expected to remain stable, ranging from $0.40 to $0.45 per square foot per month, triple-net.

At midyear, Snohomish County had a market of 18.6 million square feet of industrial space, with a vacancy rate of 8.12 percent (1.5 million square feet). New space under construction amounted to 161,846 square feet. During the first half of the year, 67,482 square feet was the net absorption for the county.

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