Published November 2001

Report: Commercial
real estate market enjoys healthy third quarter

Herald Business Journal Staff

Despite a slowing economy, Snohomish County’s commercial real estate market came through the third quarter in good shape, according to Cushman & Wakefield’s quarterly industrial and office space reports.

The company said the demand for industrial space remained “strong” and pointed to the office market as “the next stage for commercial development in the Puget Sound Region.”

During the third quarter, a high level of leasing activity in the industrial market caused the vacancy rate to decrease to 8.8 percent from 9.7 percent at midyear, according to the report. And there was a positive net absorption of about 317,985 square feet, year to date.

Leasing activity included:

• 200,000 square feet under construction in Everett for JanSport.
• 54,000 square feet in the Seaway Ridge building in Everett for National Foods.
• 24,000 square feet in the Seaway Center building in Everett for TRW Aeronautical Systems.
• 19,215 square feet in Everett’s Paine Field Business Park for Pacific Cargo.
• 12,300 square feet in the Paine Field Business Park for A.E. Petsche Co.
• 20,000 square feet in Lynnwood’s 180 Business Park for Olympic Paper & Supply.

Construction during the third quarter totaled 131,176 square feet, of which 10.8 percent was uncommitted upon completion, according to the report. Projects delivered to market include:

• 40,000-square-foot Audio Acoustics Building in Lynnwood.
• 27,400-square-foot University Mechanical Building in Mukilteo.
• 40,000-square-foot Casino Corporate Park II in Everett.
• 23,776-square-foot Steel Business Park in Everett.

While the industrial vacancy rate dropped, the office vacancy rate rose slightly from 15.2 percent at midyear to 15.8 percent in the third quarter, the report said. The increase was minimal compared with Bellevue, which saw vacancy rates soar from 14.6 percent at midyear to 20.7 percent by the third quarter.

“The Northend office market continues to provide a low-cost alternative to the Eastside and Seattle Central Business District for quality office/technology space,” the report said, adding that as rental rates have decreased across the region, office space in the county has followed suit, with rental rates dropping from $23.41 per square foot at the beginning of the year to $22.25 by the third quarter.

Year to date, a little more than 54,000 square feet of new office space construction has been delivered, with the completion of Taylor’s Landing (25,000 square feet) and the Ash Way Business Center (18,140 square feet) in Lynnwood and the Rancetti Business Center (11,000 square feet) in Everett. Of that, 76 percent has been leased, the report said.

An additional 333,732 square feet of office space is under construction in the county, with the 203,532-square-foot Cosmos Lynnwood Center expected to be completed before the end of the year. The remaining 130,200 square feet is located within two buildings at Opus Northpointe near Lynnwood, with a midyear 2002 completion expected.

Cushman & Wakefield predict that despite “the local economy leaning toward a recession,” the Northend industrial market will “stay in equilibrium through the end of the year.” As for office space, the county’s many public and private projects, including transportation and convention centers, will entice developers to the area, the report speculated.

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