Published November 2003

Office, industrial
vacancy rates inch lower

By John Wolcott
SCBJ Editor

Snohomish County’s office and industrial space market “has a very bright future” once the economy begins turning around, in the view of Gary Bullington, a top executive at Cushman & Wakefield in Seattle.

“Business owners again will begin looking at expanding and relocating,” he recently said. “When they do, they will be considering things like commuting distance for their employees, home prices, quality-of-life environments and even parking, which can run an employee $200 to $300 a month in downtown Seattle. That’s when businesses will be looking north again.”

Bullington made his comments after the company released its third-quarter statistics for office and industrial real estate activity for the Puget Sound area. Bullington said new businesses will be looking for space in Snohomish County for the same reasons they looked when the economy was healthy before.

“When Opus Northwest opened Northpointe Business Park in Lynnwood, the major attraction for their first tenant, Cypress Semiconductor, was that the location was better for their present employees and for future employees, who didn’t want the long drives and the higher cost of living in King County,” he said. “Other companies were also looking at the area just as things went on hold two years ago, but they’ll be back.”

Even Lynnwood’s slack office space market will recover as the economy recovers, he said. Buildings such as the Cosmos Lynnwood Business Center were under construction when the market changed, accounting for the difficulty in finding tenants for that building. Cushman & Wakefield’s report for the third quarter noted that the county office vacancy rate is now at 18.3 percent, down from a high of 21 percent in the second quarter of 2002.

“One of the big questions is what will happen with the former Quadrant I-5 Business Park in Lynnwood, where there is an empty 188,000-square-foot, six-story building and a 60,000-square-foot building behind it, both occupied by Boeing until 18 months ago. Now they’re still empty,” said Cushman & Wakefield executive Tom Bohman.

Thanks to successful marketing of long-vacant Boeing Co. properties near Paine Field, the industrial space vacancy rate in the county market is now 15.1 percent, down from a high of 17.4 percent at the end of the first quarter of this year.

Travis Industries of Kirkland, the largest privately held manufacturer of fireplace and hearth products in North America, leased Centre 41, a 476,000-square-foot industrial manufacturing building at Harbour Pointe, from Boeing in June.

Then Fibres International of Bellevue, a recycling company, leased 49,000 square feet in Boeing’s 45-70 building at the Bomarc Business Park near Paine Field, and Giddens Industries leased 105,000 square feet in the Bomarc park for producing complex aircraft parts, leaving two-thirds of the building still on the market.

“Actually, only about 40 percent of the companies in the market for industrial space would even consider looking at the Boeing properties, because their space is more suitable for a single large tenant than multiple tenants,” Bullington said. “If you took the Boeing space and the large Harbour Pointe Technical Center out of the market figures, the vacancy rate in Snohomish County for industrial properties would be about 8 percent, which is historically pretty normal,” Bullington said.

Although he thinks Boeing “must have discounted their properties’ value pretty deeply” to get tenants in such a slack market, he feels those successes have made the market picture somewhat rosier in Snohomish County.

“The frosting on the cake, though, could come in December if Boeing picks Everett for its 7E7 program. There are tier-one and tier-two Boeing suppliers who will be very interested in space nearby if that site is chosen,” Bullington said.

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