Published September 2002

Report: County market showing signs of stability

SCBJ Staff

Like much of the Puget Sound region, Snohomish County’s commercial real estate market has endured a tough string of months dating back to mid-2001. But reports recently released by Cushman & Wakefield offer signs of a stabilized market — one with future promise.

In its second-quarter 2002 Northend market reports, the real estate company noted that the vacancy rate for the area’s office space hovered at 20 percent at midyear, slightly down from the 20.4 percent vacancy rate reported at the end of 2001.

“It should be noted that almost half of this vacancy rate is (composed) of just two buildings, including the brand new Cosmos Lynnwood Center and the Quadrant I-5 Center Building, formerly occupied by Boeing,” the report said. “Surprisingly, weighted average asking rental rates have remained virtually unchanged during this period of increase in available space.”

At midyear, that rate was $23.16 per square foot, which Cushman said was “still the most affordable office market (in the region) with the exception of the Seattle Southend office market with an asking rental rate of $21.32 per square foot.”

In comparison, office space in downtown Bellevue at midyear was $27.56 per square foot, while the Eastside suburban rate averaged $25.10 per square foot at midyear, according to Cushman.

Office space leasing activity for the period was moderate in the Northend, according to the report, with a little more than 51,000 square feet of activity taking place, bringing the year-to-date leasing to almost 87,000 square feet. In comparison, 170,000 square feet of space was leased during the same time last year.

While leasing has been moderate, office space construction deliveries have been at a standstill for the year following the delivery of the 203,000-square-foot Cosmos Lynnwood Center in December, Cushman said. Only Opus Northpointe Building D in the Lynnwood area, totaling more than 66,000 square feet, is under construction. Expected to be completed in November, the building already is fully leased to Cypress Semiconductor and its subsidiary, Cypress MicroSystems.

“No new projects are expected to break ground in the Northend until developers achieve strong leasing activity,” the report said. “As a result, the market will remain stable during the next six months and see a reduction in vacancy before year-end.”

While office space vacancy has remained steady, the Northend’s vacancy rate for industrial space has declined from 11.3 percent at the end of first quarter 2002 to 10.6 percent at midyear, “the first decline in vacancy the market has experienced since third quarter 2001,” Cushman said.

Almost 79,000 square feet of leasing activity occurred in the Northend during the second quarter, bringing year-to-date activity to 202,000 square feet. Much of the leasing ranged between 3,000 and 5,000 square feet, with “the most notable transaction being the 9,000-square-foot lease at Harbour Reach Business Park (in Mukilteo) to Closets by Design,” the report said.

Those numbers don’t include the 57,830 square feet of industrial space MDS Pharma Services leased in Bothell, which Cushman included in the company’s Eastside reports.

Northend industrial space construction, which added almost 400,000 square feet of space during the first quarter, paused to catch its breath before another round of activity, Cushman said, noting that Panattoni Development LLC is finalizing a master site plan in the Seaway Business Center in southwest Everett to develop 600,000 square feet of warehouse/distribution and manufacturing space in phases, with the first building ready to break ground in the fall.

“This construction activity is expected to attract traditional industrial users, particularly companies that are looking for larger facilities or a secondary distribution facility to handle the Northend area,” the report said.

The Northend’s location, at the juncture of I-5 and I-405, and competitive lease rates have put both its office and industrial space markets in an enviable position for future vitality, Cushman said.

Because of worsening traffic conditions in the region, companies are looking to the Northend to relocate their distribution facilities to more effectively service the Puget Sound area, Cushman said. And call centers and back-office users are taking advantage of the counter commute, affordable rental rates and high parking ratios.

Back to the top/September 2002 Main Menu