Puget Sound – The Puget Sound economy continues to add jobs at a strong pace, adding 37,000 positions in the last 12‐ months. Increased employment has swung the pendulum back into the Landlords favor and rent growth is projected to reach 5% in 2013. Developers are responding with over two million square feet under construction in downtown Seattle and Bellevue alone. Macro factors including the trend of decreasing vacancy and rent increases are attractive. Particular attention will be given to properties located near employment hubs in King County.
Together the ports of Seattle and Tacoma comprise the third largest marine container load center in North America. The ports and mainline rail infrastructure are investing in improvements in conjunction with local cities, federal, state and regional transportation agencies through the FAST corridor program. Time savings due to location, increased efficiencies and limited land reserves make Seattle‐Tacoma a desired industrial investment market.
In the second quarter 2013, retail vacancy dropped to 5.3%. King, Snohomish, and Thurston Counties are stabilized, while Pierce and Kitsap are the softest markets. The better markets were those located closest to the employment centers. Asking rents decreased about 3.3% over the past 12‐months, although rents have been improving in stable areas. Bellevue, Kirkland and Lynnwood qualify as stable areas and will be given particular attention.
Portland – Portland is ranked as the seventh most desirable office market by Marcus & Millichap. Employment growth of 2.7% is anticipated, dropping vacancy by an estimated 1% and driving rent growth by 2.6% compared to 1% in 2012. Portland’s office market absorbed 815,000 SF in the first half of 2012, close to surpassing 2012 total absorption.
The Portland industrial market isn’t experiencing the velocity that the office market has enjoyed. However, vacancy has held near 7.5% the last three years and new development is tapered with only five deliveries as of September 2013, only one non‐ owner/user. Several large transactions will likely occur in the second half of 2013 more than off‐setting the owner/user developments. We anticipate Portland will continue to be an attractive industrial market based on its strategic location and rental savings compared to larger ports.
The retail vacancy rate stands at 5.6% as of 2Q13. Unanchored centers drag down this average with 12.96% vacancy. Rent growth in the past year was a meager 2%, but concessions and tenant improvements are lessening and the retail sector is entering an expansion phase. Sales of soft goods and apparel remain flat while convenience items and food are showing increases. More than any other product category, retail properties must be carefully chosen. Although the market is strong,the individual property’s future is more complex and dependent on trade area dynamics, tenant mix, etc.