1Q11_Southend_Industrial_Flex_Market by Jones Lang LaSalle

1Q’11 PUGET SOUND MARKET REPORT

Southend Industrial/Flex Market IN DUSTRI A L RE S U RGE N C E The Seattle Industrial Market gained strength in

SOUTHEND INDUSTRIAL/FLEX SUBMARKETS MAP

the first quarter, bolstered by continued growth in the Kent Valley Market. The three market areas of Seattle Industrial, Kent Valley Industrial, and Pierce

SEATTLE

County Industrial have all seen a significant uptick

BELLEVUE

in tenant activity, which bodes well for the rest of 2011.

GEORGETOWN/ DUWAMISH S

Industrial

Market

has

Sou

quarters and has seen very little market activity.

Smurfit leased 86,000 SF at AMB Portside and

TUKWILA

RENTON

get

consistently hovering near 5.8% for the last five

Seattle

LEGEND

SEATAC/ BURIEN

Vashon Island

Regal Aluminum Products - a Boeing supplier -

Southend Industrial/Flex Submarket

purchased a 50,000 SF facility in order to be better

Pierce County Industrial/ Flex Submarket

405

been

GEORGETOWN/ DUWAMISH N

The

WEST SEATTLE

SODO

KENT

situated in the region. FEDERAL WAY

The Kent Valley Industrial Market proved to be the winner in the first quarter. They saw nearly 720,000

NORTHEND TACOMA

SF of absorption and a 60 basis point vacancy decline, which helped to greatly strengthen that

PORT OF TACOMA/ FIFE

OTHER PIERCE COUNTY

submarket. The Valley experienced an upsurge in larger space activity in the first quarter, supported

LAKEWOOD

through occupancies by companies such as ULine

PUYALLUP/ SUMNER

and American Tire. There was a significant amount of tenant activity

AUBURN

OTHER PIERCE COUNTY

PARKLAND/ SPANAWAY OTHER PIERCE COUNTY

in the market and many existing tenants continue to seek expansion space, while new companies are looking in the region too. As occupancy levels rise

which could be a well known retailer or Trader Joe’s. If Trader

for the first time in the last eight quarters, and market stability

Joe’s does not take the space they will most likely look at build

returns, institutional buyers and REIT’s are combing the market

to suit opportunities in the Southend market.

looking for well stabilized assets. Unsolicited investment sales

The Southend Industrial Market is poised to see significant

are outpacing market sales approximately 4 to1 in the Southend

positive net absorption in the coming quarters, as there are no

Market.

buildings currently under construction and there are a multitude

The Pierce County Industrial Market has been a consistently

of tenants looking for space. One of the main areas of interest

stable market throughout the recession and continues to show

is the availability of large blocks of space in the Southend. With

signs of strengthening. On the heels of last year’s 444,000 SF

Mega Brands vacating Pacific Coast Corporate Park Phase II,

occupancy of Pepsico in the Port of Tacoma, Sumner Corporate

there are currently only 5 buildings that can support a user of

Park’s 492,000 SF Summit building is rumored to have a tenant,

over 400,000 SF.

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1Qâ&#x20AC;&#x2122;11 PUGET SOUND MARKET REPORT

Seattle Industrial Market The Seattle Industrial Market is comprised of fifteen submarkets, with

HISTORICAL VACANCY RATES & RENTAL RATES

1,278 buildings and a total of 52,187,988 SF. The overall vacany rate

7.0%

$0.46

remains relatively even with the end of 2010, while asking rental rates

6.0%

$0.45

5.0%

$0.44

4.0%

$0.43

negative territory, with the largest loss in the Georgetown/Duawamish

3.0%

$0.42

submarket.

2.0%

$0.41

1.0%

$0.40

are slightly higher. Overall, year to date net absorption remains in

0.0%

2005

2006

2007

Rental Rates

Seattle Industrial Overview INVENTORY Buildings

Market Area

2008

2009

Direct Vacancy

Sublet Vacancy

Total Vacancy

YTD

$0.39

2011

Vacancy Rates

ABSORPTION SF

2010

UNDER CONSTRUCTION Projects SF

SoDo

239

11,921,392

5.5%

0.0%

5.5%

(42,607)

Gtown/Duwamish N

284

14,192,975

8.4%

0.2%

8.6%

(64,359)

Gtown/Duwamish S

141

4,428,407

3.4%

0.2%

3.6%

5,910

Ballard

2,110,841

3.7%

0.0%

3.7%

10,049

West Seattle

3,306,501

2.0%

0.0%

2.0%

(14,679)

Other Seattle Markets*

454

16,227,872

5.1%

0.1%

5.2%

46,389

1,278

52,187,988

5.7%

0.1%

5.8%

(59,297)

SEATTLE INDUSTRIAL

Market Area

2004

2005

2006

2007

2008

2009

1Q 2010

2Q 2010

3Q 2010

4Q 2010

1Q 2011

SoDo

4.1%

3.2%

3.0%

2.3%

3.9%

3.8%

4.0%

4.1%

4.7%

5.1%

5.5%

Gtown/Duwamish N

8.3%

7.2%

7.6%

6.8%

6.1%

9.6%

8.9%

8.3%

8.6%

8.2%

8.6%

Gtown/Duwamish S

2.0%

7.1%

2.9%

2.3%

4.2%

5.7%

5.1%

3.7%

3.6%

Ballard

4.2%

4.1%

3.0%

2.2%

4.6%

3.2%

4.2%

3.7%

West Seattle

3.5%

4.1%

1.1%

1.9%

40.0%

1.3%

1.1%

1.3%

2.0%

1.6%

2.0%

Other Seattle Markets*

4.4%

4.2%

2.6%

2.4%

2.8%

5.6%

5.8%

6.3%

5.9%

5.5%

5.2%

SEATTLE INDUSTRIAL

5.1%

5.0%

4.0%

3.6%

3.9%

6.0%

5.8%

5.9%

5.7%

5.8%

Historical Total TEUs Market Area

Historical Total Absorption

2009

2010

2011-YTD

Market Area

1Q 2010

2Q 2010

3Q 2010

4Q 2010

2010

1Q 2011

Port of Seattle

1,584,596

2,139,577

323,569

SoDo

(23,886)

(7,363)

(52,834)

(56,245)

(140,328)

(42,607)

Port of Tacoma

1,545,855

1,455,467

221,193

Gtown/Duwamish N

90,405

82,441

(19,671)

49,936

203,111

(64,359)

PUGET SOUND PORTS

3,130,451

3,595,044

544,762

Gtown/Duwamish S

(2,990)

2,836

26,559

62,547

88,952

5,910

Ballard

30,358

(22,650)

470

8,178

10,049 (14,679)

West Seattle

7,500

(7,585)

(23,726)

15,188

(8,623)

Other Seattle Markets*

(36,352)

(78,013)

58,744

71,734

16,113

46,389

SEATTLE INDUSTRIAL

65,035

(30,334)

(10,458)

143,160

167,403

(59,297)

Market Area

SoDo Gtown/Duwamish N Gtown/Duwamish S Ballard West Seattle Other Seattle Markets* SEATTLE INDUSTRIAL

LEASE RATES (NNN) Shell Office

$0.55-$0.75 $0.45-$0.65 $0.45-$0.65 $0.45-$0.65 $0.45-$0.65 $0.45-$0.65 $0.45-$0.75

$0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75

OPERATING EXPENSES* (PSF) NNN Free Rent

$0.08-$0.10 $0.08-$0.10 $0.08-$0.10 $0.08-$0.10 $0.08-$0.10 $0.08-$0.10 $0.08-$0.10

1-4 months 1-4 months 1-4 months 1-4 months 1-4 months 1-4 months 1-4 months

*Rates/expenses are approximate

Gross Asking Lease Rates by Class

*Other Seattle Markets Includes: Seattle, CBD, Belltown/Denny,Capitol Hill/Central,Fremont,Lake Union,Magnolia/Queen Anne,Rainier/Beacon Hill,U. District, Waterfront

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Prior years as of 4Q

Historical Total Vacancy

1Qâ&#x20AC;&#x2122;11 PUGET SOUND MARKET REPORT

Kent Valley Industrial Market The Kent Valley Industrial Market is comprised of six submarkets, with

HISTORICAL VACANCY RATES & RENTAL RATES

1,573 buildings and a total of 111,721,944 SF. The overall vacany rate has

9.0%

dropped slightly since the end of 2010, while shell asking rates remain

7.0%

nearly the same. The Valley experienced strong positive net absorption

5.0%

during the first quarter, totaling 720,795S SF, with the largest gain in the

3.0%

Auburn submarket.

1.0%

$0.40 $0.30 $0.20

0.0%

$0.10

2005

2006

2008

Rental Rates

Kent Valley Industrial Overview INVENTORY Buildings

Market Area

2007

2009

Direct Vacancy

Sublet Vacancy

Total Vacancy

YTD

$0.00

2011

Vacancy Rates

ABSORPTION SF

2010

UNDER CONSTRUCTION Projects SF

Auburn

317

23,832,799

3.7%

1.3%

5.0%

602,850

Federal Way

1,855,596

18.0%

0.0%

18.0%

(7,852)

Kent

711

49,514,780

9.0%

0.7%

9.7%

227,222

Renton

152

13,171,517

2.8%

4.4%

7.2%

(39,643)

Seatac/Burien

3,824,949

9.2%

0.2%

9.4%

10,454

Tukwila

252

19,522,303

4.8%

0.9%

5.7%

(72,236)

1,573

111,721,944

6.5%

1.3%

7.8%

720,795

KENT VALLEY INDUSTRIAL

Historical Total Vacancy 2004

2005

2006

2007

2008

2009

1Q 2010

2Q 2010

3Q 2010

4Q 2010

Auburn

5.2%

4.8%

3.9%

6.0%

3.8%

4.2%

6.2%

7.9%

7.8%

7.4%

5.0%

Federal Way

4.3%

2.4%

2.1%

2.6%

3.0%

7.6%

8.6%

7.1%

6.8%

18.2%

18.7%

Kent

9.1%

7.1%

5.5%

4.1%

3.8%

8.8%

9.1%

9.5%

9.7%

10.2%

9.7%

Renton

5.6%

2.9%

3.6%

1.1%

1.4%

7.6%

7.8%

7.5%

7.4%

6.8%

7.2%

Seatac/Burien

8.3%

5.0%

4.3%

12.2%

13.2%

11.1%

11.4%

10.0%

9.7%

Tukwila

5.1%

5.3%

4.9%

5.1%

3.3%

5.6%

5.2%

5.7%

KENT VALLEY INDUSTRIAL

7.1%

5.8%

4.8%

4.3%

3.7%

7.2%

7.7%

8.2%

8.4%

7.8%

Historical Total TEUs Market Area

1Q 2011

Historical Total Absorption

2009

2010

2011-YTD

Market Area

1Q 2010

2Q 2010

3Q 2010

4Q 2010

2010

1Q 2011

Port of Seattle

1,584,596

2,139,577

323,569

Auburn

(459,711)

(412,586)

38,110

26,593

(807,594)

602,850

Port of Tacoma

1,545,855

1,455,467

221,193

Federal Way

(17,347)

27,321

5,067

(204,912)

(189,871)

(7,852)

PUGET SOUND PORTS

3,130,451

3,595,044

544,762

Kent

(151,091)

(186,275)

(63,492)

(278,488)

(679,346)

227,222

Renton

(20,599)

41,020

3,807

78,705

102,933

(39,643)

Seatac/Burien

77,332

(12,374)

51,266

2,313

118,537

10,454

Tukwila

79,398

(1,715)

15,102

(14,834)

77,951

(72,236)

(492,018)

(544,609)

49,860

(390,623)

(1,377,390)

720,795

KENT VALLEY

LEASE RATES (NNN) Shell Office

Market Area

Auburn Federal Way Kent Renton Seatac/Burien Tukwila KENT VALLEY INDUSTRIAL

(4 2 5 ) 9 7 4- 4000

$0.32-$0.38 $0.32-$0.38 $0.32-$0.40 $0.34-$0.40 $0.42-$0.50 $0.34-$0.40 $0.32-$0.50

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$0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75

OPERATING EXPENSES* (PSF) NNN Free Rent

$0.09-$0.14 $0.09-$0.14 $0.09-$0.14 $0.09-$0.14 $0.09-$0.14 $0.09-$0.14 $0.09-$0.14

3-5 months 3-5 months 3-5 months 3-5 months 3-5 months 3-5 months 3-5 months

*Rates/expenses are approximate

Gross Asking Lease Rates by Class

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Prior years as of 4Q

Market Area

1Qâ&#x20AC;&#x2122;11 PUGET SOUND MARKET REPORT

Pierce County Industrial Market The Pierce County Industrial Market is comprised of thirteen submarkets,

HISTORICAL VACANCY RATES & RENTAL RATES

with 1,136 buildings and a total of 61,993,353 SF. The overall vacany rate

10.0%

remains even with where the year ended in 2010, while asking rental

8.0%

rates have edged up slightly. Overall, year to date net absorption was

6.0%

$0.30

negative in most areas, with the only positive gains in the Tacoma CBD

4.0%

$0.29

and several smaller outlying submarkets.

2.0%

$0.33 $0.32 $0.31

$0.28 $0.27

0.0%

2005

2006

2008

Rental Rates

Pierce County Industrial Overview INVENTORY Buildings

Market Area

2007

2009

Direct Vacancy

Sublet Vacancy

Total Vacancy

YTD

$0.26

2011

Vacancy Rates

ABSORPTION SF

2010

UNDER CONSTRUCTION Rent NNN

Port of Tacoma/Fife

284

18,853,834

7.9%

0.0%

7.9%

(117,842)

Lakewood

108

4,770,761

7.5%

0.1%

7.6%

(139,305)

North End Tacoma

2,112,040

4.7%

0.0%

4.7%

(15,600)

Spanaway

3,432,830

6.2%

0.0%

6.2%

(9,301)

Puyallup/Sumner

268

20,907,468

13.6%

0.0%

13.6%

(10,302)

Tacoma CBD

1,435,574

11.2%

0.0%

11.2%

37,630

Other Pierce County Markets*

304

10,480,846

3.6%

0.5%

4.1%

34,562

PIERCE COUNTY INDUSTRIAL

1,136

61,993,353

9.0%

0.1%

9.1%

(220,158)

2004

2005

2006

2007

2008

2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Port of Tacoma/Fife

5.6%

3.2%

3.3%

4.8%

8.5%

9.0%

8.9%

9.4%

9.6%

7.3%

7.9%

Lakewood

6.3%

5.2%

13.9%

7.8%

4.0%

4.5%

4.8%

4.4%

4.3%

4.8%

7.6%

North End Tacoma

1.2%

2.6%

1.9%

2.6%

2.1%

4.1%

4.2%

3.9%

4.0%

4.7%

Spanaway

11.3%

2.1%

0.8%

10.8%

11.9%

5.6%

5.5%

5.4%

6.0%

5.9%

6.2%

Puyallup/Sumner

4.0%

8.3%

6.2%

11.3%

14.5%

12.4%

13.4%

12.2%

13.3%

13.0%

13.6%

Tacoma CBD

5.0%

4.3%

6.8%

7.0%

5.5%

11.4%

11.6%

13.3%

14.0%

13.8%

11.2%

Other Pierce County Markets*

3.9%

4.2%

5.2%

2.3%

4.9%

4.7%

6.4%

5.6%

4.2%

4.4%

4.1%

PIERCE COUNTY INDUSTRIAL

5.0%

4.8%

5.4%

6.9%

9.4%

8.8%

9.4%

9.0%

9.2%

9.1%

Historical Total TEUs Market Area

Historical Total Absorption

2009

2010

2011-YTD

1Q 2010

2Q 2010

3Q 2010

4Q 2010

2010

1Q 2011

Port of Seattle

1,584,596

2,139,577

323,569

Market Area

Port of Tacoma/Fife

33,660

(29,872)

290,444

430,998

725,230

(117,842)

Port of Tacoma

1,545,855

1,455,467

221,193

Lakewood

(14,500)

20,343

6,598

(23,588)

(11,147)

(139,305)

PUGET SOUND PORTS

3,130,451

3,595,044

544,762

North End Tacoma

(1,140)

4,800

600

(1,050)

3,210

(15,600)

Spanaway

2,308

5,616

(20,051)

1,752

(10,375)

(9,301)

(133,583)

244,057

(227,487)

74,350

(42,663)

(10,302) 37,630

Puyallup/Sumner Tacoma CBD

(3,360)

(23,070)

(10,468)

1,932

(34,966)

Other Pierce County Markets*

(177,942)

88,890

146,945

(29,623)

28,270

34,562

PIERCE COUNTY INDUSTRIAL

(294,557)

310,764

186,581

454,771

657,559

(220,158)

Gross Asking Lease Rates by Class

Port of Tacoma/Fife Lakewood North End Tacoma Spanaway Puyallup/Sumner Tacoma CBD Other Pierce County Markets* PIERCE COUNTY INDUSTRIAL

$0.28-$0.36 $0.28-$0.36 $0.28-$0.36 $0.28-$0.36 $0.28-$0.36 $0.28-$0.36 $0.26-$0.32 $0.28-$0.36

$0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75 $0.75

OPERATING EXPENSES* (PSF) NNN Free Rent

$0.09-$0.14 $0.09-$0.14 $0.09-$0.14 $0.09-$0.14 $0.09-$0.14 $0.09-$0.14 $0.09-$0.14 $0.09-$0.14

3-6 months 3-6 months 3-6 months 3-6 months 3-6 months 3-6 months 3-6 months 3-6 months

Rates/expenses are approximate

LEASE RATES (NNN) Shell Office

Market Area

*Other Pierce County Markets Includes: Dupont,E Pierce,E Tacoma,Fort Lewis,Gig Harbor,University Place, E Pierce

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Prior years as of 4Q

Historical Total Vacancy Market Area