2Q11 Puget_Sound_Market_Report_PDF

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MARKET REPORT

2 Q ’ 11

Puget Sound SEATTLE | EASTSIDE | NORTHEND | SOUTHEND

HEADING INTO POSITIVE TERRITORY The Puget Sound region continues to gain momentum as we wrap up the second quarter of 2011, with most submarkets experiencing a declining vacancy rate, rising rental rates, dwindling supplies of available large blocks of space and renewed enthusiasm on the investment front.


PACIFIC REAL ESTATE PARTNERS, INC.

Puget Sound Market Report ECONO MI C OV E R V IE W

P U G E T S O U N D E M P L OY M E N T G R O W T H B Y S E C TO R

24.00% # Change as of April 21.00% 18.00%

Cumulative Growth 2011-2015 % Change as of April 2011 Forecast

15.00% 12.00% 9.00% 6.00%

Source: Moody’s Analytics

3.00% 0.00% -3.00% -6.00% Construction

Manufacturing

Trade, Transportation & Utilities

Financial Activities

Education & Health Services

Business & Professional Services

Government

Information

Leisure & Hospitality

So und Vita l i t y The Puget Sound Region continued to see signs of strengthening

other sectors such as Information Technology and Leisure/

and stability in the second quarter of 2011. Although employment

Hospitality adding an additional 25,000 new jobs.1

growth fell short of initial expectations the region experienced

The Puget Sound’s aerospace and manufacturing industries

a modest jump in jobs of 1.8%. In addition, there was an 11.9%

have seen an upsurge in activity as a result of Boeing’s escalation

drop in initial unemployment claims, which is another indicator

of production of the 737. The world’s second largest maker of

that we are heading toward more stable ground.

commercial planes plans to boost production to 31.5 planes per

Currently, the Puget Sound’s unemployment rate sits at 8.6%

month (2 per day) by 2014, which will bode well for the majority

and according to Moody’s Analytics it is expected to continue to

of our region.

gradually decline to approximately 6.5% by 2015. This decline

The Ports are seeing continued growth and stability, with Port

will primarily be attributed to strong employment gains in the

TEU’s in the region higher than the same period last year. The

Technology/Business and Professional Services sector, which is

Port of Seattle is up 6.2% from 2010, and the Port of Tacoma is

expected to see 23% growth over the next four years.1

up 7.90% over the same period.

It is anticipated that job growth for traditional office space

Overall, the Puget Sound is poised for a strong recovery

users over the next several years will be led by the Business &

over the next four years with growth in many industries. With

Professional Services sector and the Education & Health Services

the economic climate showing signs of stability and consumer

industries. By 2015 it is expected that these two industries alone

confidence returning the Puget Sound is on track for a steady

will add nearly 35,000 new jobs to the Puget Sound area, with

and robust resurgence.

(1) Moody’s Analytics (2) PPR (Property and Portfolio Research)

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2Q’11 PUGET SOUND MARKET REPORT

Vacancy by Submarket & Class SEATTL E O F F IC E MA RK E T 50.0% 46.9%

CLASS A CLASS B CLASS C

45.0%

42.4%

40.0%

35.0%

30.0%

25.0%

23.7%

19.1%

20.0%

15.0%

15.4%

18.4% 17.0%

16.8%

16.3%

15.7% 13.2%

10.4%

10.3%

10.0%

12.0%

10.5%

9.8% 7.3%

6.2% 4.1%

5.0%

2.3%

1.7%

0.0%

0.0% Seattle CBD

Ballard/ U-District

Belltown/ Denny Regrade

1.6%

0.0%

Capitol Hill/ Central District

Lake Union

Pioneer Square/ Waterfront

Queen Anne/ Magnolia

South Seattle

Excludes Capitol Hill Class A: 2 Buildings 87% Vacant, South Seattle Class A: 3 Buildings 72% Vacant

EASTSI DE OF F IC E MA RKE T 35.0%

29.9%

CLASS A CLASS B CLASS C

30.0%

25.0%

21.1%

20.6%

21.1%

19.7%

19.6%

20.0%

19.2%

17.0%

17.2%

16.2%

15.5%

14.6%

15.0%

14.0%

13.3% 10.3%

10.0%

10.2% 8.0% 6.5%

5.8% 5.0%

6.4%

6.2%

3.8% 2.5%

2.3%

0.9% Bellevue CBD

0.0%

0.0%

0.0% Bothell

520 Corridor

I-90 Corridor

Issaquah

Kirkland

Mercer Island

Redmond

Suburban Bellevue

Excludes Suburban Bellevue Class A: 1 Building 100% Vacant

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pug et so u n d OF F IC E m a rke t m ap

Whidbey Island

EVERETT

NORTHEND

5

Puget Sound

5 405

Lake Washington

S E AT T L E

520

SEATTLE 90

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EASTSIDE


2Q’11 PUGET SOUND MARKET REPORT

p u ge t sou n d I N DUS T R I AL m a rket ma p

Whidbey Island

5

EVERETT

Puget Sound

N orthend

E astside 5

S eattle Bainbridge Island

405 Lake Washington

520

SEATTLE 90

BELLEVUE

KENT

Vashon Island

S o u thend

TACOMA

5

P ier c e Co u nt y

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PACIFIC REAL ESTATE PARTNERS, INC.

Seattle Office Market SEATTLE R E IG N S The Seattle office market ended the second quarter with positive

Seattle OFFICE SubmarketS map

signs on all fronts - experiencing increased tenant activity, 244,000 SF of positive absorption and a decline in vacancy of 20

BALLARD/ U DISTRICT

basis points. The technology sector continues to thrive and has had a major impact on the office market. Organic growth, combined with expansions and relocations all contributed to the sustained

QUEEN ANNE/ MAGNOLIA

520

positive momentum in the CBD and surrounding submarkets.

LAKE UNION

Many of these tech companies are centralizing themselves

DENNY REGRADE SEATTLE CBD

around Lake Union where Amazon.com is now anchored. Although there was nearly 500,000 square feet of negative absorption in the Seattle CBD, Pioneer Square and South Seattle

CAPITOL HILL/ CENTRAL DISTRICT

SEATTLE

PIONEER SQ/ WATERFRONT Elliott Bay

Lake Washington

90 5

submarkets combined, this figure was offset by close to 622,000 square feet of positive absorption, mostly as a result of Amazon moving to the Lake Union submarket.

S SEATTLE/SODO WEST SEATTLE

The new world headquarters of the Bill & Melinda Gates Foundation is also located in the Lake Union area. The nearly 600,000 SF campus consolidates the foundation’s regional operations, which also contributed to the negative absorption in the surrounding submarkets. In addition to these two large users, the Biotech industry continues to strengthen its presence in the Lake Union area as

“Class A+” property in Seattle with large blocks of available

well. Major firms such as UW Medicine, Fred Hutchinson and the

space, which has seen significant tenant activity as the Class A

Institute for Systems Biology continue to expand their footprint

market continues to tighten up.

in that very active submarket.

Overall, the Seattle office market is nearing equilibrium as

For the first time in the last three years tenants are starting

landlords and tenants are moving toward middle ground in rents

to vie for coveted premier locations and there has been an

and concessions. With the third quarter occupancies of Amazon.

uptick in bidding wars for desirable spaces. As a result of this

com at 1918 8th and Dendreon at Russell Investments Center

positive activity deal velocity is increasing and timelines are

the Seattle office market is expected to see as much as one

shortening; landlords are just as compelled as tenants to lease

million square feet of absorption come October.

spaces. Even the less expensive, more commodity-type spaces

Seattle is returning to its status as a “darling” for investors, with

are experiencing competition between tenants as the market

many properties reaching required occupancy and experiencing

tightens and large blocks of available space diminish.

a declining cap rate. While new speculative construction is most

There has been a shift in demand for the “Class A+” space,

likely still two years away, we may begin to see a rise in the

as premier properties like Russell Investments Center and 1918

ground breaking of new build to suit properties that can service

8th have seen their occupancy levels skyrocket over the last

the larger tenants in the market.

two years. West 8th is now the only remaining new construction 6

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2Q’11 PUGET SOUND MARKET REPORT

Seattle Office Market The Seattle office market is comprised of 693 total properties spread

HISTORICAL Vacancy RATES & Rental Rates

throughout eight submarkets and totals just under 60 million square

18.0%

feet. The overall vacancy rate declined slightly, with the largest decrease

15.0%

in the Lake Union submarket. Positive net absorption was slightly lower

12.0%

than first quarter, ending at 244,642 square feet and average rental rates in all submarkets continue to be on the rise.

$32.00 $30.00

9.0%

$28.00

6.0% $26.00

3.0% 0.0%

2005

2006

INVENTORY Buildings

Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle DOWNTOWN SEATTLE

2008

Rental Rates (FS)

Seattle Office Overview Market Area

2007

103 82 78 84 103 99 74 70 693

SF

Direct Vacancy

Sublet Vacancy

Total Vacancy

25,122,835 3,164,052 5,474,188 4,628,331 8,018,207 6,218,623 3,912,636 2,830,388 59,369,260

13.9% 5.2% 11.8% 6.9% 17.1% 23.5% 18.4% 25.5% 15.0%

1.3% 4.4% 1.2% 0.0% 0.3% 0.6% 0.3% 0.0% 1.0%

15.2% 9.6% 13.0% 6.9% 17.4% 24.1% 18.7% 25.5% 16.0%

ABSORPTION 2Q Absorption YTD

(143,867) 37,396 67,557 22,540 622,873 (161,138) (13,642) (187,077) 244,642

2009

2010

$24.00

2011

Vacancy Rates AVERAGE RENT & EXPENSES (FS) Rent NNN

(223,315) 100,020 46,809 26,692 910,699 (63,433) 27,668 (236,827) 588,313

$30.17 $31.70 $25.84 $36.00 $34.49 $28.70 $33.38 $24.51 $30.60

$9.45 $8.00 $8.25 $8.00 $9.45 $8.50 $8.50 $8.00 $8.52

Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle SEATTLE OFFICE

2004

2005

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

2Q 2011

13.4% 5.4% 14.1% 11.2% 18.3% 13.9% 17.7% 9.9% 13.3%

12.5% 4.7% 12.0% 10.6% 16.1% 11.9% 15.9% 9.7% 11.9%

10.4% 3.4% 9.7% 7.3% 11.6% 8.7% 8.5% 12.7% 9.2%

10.4% 2.7% 9.2% 4.1% 5.7% 7.2% 7.6% 9.6% 8.6%

11.0% 12.6% 8.1% 4.3% 6.4% 12.4% 5.8% 10.0% 10.1%

15.9% 11.9% 16.4% 13.5% 8.2% 15.6% 15.6% 10.9% 16.4%

16.2% 14.5% 12.4% 8.6% 22.4% 18.4% 16.6% 18.6% 16.4%

15.3% 14.6% 13.1% 7.5% 22.3% 22.2% 16.4% 16.7% 16.3%

14.0% 14.4% 13.2% 7.2% 20.9% 22.4% 16.5% 15.9% 15.6%

14.5% 10.7% 13.6% 7.4% 25.7% 20.7% 18.2% 18.6% 16.2%

15.2% 9.6% 13.0% 6.9% 17.4% 24.1% 18.7% 25.5% 16.0%

Historical Rents (FS) Market Area

Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle SEATTLE OFFICE

Prior years as of 4Q

Historical Total Vacancy Market Area

Historical Total Absorption

2007

2008

2009

2010

$35.37 $35.59 $29.25 $35.08 $32.52 $25.92 $25.81 $22.74 $30.29

$33.37 $31.10 $30.56 $31.05 $38.31 $28.97 $35.80 $22.95 $31.51

$29.49 $28.83 $26.16 $30.00 $31.29 $26.34 $21.55 $23.61 $27.16

$29.16 $28.06 $24.80 $29.53 $32.20 $25.69 $27.66 $23.25 $27.54

Market Area

Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle SEATTLE OFFICE

2Q’10

3Q’10

4Q’10

2010

1Q’11

2Q 2011

(140,078) (16,787) 182,460 24,976 509,498 (3,664) (18,245) (2,512) 535,648

229,388 (2,393) (40,792) 30,320 144,692 (232,194) 4,559 53,491 187,071

320,815 78,031 (7,401) 22,719 98,069 (14,602) (1,035) 22,632 519,228

475,335 (4,847) 175,473 269,416 869,821 (170,228) (31,307) 49,242 1,632,905

(79,448) 62,624 (20,748) 4,152 287,826 97,705 41,310 (49,750) 343,671

(143,867) 37,396 67,557 22,540 622,873 (161,138) (13,642) (187,077) 244,642

Asking Lease Rates by Class Class A

Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle SEATTLE OFFICE

$30.17 $31.70 $25.84 $36.00 $34.49 $28.70 $33.38 $24.51 $30.60

LEASE RATES (FULL SERVICE) Class B Class C

$22.52 $24.50 $25.18 $28.93 $25.00 $22.36 $20.78 $21.50 $23.85

$17.38 $18.57 $19.39 $22.34 $16.56 $16.76 $19.68 $20.76 $18.93

Class A

$9.45 $8.00 $8.25 $8.00 $9.45 $8.50 $8.50 $8.00 $8.52

OPERATING EXPENSES* (PSF) Class B Class C

$8.45 $7.00 $7.25 $7.00 $8.45 $7.50 $7.50 $7.00 $7.52

$7.45 $6.00 $6.25 $6.00 $7.45 $6.50 $6.50 $6.00 $6.52

*Expenses are approximate

Market Area

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Eastside and Northend Office Market EASTSI DE S OL ID IF IE S The Eastside and Northend office markets both continued to see a significant rise in activity in the second quarter of 2011. The majority of the activity was attributable to the Eastside suburban markets, as occupancies of leases executed during previous quarters went into effect. Overall, rents are stabilizing, tenant

EASTSIDE AND NORTHEND OFFICE SUBMARKETS LEGEND Northend Office Submarkets Eastside Office Submarkets 5

concessions are decreasing and vacancy rates continue to drop.

EVERETT CBD

As we reach the mid-year point of 2011 it appears as though

S SNOHOMISH COUNTY

market tension is easing as tenant activity continues to gain

S EVERETT/ HARBOR POINTE

momentum. Transaction volume on the Eastside has gained strength with nearly 250 lease transactions, accounting for more than one million square feet already inked in 2011. Investment activity also experienced an uptick on the Eastside, with eight office building sales totaling $342M in just

EDMONDS/ LYNNWOOD

MILL CREEK/ WOODINVILLE

BOTHELL

over 900,000 SF. The highlight of the second quarter was the sale of the 488,000 SF Class A office building, Key Center, to Kilroy Realty Corporation for $217M ($444/SF). Rental rates, vacancy, absorption and concessions saw their

405 NORTHGATE/ N SEATTLE KIRKLAND

biggest transition in the second quarter. Indicators of climbing market strength were 513,000 SF of absorption, a 1.7% vacancy

520 CORRIDOR

drop, rental rates holding steady and concessions from landlords beginning to decrease. Leasing was strong throughout most of the submarkets and was highlighted by Expedia’s expansion into 54,000 SF at Bellevue CBD’s Skyline Tower. With rental rates stabilizing, absorption

REDMOND

5 520

SEATTLE

BELLEVUE

SUBURBAN BELLEVUE BELLEVUE CBD I-90 CORRIDOR

MERCER ISLAND ISSAQUAH

90

increasing and concessions shrinking, the Eastside office market is getting closer to market equilibrium. While the landscape of the market is starting to shift there are still opportunities for

amount of prospective tenant activity.

tenants; however if a move or expansion is needed, the window

As expected, the high tech, professional services and

of opportunity in this market is shrinking.

biomedical industries are growing and will continue to have the

Heading into the second half of 2011 the Eastside office market

greatest demand for this type of product. With the stabilization

will continue to have one primary challenge: the diminishing

of rental rates and vacancy inching closer to lower levels the

supply of available space for tenants that require contiguous

Eastside office market may once again begin to see office

large blocks. Prior quarter’s increased tenant activity and the lack

development sites become active.

of new development will combine to put a strain on contiguous

While any new speculative development most likely wouldn’t

blocks of space that are 75,000 SF or greater. Currently, there

hit the market until 2013 there are emerging signs that the

are only 10 buildings on the Eastside that can deliver this type

Eastside office market is solidifying and those market indicators

of commodity, many of which are already experiencing a healthy

may be the foundation that developers need to move forward.

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2Q’11 PUGET SOUND MARKET REPORT

Eastside Office Market The Eastside office market is made up of nine submarkets, with a total

HISTORICAL Vacancy RATES & Rental Rates

of 668 office buildings that total nearly 35 million square feet. Over the

18.0%

$35.00

second quarter the overall vacancy rate declined nearly 2%, positive net

15.0%

$30.00

absorption increased just over 513,000 square feet and overall average

12.0%

$25.00 $20.00

9.0%

rental rates increased close to 11.6%.

$15.00

6.0%

$10.00

3.0% 0.0%

$5.00

2005

2006

Eastside Office Overview Market Area

2008

Rental Rates (FS)

INVENTORY Buildings

Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE

2007

51 72 76 58 39 111 21 68 172 668

SF

Direct Vacancy

Sublet Vacancy

Total Vacancy

8,425,846 3,866,066 3,114,091 4,797,842 1,805,874 4,027,270 593,816 3,815,304 4,442,803 34,888,912

12.7% 17.0% 9.8% 11.1% 12.1% 13.7% 12.1% 18.7% 12.8% 13.4%

1.4% 1.6% 0.2% 1.2% 0.3% 1.4% 0.1% 1.3% 0.6% 1.1%

14.1% 18.6% 10.0% 12.3% 12.4% 15.1% 12.2% 20.0% 13.4% 14.5%

ABSORPTION 2Q Absorption YTD

57,837 64,860 29,818 179,478 11,629 115,454 (7,537) 11,651 50,467 513,657

2009

2010

$0.00

2011

Vacancy Rates AVG CLASS A RENT & EXPENSES (FS) Rent NNN

65,479 121,161 50,448 181,068 29,162 165,675 (3,873) 31,939 (54,118) 586,941

$34.20 $27.00 $27.25 $31.20 $28.96 $31.09 $30.39 $26.09 $35.00 $30.13

$9.75 $8.00 $7.00 $8.50 $7.50 $8.00 $9.00 $7.00 $8.50 $8.14

Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE OFFICE

2004

2005

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

2Q’11

16.3% 20.0% 12.7% 14.1% 3.3% 14.0% 3.6% 23.2% 11.1% 14.9%

9.6% 15.1% 12.3% 9.0% 2.0% 7.4% 1.2% 13.2% 7.7% 9.7%

5.5% 16.1% 8.9% 5.8% 3.0% 10.6% 1.8% 9.7% 10.1% 8.7%

6.9% 26.2% 3.5% 6.7% 5.9% 6.8% 4.9% 7.8% 8.3% 9.0%

10.5% 27.8% 6.5% 15.0% 2.3% 12.6% 10.1% 12.0% 9.7% 12.6%

13.4% 22.9% 12.0% 16.9% 6.5% 19.0% 14.8% 21.8% 11.6% 15.8%

16.3% 22.9% 12.7% 14.9% 4.9% 17.0% 20.4% 23.6% 11.1% 16.4%

15.3% 21.1% 13.0% 16.5% 13.9% 17.4% 19.3% 19.7% 12.5% 16.2%

14.9% 21.7% 11.5% 16.1% 14.1% 19.3% 15.7% 19.9% 12.1% 16.2%

14.8% 20.3% 10.9% 16.0% 13.0% 18.1% 14.9% 20.4% 14.3% 16.1%

14.1% 18.6% 10.0% 12.3% 12.4% 15.1% 12.2% 20.0% 13.4% 14.5%

Historical Rents (FS) Market Area

Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE OFFICE

*Prior years as of 4Q

Historical Total Vacancy Market Area

Historical Total Absorption

2007

2008

2009

2010

$37.87 $25.81 $28.04 $34.61 $31.42 $31.22 $29.42 $28.74 $29.20 $30.70

$39.06 $26.14 $28.59 $35.50 $31.65 $32.96 $30.40 $28.91 $29.88 $31.45

$35.02 $23.54 $26.15 $31.04 $29.95 $27.57 $26.65 $25.11 $26.02 $27.89

$32.67 $23.58 $24.51 $30.37 $29.04 $27.18 $26.63 $24.45 $24.65 $27.01

Market Area

Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE OFFICE

2Q’10

3Q’10

4Q’10

2010

1Q’11

2Q’11

(50,899) (35,567) (2,390) 11,797 (16,431) 49,563 (21,177) 54,638 9,977 (489)

81,147 70,787 (8,388) 231,887 (48,569) (16,464) 4,882 144,764 (22,694) 437,352

37,295 (25,991) 44,697 (85,126) (2,883) (78,489) 15,633 61,787 19,394 (13,683)

(123,800) 46,610 15,692 284,751 (93,219) (14,306) (4,251) 137,778 19,160 268,415

7,642 56,301 20,630 1,590 17,533 50,221 3,664 20,288 (104,585) 73,284

57,837 64,860 29,818 179,478 11,629 115,454 (7,537) 11,651 50,467 513,657

Asking Lease Rates by Class (FS) Class A

Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE OFFICE

$34.20 $27.00 $27.25 $31.20 $28.96 $31.09 $30.39 $26.09 $35.00 $30.13

LEASE RATES (FULL SERVICE) Class B Class C

$26.62 $23.74 $23.52 $27.34 $29.25 $24.94 $24.79 $22.36 $24.63 $25.24

$20.44 $22.53 $14.25 $20.00 $22.72 $24.38 $18.94 $18.35 $18.07 $19.96

Class A

$10.75 $9.00 $8.00 $9.50 $8.50 $9.00 $10.00 $8.00 $9.50 $9.14

OPERATING EXPENSES* (PSF) Class B Class C

$9.75 $8.00 $7.00 $8.50 $7.50 $8.00 $9.00 $7.00 $8.50 $8.14

$8.75 $7.00 $6.00 $7.50 $6.50 $7.00 $8.00 $6.00 $7.50 $7.14

*Expenses are approximate

Market Area

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Northend Office Market The Northend office market is comprised of 298 properties and is spread throughout seven submarkets, representing a total of just over 8.6 million square feet. Although there was no change to the overall vacancy rate during the second quarter, average rental rates saw a slight increase to $24.21 per square foot and YTD net absorption remains in positive territory at 67,833 square feet.

HISTORICAL Vacancy RATES & Rental Rates 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

$27.50 $26.00 $24.50 $23.00 $21.50

2005

2006

2007

2008

Rental Rates (FS)

2009

2010

2011

$20.00

Vacancy Rates

Northend Office Overview INVENTORY Buildings

Market Area

SF

Direct Vacancy

Sublet Vacancy

Total Vacancy

ABSORPTION 2Q Absorption YTD

AVERAGE RENT & EXPENSES (FS) Rent NNN

Everett CBD

64

1,926,654

6.8%

0.0%

6.8%

(160)

3,775

$22.33

$4.50

Lynnwood/Edmonds

91

2,720,504

23.9%

0.2%

24.1%

(5,298)

2,649

$22.24

$5.50

Woodinville/Mill Creek

27

671,368

19.6%

0.0%

19.6%

(2,749)

39,489

$24.81

$4.50

N Snohomish County

19

361,271

6.7%

0.0%

6.7%

-

(1,950)

$21.56

$4.50

S Snohomish County

7

227,227

9.1%

0.0%

9.1%

383

383

$28.00

$4.50

S Everett/Harbor Point

42

1,218,966

10.2%

1.7%

11.9%

(12,748)

(7,405)

$28.04

$4.50

North Seattle/Northgate

48

1,555,355

10.7%

0.5%

11.2%

12,758

30,892

$22.46

$5.00

NORTHEND

298

8,681,345

14.4%

0.4%

14.8%

(7,814)

67,833

$24.21

$5.19

Historical Total Vacancy 2004

2005

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

Everett CBD

5.0%

6.7%

6.5%

8.9%

5.6%

4.1%

5.1%

6.2%

7.7%

7.4%

2Q’11

6.8%

Lynnwood/Edmonds

17.0%

17.0%

17.7%

18.9%

16.3%

23.0%

24.3%

24.5%

24.0%

23.7%

24.1% 19.6%

Woodinville/Mill Creek

5.2%

7.9%

10.2%

12.8%

29.3%

30.8%

30.5%

28.0%

26.9%

20.6%

N Snohomish County

5.1%

2.8%

3.4%

3.1%

4.4%

5.1%

6.5%

5.7%

6.1%

6.7%

6.7%

S Snohomish County

1.0%

11.0%

13.3%

12.6%

12.0%

8.7%

7.1%

11.5%

9.3%

9.3%

9.1%

S Everett/Harbor Point

13.8%

16.3%

10.7%

9.4%

9.5%

12.0%

10.8%

11.7%

11.5%

11.1%

11.9%

North Seattle/Northgate

9.3%

11.2%

11.5%

9.5%

11.2%

12.8%

12.8%

11.8%

12.7%

11.5%

11.2%

NORTHEND OFFICE

11.1%

12.3%

11.9%

12.4%

12.6%

15.2%

15.7%

15.8%

15.9%

14.8%

14.8%

2Q’11

Historical Rents (FS)

Historical Total Absorption

Market Area

$24.54

$23.32

$23.43

$23.29

Market Area

2Q’10

3Q’10

4Q’10

2010

1Q’11

Everett CBD

$24.23

$24.15

$22.70

$22.33

Everett CBD

(3,679)

(17,901)

(25,161)

(60,832)

3,935

(160)

Lynnwood/Edmonds

$26.80

$25.89

$23.26

$22.72

Lynnwood/Edmonds

12,372

(5,431)

13,135

(27,804)

7,947

(5,298)

Woodinville/Mill Creek

$25.83

$24.87

$21.58

$21.42

Woodinville/Mill Creek

1,465

16,830

7,190

33,069

42,238

(2,749)

N Snohomish County

$26.87

$27.60

$20.41

$28.09

N Snohomish County

(4,070)

3,144

(1,685)

(3,645)

(1,950)

-

S Snohomish County

$22.46

$22.62

$22.26

$21.92

S Snohomish County

-

(10,168)

5,099

(1,258)

-

383

S Everett/Harbor Point

$26.80

$25.61

$23.12

$22.49

S Everett/Harbor Point

22,849

(12,110)

2,549

5,515

5,343

(12,748)

North Seattle/Northgate

$25.36

$24.87

$22.39

$23.18

North Seattle/Northgate

(1,712)

16,847

(14,326)

2,674

18,134

12,758

NORTHEND OFFICE

$25.36

$24.87

$22.39

$23.18

NORTHEND OFFICE

27,225

(8,789)

(13,199)

(52,281)

75,647

(7,814)

Asking Lease Rates by Class

Everett CBD Lynnwood/Edmonds

Class A

LEASE RATES (FULL SERVICE) Class B Class C

Class A

OPERATING EXPENSES* (PSF) Class B Class C

-

$26.47

$17.80

-

$5.00

$4.00

$25.34

-

$20.09

$6.50

-

$4.50

Woodinville/Mill Creek

-

$23.02

$18.11

-

$5.00

$4.00

N Snohomish County

-

$22.00

$19.00

-

$5.00

$4.00

S Snohomish County

-

$22.00

$19.00

-

$5.00

$4.00

S Everett/Harbor Point

-

$23.29

$16.31

-

$5.00

$4.00

North Seattle/Northgate

$23.62

$22.48

$19.94

$6.00

$5.00

$4.00

NORTHEND OFFICE

$24.48

$23.21

$18.61

$6.50

$5.00

$4.07

10

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*Expenses are approximate

Market Area

*Prior years as of 4Q

Market Area


2Q’11 PUGET SOUND MARKET REPORT

Southend Industrial/Flex Market IN DU STRI AL S T RE N GT H The Seattle industrial market continued to show

SOUTHEND INDUSTRIAL/FLEX SUBMARKETS MAP

signs of strength in the second quarter, with 150,000 SF of positive absorption and a 70 basis point decrease in vacancy to 5.1%, most of which

SEATTLE

was driven by Smurfit-Stone’s 83,000 square foot

BELLEVUE

lease at AMB/Prologis Portside quarter with little or no change in vacancy. Of the

GEORGETOWN/ DUWAMISH N

total YTD net absorption of 723,000 SF, only 2,273

GEORGETOWN/ DUWAMISH S

WEST SEATTLE

TUKWILA

Sou

SF was realized in the second quarter.

nd

Tenant activity continues to be strong, as many

405

LEGEND

SEATAC/ BURIEN

Vashon Island

existing tenants seek expansion space and new

Southend Industrial/Flex Submarket

companies are continuing their searches in the

Pierce County Industrial/ Flex Submarket

90

RENTON

get

SODO

Pu

The Kent Valley was relatively flat in the second

KENT

5

region too. Occupancy levels are beginning to rise FEDERAL WAY

in the market and stability is returning, with many institutional buyers and REITs eying the market’s

NORTHEND TACOMA

future stabilized assets. The Pierce County industrial market has been

PORT OF TACOMA/ FIFE

OTHER PIERCE COUNTY

the most unwavering market in the Southend throughout the recession and once again finished

LAKEWOOD

strong. The second quarter brought nearly 185,000

PUYALLUP/ SUMNER

SF of absorption and a 30 basis point drop in vacancy, which shows the elevating strength in this

AUBURN

OTHER PIERCE COUNTY

PARKLAND/ SPANAWAY OTHER PIERCE COUNTY

market. The highlight of the quarter and possibly of the year was Amazon.com’s full building lease of Sumner Corporate Park’s 492,000 SF Summit building. In

market recovery underway, the limited amount of large blocks

addition, Trader Joe’s is rumored to be looking in the South

of space and rising rental rates, those tenants that have been

Sound area for a 500,000 SF build to suit option that could break

waiting in the wings may want to make their move on premium

ground as early as fourth quarter 2011.

spaces and low rates.

Large blocks of space continue to be watched closely in the

Early indicators point toward this active market possibly

region. With more tenants rumored to have locked up several of

beginning to see new construction in the near future.

the remaining available spaces there may be fewer than three spaces in the region that would be capable of supporting a 400,000 SF tenant by fourth quarter. Overall the Southend industrial market is strong and is showing signs of a quicker recovery than initially anticipated. With the

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11


PACIFIC REAL ESTATE PARTNERS, INC.

Seattle Industrial Market The Seattle industrial market is made up of 1,279 properties spanning

HISTORICAL Vacancy RATES & Rental Rates

six submarkets from Ballard to the North and Duwamish to the South.

7.0%

$0.46

It accounts for a total of just over 52 million square feet. The overall

6.0%

$0.45

vacancy rate remains relatively low, finishing up slightly lower than the

5.0%

$0.44

4.0%

$0.43

3.0%

$0.42

at 150,270 square feet, helping the YTD total gain reach 90,973 square

2.0%

$0.41

feet.

1.0%

$0.40

first quarter at 5.1%. Net absorption headed well into positive territory

0.0%

2005

2006

2008

Rental Rates

Seattle Industrial Overview INVENTORY Buildings

Market Area

2007

2009

Direct Vacancy

Sublet Vacancy

Total Vacancy

2Q

$0.39

2011

Vacancy Rates

ABSORPTION SF

2010

UNDER CONSTRUCTION Projects SF

YTD

SoDo

239

11,921,392

4.9%

0.0%

4.9%

54,719

12,112

-

-

Gtown/Duwamish N

285

14,205,445

7.1%

0.2%

7.3%

139,852

75,493

-

-

Gtown/Duwamish S

141

4,428,407

3.0%

0.2%

3.2%

5,667

11,577

-

-

Ballard

88

2,110,841

2.2%

0.0%

2.2%

(5,500)

4,549

-

-

West Seattle

72

3,306,501

1.7%

0.0%

1.7%

(1,380)

(16,059)

-

-

Other Seattle Markets*

454

16,146,527

4.5%

0.6%

5.1%

(43,088)

3,301

-

-

1,279

52,119,113

4.9%

0.2%

5.1%

150,270

90,973

-

-

SEATTLE INDUSTRIAL

Historical Total Vacancy 2004

2005

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

SoDo

4.1%

3.2%

3.0%

2.3%

3.9%

3.8%

4.1%

4.7%

5.1%

5.5%

2Q’11

4.9%

Gtown/Duwamish N

8.3%

7.2%

7.6%

6.8%

6.1%

9.6%

8.3%

8.6%

8.2%

8.6%

7.3%

Gtown/Duwamish S

2.0%

7.1%

2.9%

2.3%

4.2%

5.7%

5.7%

5.1%

3.7%

3.6%

3.2%

Ballard

4.2%

4.1%

4.1%

3.0%

2.2%

4.6%

4.2%

4.2%

4.2%

3.7%

2.2%

West Seattle

3.5%

4.1%

1.1%

1.9%

40.0%

1.3%

1.3%

2.0%

1.6%

2.0%

1.7%

Other Seattle Markets*

4.4%

4.2%

2.6%

2.4%

2.8%

5.6%

6.3%

5.9%

5.5%

5.2%

5.1%

SEATTLE INDUSTRIAL

5.1%

5.0%

4.0%

3.6%

3.9%

6.0%

5.9%

5.9%

5.7%

5.8%

5.1%

Historical Total TEUs Market Area

Historical Total Absorption

2009

2010

2011-YTD

Port of Seattle

1,584,596

2,139,577

656,045

Market Area

2Q’10

3Q’10

4Q’10

2010

1Q’11

2Q’11

SoDo

(7,363)

(52,834)

(56,245)

(140,328)

(42,607)

54,719

Port of Tacoma

1,545,855

1,455,467

Puget Sound Ports Total

3,130,451

3,595,044

465,100

Gtown/Duwamish N

82,441

(19,671)

49,936

203,111

(64,359)

139,852

1,121,145

Gtown/Duwamish S

2,836

26,559

62,547

88,952

5,910

5,667

(22,650)

470

-

8,178

10,049

(5,500)

Ballard West Seattle

(7,585)

(23,726)

15,188

(8,623)

(14,679)

(1,380)

Other Seattle Markets*

(78,013)

58,744

71,734

16,113

46,389

(43,088)

SEATTLE INDUSTRIAL

(30,334)

(10,458)

143,160

167,403

(59,297)

150,270

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

EXPENSES & CONCESSIONS NNN Free Rent

$0.10-$0.15 $0.10-$0.15 $0.10-$0.15 $0.10-$0.15 $0.10-$0.15 $0.10-$0.15 $0.10-$0.15

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

Market Area


2Q’11 PUGET SOUND MARKET REPORT

Kent Valley Industrial Market The Kent Valley industrial market totals just over 112 million square feet

HISTORICAL Vacancy RATES & Rental Rates

in 1,579 buildings and spans six submarkets. Net absorption for the

9.0%

second quarter was down considerably from the first quarter, ending

7.0%

near 29,000 square feet, with the YTD total now just under 750,000

5.0%

square feet. The overall vacancy rate for these submarkets remained

3.0%

unchanged at 7.6%.

1.0%

$0.40 $0.30 $0.20

0.0%

$0.10

2005

2006

2008

2009

Rental Rates

Kent Valley Industrial Overview INVENTORY Buildings

Market Area

2007

SF

Direct Vacancy

Sublet Vacancy

Total Vacancy

2010

$0.00

2011

Vacancy Rates

ABSORPTION 2Q Absorption YTD

UNDER CONSTRUCTION Projects SF

Auburn

317

24,709,326

3.9%

1.3%

5.2%

2,313

605,163

-

-

Federal Way

53

1,855,596

17.9%

0.0%

17.9%

(6,363)

(14,215)

-

-

Kent

708

49,141,635

9.6%

0.1%

9.7%

(65,370)

161,852

-

-

Renton

153

13,188,823

5.7%

1.1%

6.8%

30,970

(8,673)

-

-

Seatac/Burien

89

3,834,790

9.4%

0.0%

9.4%

(1,407)

9,047

-

-

Tukwila

259

19,873,485

4.6%

0.4%

5.0%

68,797

(3,439)

-

-

1,579

112,603,655

7.2%

0.4%

7.6%

28,940

749,735

-

-

KENT VALLEY INDUSTRIAL

Historical Total Vacancy 2004

2005

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

Auburn

5.2%

4.8%

3.9%

6.0%

3.8%

4.2%

7.9%

7.8%

7.4%

5.0%

2Q’11

5.2%

Federal Way

4.3%

2.4%

2.1%

2.6%

3.0%

7.6%

7.1%

6.8%

18.2%

18.7%

17.9%

Kent

9.1%

7.1%

5.5%

4.1%

3.8%

8.8%

9.5%

9.7%

10.2%

9.7%

9.7%

Renton

5.6%

2.9%

3.6%

1.1%

1.4%

7.6%

7.5%

7.4%

6.8%

7.2%

6.8%

Seatac/Burien

8.3%

8.3%

5.0%

4.3%

12.2%

13.2%

11.4%

10.0%

10.0%

9.7%

9.4%

Tukwila

5.1%

5.3%

4.9%

5.1%

3.3%

5.6%

5.2%

5.2%

5.2%

5.7%

5.0%

KENT VALLEY INDUSTRIAL

7.1%

5.8%

4.8%

4.3%

3.7%

7.2%

8.2%

8.2%

8.4%

7.6%

7.6%

Historical Total TEUs Market Area

Prior years as of 4Q

Market Area

Historical Total Absorption

2009

2010

2011-YTD

Port of Seattle

1,584,596

2,139,577

656,045

Market Area

Auburn

Port of Tacoma

1,545,855

1,455,467

465,100

Federal Way

Puget Sound Ports Total

3,130,451

3,595,044

1,121,145

Kent

2Q’10

3Q’10

4Q’10

2010

1Q’11

(412,586)

38,110

26,593

(807,594)

602,850

2Q’11

2,313

27,321

5,067

(204,912)

(189,871)

(7,852)

(6,363) (65,370)

(186,275)

(63,492)

(278,488)

(679,346)

227,222

Renton

41,020

3,807

78,705

102,933

(39,643)

30,970

Seatac/Burien

(12,374)

51,266

2,313

118,537

10,454

(1,407)

Tukwila KENT VALLEY

(1,715)

15,102

(14,834)

77,951

(72,236)

68,797

(544,609)

49,860

(390,623)

(1,377,390)

720,795

28,940

(425) 9 7 4 -4 0 0 0

|

Market Area

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

LEASE RATES (NNN) Shell Office

$0.32-$0.38 $0.35-$0.40 $0.32-$0.40 $0.34-$0.40 $0.42-$0.50 $0.34-$0.42 $0.32-$0.50

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

EXPENSES & CONCESSIONS 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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PACIFIC REAL ESTATE PARTNERS, INC.

Pierce County Industrial Market The Pierce County industrial market is comprised of seven submarkets,

HISTORICAL Vacancy RATES & Rental Rates

totals just over 62 million square feet and is spread across 1,150

10.0%

properties. Net absorption reached positive territory at just over 225,000

8.0%

square feet in the second quarter, which was well ahead of where the

6.0%

$0.30

first quarter ended. Overall vacancy also experienced positive gains

4.0%

$0.29

over the first quarter, settling in at 8.8%.

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

SF

Direct Vacancy

Sublet Vacancy

Total Vacancy

2009

2010

$0.26

2011

Vacancy Rates

ABSORPTION 2Q Absorption YTD

UNDER CONSTRUCTION Projects SF

Port of Tacoma/Fife

284

18,705,677

7.2%

0.0%

7.2%

103,740

(14,102)

-

-

Lakewood

108

4,770,761

7.3%

0.1%

7.4%

20,960

(118,345)

-

-

North End Tacoma

67

2,112,040

5.5%

0.0%

5.5%

2,242

(13,358)

-

-

Spanaway

56

3,432,830

6.1%

0.0%

6.1%

2,280

(7,021)

-

-

Puyallup/Sumner

268

20,907,468

13.2%

0.1%

13.3%

37,403

27,101

-

-

Tacoma CBD

49

1,435,574

9.5%

0.7%

10.2%

12,882

50,512

-

-

Other Pierce County Markets*

318

10,688,751

4.3%

0.3%

4.6%

48,180

82,742

-

-

PIERCE COUNTY INDUSTRIAL

1,150

62,053,101

8.7%

0.1%

8.8%

227,687

7,529

-

-

Historical Total Vacancy 2004

2005

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

Port of Tacoma/Fife

5.6%

3.2%

3.3%

4.8%

8.5%

9.0%

9.4%

9.6%

7.3%

7.9%

2Q’11

7.2%

Lakewood

6.3%

5.2%

13.9%

7.8%

4.0%

4.5%

4.4%

4.3%

4.8%

7.6%

7.4%

North End Tacoma

1.2%

2.6%

1.9%

2.6%

2.1%

4.1%

3.9%

3.9%

4.0%

4.7%

5.5%

Spanaway

11.3%

2.1%

0.8%

10.8%

11.9%

5.6%

5.4%

6.0%

5.9%

6.2%

6.1%

Puyallup/Sumner

4.0%

8.3%

6.2%

11.3%

14.5%

12.4%

12.2%

13.3%

13.0%

13.6%

13.3%

Tacoma CBD

5.0%

4.3%

6.8%

7.0%

5.5%

11.4%

13.3%

14.0%

13.8%

11.2%

10.2%

Other Pierce County Markets*

3.9%

4.2%

5.2%

2.3%

4.9%

4.7%

5.6%

4.2%

4.4%

4.1%

4.6%

PIERCE COUNTY INDUSTRIAL

5.0%

4.8%

5.4%

6.9%

9.4%

8.8%

9.0%

9.2%

9.1%

9.1%

8.8%

Historical Total TEUs Market Area

Historical Total Absorption

2009

2010

2011-YTD

Port of Seattle

1,584,596

2,139,577

656,045

Port of Tacoma

1,545,855

1,455,467

465,100

Puget Sound Ports Total

3,130,451

3,595,044

1,121,145

Market Area

2Q’10

3Q’10

4Q’10

2010

1Q’11

2Q’11

Port of Tacoma/Fife

(29,872)

290,444

430,998

725,230

(117,842)

103,740 20,960

Lakewood

20,343

6,598

(23,588)

(11,147)

(139,305)

North End Tacoma

4,800

600

(1,050)

3,210

(15,600)

2,242

Spanaway

5,616

(20,051)

1,752

(10,375)

(9,301)

2,280

Puyallup/Sumner

244,057

(227,487)

74,350

(42,663)

(10,302)

37,403

Tacoma CBD

(23,070)

(10,468)

1,932

(34,966)

37,630

12,882

Other Pierce County Markets*

88,890

146,945

(29,623)

28,270

34,562

48,180

PIERCE COUNTY INDUSTRIAL

310,764

186,581

454,771

657,559

(220,158)

227,687

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

LEASE RATES (NNN) Shell Office

$0.32-$0.38 $0.28-$0.36 $0.32-$0.38 $0.28-$0.36 $0.32-$0.38 $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

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

14

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Rates/expenses are approximate

Market Area

Prior years as of 4Q

Market Area


2Q’11 PUGET SOUND MARKET REPORT

Eastside and Northend Industrial/Flex Market STEADY M A RK E T The Eastside and Northend industrial markets continue to show signs of slow stabilization.

EASTSIDE AND NORTHEND INDUSTRIAL/FLEX SUBMARKETS MAP

Although Eastside vacancy rates improved slightly over first quarter they continue to remain stubbornly high compared to last year. The Northend market is following a similar path, with only slight improvements over one year ago. et S oun d

sector will begin to realize larger gains when there is significant

5

Pug

primarily to renewed Boeing production. The Eastside market

EVERETT

MUKIL TEO

The moderate increase in Northend activity can be attributed

improvement in the residential, commercial and building trade

MONROE

industries; however, technology and small manufacturing LYNNWOOD

companies are showing signs of strength. The flex markets are still weak, with both the Eastside and

BOTHELL

Northend markets experiencing only a slight improvement over the last quarter.

WOODINVILLE

5

Absorption has been moving into positive

405

territory, which is a welcomed trend in this sluggish market sector. Looking forward to the third and fourth quarters of 2011, the shoulders of last quarter’s tanker contract awarded to Boeing manufacturing across the board. The surge in production will

Wa s

hin

Northend market should see increased tenant activity. On the 520

SEATTLE

Lake

the aerospace giant has also announced a ramp up in airplane

REDMOND

gto

n

KIRKLAND

90

have a positive impact on those companies that are located

BELLEVUE

BELLEVUE

nearby and provide support services to this manufacturing powerhouse.

West Seattle

ISSAQUAH

In late June the Port of Everett celebrated its 1,000th barge carrying aerospace parts for the 747, 767 and 777 models, a sign that Boeing is on a steady course to raise its plane output. As tenant demand increases and space options decrease, the Northend should see a rise in rents and decline in concessions

LEGEND Northend Industrial Submarket Eastside Industrial Submarket

to balance the supply to demand ratio. Similarly, the Eastside is poised for improving tenant activity as the economy continues to gain momentum. Several large tenants, including Saltworks, are expanding operations in the Woodinville market, which will help contribute to positive growth in that submarket. www.pacific-re .co m

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15


PACIFIC REAL ESTATE PARTNERS, INC.

Eastside and Northend Industrial Market The Eastside industrial market is comprised of seven submarkets, 447

HISTORICAL Vacancy RATES

properties and totals just over 17 million square feet. The Northend

18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

industrial market has a total of 295 properties spanning three submarkets and totals just over 12 million square feet. Both markets outpaced the first quarter, moving well into positive net absorption territory. Overall vacancy rates trended in the same direction, with the Eastside finishing at 9.4% and the Northend finishing just above 12%.

N O RT H

END

EA STS IDE

2005

2006

2007

2008

2009

2010

2011

Eastside and Northend Industrial Overview Direct Vacancy

Sublet Vacancy

ABSORPTION 2Q Absorption YTD

Total Vacancy

AVERAGE RENT & EXPENSES Shell Office

CONCESSIONS Free Rent

Bothell

32

1,210,694

0.2%

0.0%

0.2%

7,000

(3,000)

$0.50-$0.60

$1.00-$1.20

4-6 months

Woodinville

136

5,385,289

9.9%

0.0%

9.9%

2,492

30,009

$0.45-$0.60

$0.95-$1.20

4-6 months

Kirkland

43

1,576,880

9.1%

1.3%

10.4%

13,556

8,076

$0.45-$0.60

$0.95-$1.25

4-5 months

Monroe

48

1,591,296

20.2%

2.3%

22.5%

2,200

(2,717)

$0.40-$0.55

$0.95-$1.15

4-7 months

Redmond

105

3,856,247

9.1%

0.5%

9.6%

1,342

2,490

$0.50-$0.60

$1.00-$1.25

3-6 months

Bellevue

68

2,883,008

5.5%

0.0%

5.5%

60,696

(37,995)

$0.50-$0.65

$1.10-$1.25

3-5 months

Issaquah

15

731,980

6.4%

0.0%

6.4%

4,588

1,831

$0.50-$0.65

$1.10-$1.25

3-6 months

EASTSIDE INDUSTRIAL

447

17,235,394

9.0%

0.4%

9.4%

91,874

(1,306)

$0.45-$0.65

$0.95-$1.25

3-7 months

Everett

176

8,234,876

11.4%

0.3%

11.7%

52,709

37,356

$0.45-$0.60

$1.10-$1.25

3-6 months

Mukilteo

59

2,208,128

18.4%

0.0%

18.4%

(641)

30,010

$0.50-$0.65

$1.10-$1.25

3-6 months

Lynnwood

60

1,686,432

6.6%

0.8%

7.4%

(4,933)

(19,375)

$0.50-$0.65

$1.10-$1.25

3-6 months

NORTHEND INDUSTRIAL

295

12,129,436

12.0%

0.3%

12.3%

47,135

47,991

$0.45-$0.65

$1.10-$1.25

3-6 months

*5 year deal

INVENTORY Buildings SF

Market Area

Historical Total Vacancy 2004

2005

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

Bothell

18.8%

18.1%

13.6%

2.8%

0.3%

2.2%

2.1%

2.1%

0.0%

0.8%

2Q’11

0.2%

Woodinville

14.1%

11.9%

8.1%

4.9%

4.6%

10.9%

10.2%

11.3%

10.7%

10.2%

9.9%

Kirkland

32.0%

12.7%

3.1%

10.8%

3.7%

14.4%

13.7%

10.7%

10.9%

11.3%

10.4%

Monroe

3.6%

3.6%

8.1%

10.4%

8.9%

24.2%

24.8%

23.1%

23.0%

23.3%

22.5%

Redmond

10.2%

9.5%

5.0%

3.9%

4.3%

8.9%

9.0%

9.9%

9.7%

9.7%

9.6%

Bellevue

6.5%

4.1%

22.2%

12.2%

5.2%

5.4%

2.0%

2.7%

4.2%

7.5%

5.5%

Issaquah

42.2%

32.5%

22.5%

10.1%

6.4%

6.9%

7.0%

7.0%

6.7%

7.0%

6.4%

EASTSIDE INDUSTRIAL

13.9%

10.4%

10.3%

7.4%

4.7%

10.2%

9.4%

9.8%

9.8%

10.5%

9.4%

Everett

18.0%

15.9%

18.7%

9.2%

11.2%

15.7%

14.9%

14.2%

12.8%

13.0%

11.7%

Mukilteo

17.2%

16.0%

13.9%

10.8%

9.4%

11.6%

14.6%

20.2%

19.8%

18.4%

18.4%

Lynnwood

6.7%

12.0%

7.0%

7.0%

4.8%

7.5%

6.9%

7.1%

6.3%

7.1%

7.4%

NORTHEND INDUSTRIAL

16.0%

15.3%

15.8%

9.1%

9.9%

13.7%

13.6%

14.2%

13.1%

13.1%

12.3%

Historical Leasing Activity Market Area

Historical Total Absorption

2010-Leases

2010-SF

YTD 2011-Leases

YTD 2011-SF

Bothell

2

24,311

2

9,000

Woodinville

46

313,272

24

176,007

Market Area

Bothell Woodinville

2Q’10

3Q’10

4Q’10

2010

1Q’11

-

(17,096)

(2,998)

(20,094)

(10,000)

2Q’11

7,000

48,213

(60,658)

33,796

21,351

27,517

2,492 13,556

Kirkland

18

98,863

3

15,385

Kirkland

1,019

48,200

(3,878)

45,341

(5,480)

Monroe

13

94,970

4

23,615

Monroe

15,646

26,925

2,318

44,889

(4,917)

2,200

Redmond

20

115,136

11

201,172

Redmond

(41,961)

(34,139)

4,878

(71,222)

1,148

1,342

Bellevue

29

221,443

11

81,918

Bellevue

52,599

(17,922)

(43,489)

(8,812)

(98,691)

60,696

Issaquah

5

18,220

2

6,140

Issaquah

(2,540)

-

2,190

(350)

(2,757)

4,588

EASTSIDE INDUSTRIAL

133

886,215

57

513,237

EASTSIDE INDUSTRIAL

72,976

(54,690)

(7,183)

11,103

(93,180)

91,874

Everett

39

643,109

10

113,221

Everett

111,190

54,107

110,737

276,034

(15,353)

52,709

Mukilteo

9

31,970

3

23,137

Mukilteo

(26,092)

(124,594)

8,333

(142,353)

30,651

(641)

Lynnwood

14

60,244

3

12,932

Lynnwood

10,202

(4,977)

15,165

20,390

(14,442)

(4,933)

NORTHEND INDUSTRIAL

62

735,323

16

149,290

NORTHEND INDUSTRIAL

95,300

(75,464)

134,235

154,071

856

47,135

16

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Prior years as of 4Q

Market Area


2Q’11 PUGET SOUND MARKET REPORT

Eastside and Northend Flex Market The Eastside flex market has a total of six submarkets and the 307

HISTORICAL Vacancy RATES

properties account for just over 10 million square feet. The Northend

30.0%

industrial market totals three markets, 57 total buildings and is just

25.0%

under 2.2 million square feet. Both markets experienced positive

20.0%

net absorption, helping to keep the YTD totals in positive territory.

15.0%

Overall vacancy rates dropped slightly, with only two of the total nine

10.0%

EA

ST

SID

E

NOR

ND

5.0%

submarkets - Kirkland and Redmond - experiencing increases.

0.0%

2005

2006

2007

2008

2009

2010

2011

Vacancy Rates

INVENTORY Buildings SF

Direct Vacancy

Sublet Vacancy

Total Vacancy

ABSORPTION 2Q Absorption YTD

AVERAGE RENT & EXPENSES Shell Office

CONCESSIONS Free Rent

Bothell

63

2,934,702

19.0%

1.9%

20.9%

47,186

57,134

$0.50-$0.60

$1.10-$1.25

1-3 months

Woodinville

13

409,292

8.1%

4.4%

12.5%

2,546

23,110

$0.50-$0.60

$1.00-$1.25

3-6 months

Kirkland

43

1,264,755

22.9%

0.1%

23.0%

(9,379)

(30,894)

$0.50-$0.65

$1.10-$1.25

1-3 months

Redmond

129

4,036,694

14.1%

1.3%

15.4%

(22,974)

(50,986)

$0.50-$0.65

$1.10-$1.25

2-4 months

Bellevue

47

1,219,741

15.8%

0.0%

15.8%

4,722

(3,794)

$0.50-$0.65

$1.10-$1.25

3-5 months

Issaquah

12

267,600

3.0%

0.0%

3.0%

3,774

5,690

$0.50-$0.65

3-5 months

EASTSIDE FLEX

307

10,132,784

15.9%

1.1%

17.0%

25,875

260

$0.50-$0.65

$1.10-$1.25 $1.00-$1.25

1-5 months

Everett

19

1,204,235

7.4%

8.1%

15.5%

10,893

19,499

$0.50-$0.60

$1.05-$1.25

3-6 months

Mukilteo

13

594,296

13.3%

0.0%

13.3%

-

-

$0.50-$0.60

$1.05-$1.25

3-6 months

Lynnwood

25

400,063

12.4%

0.0%

12.4%

(580)

(8,779)

$0.50-$0.60

$1.05-$1.25

3-6 months

NORTHEND FLEX

57

2,198,594

9.9%

4.4%

14.3%

10,313

10,720

$0.50-$0.60

$1.05-$1.25

3-6 months

*5 year deal

Eastside and Northend Flex Overview Market Area

THE

Bothell

2004

2005

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

2Q’11

25.9%

23.3%

19.1%

14.8%

21.5%

23.1%

21.4%

20.1%

21.1%

21.7%

20.9%

Woodinville

8.4%

2.8%

8.0%

9.8%

9.6%

8.3%

9.5%

18.1%

18..1%

13.1%

12.5%

Kirkland

18.3%

17.1%

13.9%

12.7%

16.1%

22.2%

19.8%

19.9%

20.6%

22.3%

23.0%

Redmond

26.7%

24.8%

11.6%

8.4%

7.6%

11.7%

12.7%

13.9%

14.2%

14.8%

15.4%

Bellevue

10.0%

8.8%

8.7%

11.4%

10.5%

17.0%

18.4%

16.1%

15.5%

16.2%

15.8%

Issaquah

33.6%

1.9%

4.7%

13.5%

8.6%

6.0%

4.9%

4.5%

5.1%

4.4%

3.0%

EASTSIDE FLEX

22.7%

19.9%

13.3%

11.2%

12.9%

16.5%

16.3%

16.5%

16.9%

17.4%

17.0%

Everett

16.2%

10.4%

15.2%

8.9%

8.2%

8.2%

8.6%

8.6%

18.3%

16.9%

15.5%

Mukilteo

58.6%

36.6%

16.2%

15.3%

13.7%

20.5%

20.5%

13.3%

13.3%

13.3%

13.3%

Lynnwood

20.1%

17.2%

11.3%

7.2%

6.7%

12.1%

14.7%

10.8%

10.6%

12.4%

12.4%

NORTHEND FLEX

28.7%

25.2%

20.3%

9.9%

9.4%

12.3%

13.1%

15.8%

15.6%

14.8%

14.3%

Historical Leasing Activity Market Area

*Prior years as of 4Q

Historical Total Vacancy Market Area

Historical Total Absorption

2010-Leases

2010-SF

YTD 2011-Leases

YTD 2011-SF

2Q 2010

3Q 2010

4Q 2010

2010

1Q 2011

2Q 2011

Bothell

42

223,637

16

145,298

Bothell

36,050

36,087

(26,113)

52,806

9,948

47,186

Woodinville

6

8,194

7

10,906

Woodinville

(3,758)

(35,660)

515

(40,172)

23,110

2,546

Kirkland

18

58,040

9

17,429

Kirkland

10,192

(1,560)

(8,657)

21,081

(30,894)

(9,379)

Redmond

82

231,921

22

68,401

Redmond

(33,978)

(46,613)

(12,515)

(98,453)

(50,986)

(22,974)

Bellevue

35

106,785

10

25,685

Bellevue

(1,588)

27,864

7,562

18,530

(3,794)

4,722

Issaquah

4

8,797

1

1,916

Issaquah

4,533

1,000

(1,547)

2,373

5,690

3,774

11,451

(18,882)

(40,755)

(43,835)

(46,926)

25,875

-

(117,733)

4,476

(139,551)

16,106

10,893

EASTSIDE FLEX

Market Area

187

637,374

65

269,635

EASTSIDE FLEX

Everett

6

25,180

5

30,336

Everett

Mukilteo

10

232,645

-

-

Mukilteo

-

42,534

(76)

42,458

-

-

Lynnwood

24

42,109

5

8,936

Lynnwood

1,338

18,535

759

6,819

(8,779)

(580)

NORTHEND FLEX

40

299,934

10

39,272

NORTHEND FLEX

1,338

(56,664)

5,159

(90,274)

7,327

10,313

www.pacific-re .co m

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17


PACIFIC REAL ESTATE PARTNERS, INC.

Puget Sound Retail Market Consumer C onfi d ence is K e y The Puget Sound retail market continues to be

PUGET SOUND RETAIL SubmarketS map

a stable marketplace, maintaining an overall vacancy rate of less than 7% since 2009 and a rate

5

between 6% and 6.3% over the last five quarters. EVERETT CBD

With population growth on the rise, net migration up, and growth in the office and

S SNOHOMISH COUNTY

S EVERETT/ HARBOR POINTE Puget Sound

industrial markets, the Puget Sound retail market is poised for expansion and growth. The downtown Seattle retail market is one of

EDMONDS/ LYNNWOOD

the stronger and more established retail centers

MILL CREEK/ WOODINVILLE

BOTHELL

405

in the region with its diverse tenant mix, limited available space and high traffic flow both on foot and in cars. The two major downtown retail centers, Westlake Center and Pacific Place saw a steady flow of consumers in the first half of 2011 as market conditions steadily improved.

NORTHGATE/ N SEATTLE

KIRKLAND

BALLARD/ U DISTRICT

QUEEN ANNE/ MAGNOLIA

520 CORRIDOR SUBURBAN BELLEVUE BELLEVUE CBD I-90 CORRIDOR

REDMOND

520

LAKE UNION

SEATTLE BELLEVUE

CAPITAL HILL/ CENTRAL DIST. BELLTOWN

The Eastside retail market is concentrated in the Bellevue CBD at the adjacent retail centers

SEATTLE CBD

MERCER ISLAND

S SEATTLE

PIONEER SQ/ WATERFRONT

of Bellevue Square and Lincoln Square, which

COAL CREEK/ ISSAQUAH

90

RENTON/TUKWILA

have also seen increased consumer traffic and SEATAC/ BURIEN

activity with the improved market conditions and influx of Microsoft employees now working and

5

living within blocks of the retail center.

LEGEND

The Northend and Southend retail markets are also experiencing positive growth.

KENT

Northend Retail Submarkets FEDERAL WAY/ AUBURN

These

suburban retail areas have and will continue to see increased consumer traffic as market conditions

Eastside Retail Submarkets Seattle Retail Submarkets

TACOMA

Pierce County Retail Submarkets

improve and the core retail areas become more crowded. They will also be positively affected by Boeing’s ramp up in production, and job growth will follow in

retail center anchored by AMC, Target, Burlington and Barnes &

order to support the manufacturer’s needs.

Noble.

The Tacoma retail market continues to be a stagnant market

Overall, the Puget Sound retail market is still seeing stagnation

as much of the downtown core is wrought with retail storefront

as it awaits regional market stability. However, as consumer

vacancies. The Tacoma Mall area continues to be one of the

confidence rises, job growth increases and personal income

stronger retails centers in Tacoma, anchored by major tenants

levels rise, the overall retail market will begin seeing higher

such as Sears, JC Penny, Nordstrom, Macy’s and Best Buy. The

profits, more consumers and additional retail developments.

Lakewood Towne Center has also become a strong Tacoma area 18

|

( 425) 974- 4000

www.p a c i fi c -re.c om


2Q’11 PUGET SOUND MARKET REPORT

Puget Sound Retail Market The Puget Sound retail market encompasses all five markets, spanning

HISTORICAL Vacancy RATES & Rental Rates

from Everett to Tacoma. There are a total of 13,480 buildings that fall

7.0%

into this classification, totaling over 171 million square feet. The second

6.0%

quarter vacancy rates in these markets ranged from 3.3% in Downtown

5.0%

Seattle to 8.2% in the Southend. Net absorption remained in positive

$20.00

4.0%

$15.00

3.0%

$10.00

territory, with the largest gains on the Eastside and in Tacoma. Asking

2.0%

rental rates continue to be on pace with last year, averaging $18.31 per

1.0% 0.0%

square foot.

$25.00

$5.00

2006

2007

2009

Rental Rates

Puget Sound Retail Overview Market Area

2008

INVENTORY Buildings

SF

Direct Vacancy

Sublet Vacancy

Total Vacancy

2010

$0.00

2011

Vacancy Rates

ABSORPTION 2Q Absorption YTD

AVERAGE RENT & EXPENSES Rent NNN

Downtown Seattle

3,093

31,435,923

3.2%

0.1%

3.3%

70,552

140,289

$20.39

$8.00

Eastside

1,504

27,018,228

6.3%

0.2%

6.5%

68,847

140,655

$21.77

$8.00

Northend

3,178

43,348,424

6.3%

0.2%

6.5%

33,321

116,906

$17.66

$5.50

Southend

1,793

29,840,806

7.8%

0.3%

8.1%

(32,688)

(52,387)

$15.91

$4.50

Tacoma

3,972

40,184,292

6.5%

0.1%

6.6%

199,895

151,899

$15.83

$4.50

PUGET SOUND

13,540

171,827,673

6.1%

0.2%

6.3%

339,927

497,362

$18.31

$6.10

2Q’11

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

Downtown Seattle

3.7%

3.7%

3.5%

4.8%

4.8%

4.0%

3.7%

3.4%

3.3%

Eastside

4.5%

4.2%

4.8%

7.1%

6.8%

7.0%

7.0%

6.8%

6.5%

Northend

4.7%

3.8%

4.0%

5.9%

6.4%

6.7%

6.9%

6.8%

6.5%

Southend

4.9%

5.5%

6.4%

7.9%

8.0%

7.7%

7.9%

8.0%

8.1%

Tacoma

5.0%

4.4%

5.8%

7.0%

6.9%

7.0%

7.2%

7.3%

6.6%

PUGET SOUND

4.6%

4.3%

4.9%

6.5%

6.6%

6.5%

6.6%

6.4%

6.3%

Historical Rents (NNN) Market Area

*Prior years as of 4Q

Historical Total Vacancy Market Area

Historical Total Absorption

2007

2008

2009

2010

Market Area

Downtown Seattle

$23.42

$24.42

$22.23

$20.20

Eastside

$34.09

$31.95

$24.98

$21.88

Eastside

140,907

(59,179)

876

73,776

71,808

68,847

Northend

$20.93

$20.77

$17.94

$17.64

Northend

(31,665)

(103,473)

(73,047)

(319,258)

83,585

33,321

Southend

$22.05

$19.93

$17.11

$16.30

Southend

69,567

75,703

(64,013)

26,759

(19,699)

(32,688)

Tacoma

$18.52

$18.34

$16.77

$15.82

Tacoma

(25,405)

(36,309)

(74,142)

(63,994)

(47,996)

199,895

PUGET SOUND

$23.80

$23.08

$19.81

$18.37

PUGET SOUND

118,241

116,753

(94,342)

90,933

157,435

339,927

Downtown Seattle

2Q’10

3Q’10

4Q’10

2010

1Q’11

2Q’11

(35,163)

240,011

115,984

373,650

69,737

70,552

Average Asking Lease Rates Market Area

LEASE RATES (NNN) Rent NNN

OPERATING EXPENSES* (PSF) TI's Parking

Downtown Seattle

$20.39

$8.00

$10-$20/SF

Free

Eastside

$21.77

$8.00

$15-$30/SF

Free

Northend

$17.66

$5.50

$10-$25/SF

Free

Southend

$15.91

$4.50

$10-$25/SF

Free

Tacoma

$15.83

$4.50

$10-$20/SF

Free

PUGET SOUND

$18.31

$6.10

$10-$30/SF

Free

www.pacific-re .co m

(425) 9 7 4 -4 0 0 0

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19


PACIFIC REAL ESTATE PARTNERS, INC.

Puget Sound Investment Market K EY I NVES T ME N T The Puget Sound investment market saw strengthening in the

also purchased the four-building, 280,000 square foot Class A

second quarter of 2011 with the sale of office buildings leading

complex, Plaza Yarrow Bay for $100M ($358/SF) in April of this

the charge.

year.

Diminishing vacancy levels and stabilizing rental rates

In the Seattle submarkets, tenants such as Amazon.com are

contributed to the uptick in sales levels and both will continue

paving the way for investment activity, stretching from Lake

to be driving forces in future investment activity as we head into

Union to the CBD. The lease-up of Seattle’s Class A towers

the third and fourth quarters.

has investors nationally looking to the Northwest for viable

The Industrial and Retail sectors continue to struggle and will

opportunities.

most likely lag behind until the more stabilized office assets have

The vast array of office product that is currently on the market

been traded. Although there has been healthy activity across the

has been closely watched by investors locally and nationally

region as a whole, the Downtown Seattle and Bellevue markets

and they are starting to make their move. Seattle Tower and

have been the key markets in Puget Sound, with a multitude of

Westlake have already selected buyers and other investment

investment opportunities currently being marketed.

opportunities such as 505 First, 83 King, 818 Stewart and 1918

The highlight of the quarter was the sale of Bellevue CBD’s

Terry are all on the market as well stabilized “core” assets.

Key Center. The 488,000 square foot Class A office building was

These varying types of assets are all going to be eyed by

purchased by Kilroy for $217M ($444/SF). Additionally, Kilroy

investors as cap rates decline and $/SF increase.

Price/sf & c a p r at e by p ro d uc t t y p e $700

10.0% 9.0%

$600 8.0% $500

6.0%

$/SF

$400

5.0% $300 4.0% 3.0%

$200 Office Cap Rate

Retail

Industrial

Office

Retail Cap Rate

$0 2005

20

|

2.0%

Industrail Cap Rate

$100

( 425) 974- 4000

2006

www.p a c i fi c -re.c om

2007

2008

2009

2010

2011

1.0% 0.0%

Cap Rate

7.0%


2Q’11 PUGET SOUND MARKET REPORT

Puget Sound Investment Market IN STI TUTI O N AL S AL E S Office Sales Over $10M Class A & B Transactions Highest Price/SF Avg Cap Rate

2005

2006

2007

2008

2009

2010

43

54

131

7

5

15

2011-YTD

7

$459/SF

$575/SF

$575/SF

$342/SF

$405/SF

$548/SF

$444/SF

6.7%

6.3%

6.3%

6.1%

9.5%

7.2%

7.2%

2005

2006

2007

2008

2009

2010

2011-YTD

22

14

35

19

9

8

9

$109/SF

$131/SF

$164/SF

$142/SF

$100/SF

$186/SF

$272/SF

6.8%

6.8%

5.8%

5.8%

9.2%

7.3%

7.0%

2005

2006

2007

2008

2009

2010

2011-YTD

22

28

19

4

8

7

8

$368/SF

$518/SF

$467/SF

$380/SF

$404/SF

$305/SF

$428/SF

6.3%

6.4%

5.9%

7.2%

8.8%

-

7.1%

2011-YTD

Industrial Sales Over $10M All Classes Transactions Highest Price/SF Avg Cap Rate

Retail Sales Over $10M All Classes Transactions Highest Price/SF Avg Cap Rate

P RI VATE C APITAL S AL E S Office Sales $1M - $10M Class A & B Transactions Volume Average Size (SF)

2007

2008

2009

2010

73

52

18

18

10

$384M

$310M

$55M

$70M

$30M 44,610 SF

27,623 SF

24,570 SF

7,798 SF

30,939 SF

Average Price

$5.3M

$6M

$3.1M

$3.9M

$3M

Average Price/SF

$191/SF

$243/SF

$168/SF

$126/SF

$214/SF

2007

2008

2009

2010

2011-YTD

133

89

36

51

17

$478M

$299M

$111M

$162M

$71M 60,951 SF

Industrial Sales $1M - $10M All Classes Transactions Volume

29,278 SF

27,052 SF

34,147 SF

38,196 SF

Average Price

Average Size (SF)

$3.6M

$3.3M

$3.1M

$3.1M

$4.2M

Average Price/SF

$123/SF

$124/SF

$90/SF

$83/SF

$92/SF

2007

2008

2009

2010

2011-YTD

182

209

77

58

25

$423M

$351M

$162M

$159M

$61M 17,179 SF

Retail Sales $1M - $10M All Classes Transactions Volume

20,026 SF

11,601 SF

9,435 SF

16,681 SF

Average Price

Average Size (SF)

$2.4M

$2.7M

$2.1M

$2.7M

$2.4M

Average Price/SF

$229/SF

$242/SF

$236/SF

$168/SF

$142/SF

www.pacific-re .co m

(425) 9 7 4 -4 0 0 0

|

21


2Q’11 PUGET SOUND MARKET REPORT

Puget Sound Investment Market TO P LEASE T RA N S A C T IO N S YTD Occupancy/Type

Tenant

Building

SF

Submarket

3Q 2011

Amazon.com

1918 Eighth

465,000

Lake Union Denny Regrade

1 2

Renewal

Amazon.com

2201 Westlake

190,000

3

3Q 2011

Dendreon

Russell Investments Center

180,000

Seattle CBD

4

Blend & Extend

Wells Fargo

Wells Fargo Center

173,000

Seattle CBD

5

3Q 2011

Isilon Systems

505 First

138,000

Pioneer Square

6

PATH

PATH

2201 Westlake

112,000

Denny Regrade

7

3Q 2011

Seattle Genetics

RidgePoint at Canyon Park

81,000

Bothell

8

3Q 2011/Expansion

Zillow

Russell Investments Center

72,000

Seattle CBD

9

4Q 2011

KPMG

1918 Eighth

60,000

Lake Union

10

3Q 2011

Expedia

Skyline Tower

54,494

Bellevue CBD

To p Sales Tr a nsa c t ions YTD over $ 1 0 M Sale Date

Buyer

Building

SF

$ & $/SF

Cap

1

6/11

Kilroy

Key Center

488,470

$217.22M ($444/SF)

6.2%

2

4/11

Kilroy

Plaza Yarrow Bay

279,650

$100.21M ($358/SF)

6.5%

3

5/25

Principal Financial

705 Union Station

253,769

$38.29M ($150/SF)

-

4

1/27/2011

Simms Commercial Dev.

1000 Denny Way

285,186

$36.00M ($126/SF)

9.0%

5

3/30/2011

Stockbridge Capital

Queen Anne Square

155,766

$34.00M ($218/SF)

7.2%

6

5/05/2011

W3 Partners

Legacy Corporate Center

103,176

$14.17M ($137/SF)

-

7

3/21/2011

Equity Residential

51 University

96,582

$11.75M ($121/SF)

-

8

6/30/2011

Stockbridge Capital

1100 Olive Way

38,346

$11.12M ($289/SF)

5.9%

1 Key Center

2 Plaza Yarrow Bay

3 705 Union Station

4 1000 Denny Way

5 Queen Anne Square

6 Legacy Corporate Center

7 51 University

8 1100 Olive Way

www.pacific-re .co m

(425) 9 7 4 -4 0 0 0

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22


2Q’11 PUGET SOUND MARKET REPORT

Pacific Real Estate Partners, Inc.

David Abbott Associate

Ann Chamberlin Principal

Laura Ford Vice President

Tony Ford Vice President

Lori Hill Principal

Erwin Park Associate

Nate White Associate

Stuart Williams Principal, Co-Founder

Les Boudwin, SIOR Principal

Scott Carter Principal

Bill Cooper Associate

Mark Flippo Principal, Co-Founder

Chris Hughes Principal

Brent Jackson Vice President

Steve Schwartz Principal, Co-Founder

Daniel Seger Vice President

JJ Shephard Principal

Gabriel Smith Associate

Andrew Stark Vice President

Casey Trees Associate

Steve Crantz Vice President

Mike Horner Vice President

Andrew Miller Associate

Buzz Ellis, SIOR Principal

Mark Friel Vice President

Kristin Hammond Associate

John Lee Associate

Mark McFarland, SIOR Paige Morgan Principal Vice President

Jeff Sholian, SIOR Principal

Josh Stohr Associate

Joe Vaughan Vice President

Wyk Parker Vice President

Charlie Malley Principal

PORTLAND

TA C O M A

BELLEVUE

S E AT T L E

B RO KER S

www.pacific-re .co m

Tom Shimota Associate

(425) 9 7 4 -4 0 0 0

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23


SEATTLE BELLEVUE

TACOMA

Founded in 1993, Pacific Real Estate Partners (PREP) has over 35 brokers in four offices serving

WASHINGTON

the Seattle, Bellevue, Tacoma, Washington and Portland, Oregon markets. Providing client-centered and value-driven real estate services to clients throughout the Pacific Northwest and beyond, we represent tenants, landlords, and investors in the office, industrial, investment sales, and retail sectors.

PORTLAND OUR BROKERS: SEATTLE:

EASTSIDE:

PORTLAND:

David Abbott

Bill Cooper

Buzz Ellis, SIOR

Ann Chamberlin

Mark Flippo

Mark Friel

Tony Ford

Chris Hughes

Kristin Hammond

Laura Ford

Brent Jackson

John Lee

Lori Hill

Charlie Malley

Mark McFarland, SIOR

Erwin Park

Steve Schwartz

Paige Morgan

Wyk Parker

Daniel Seger

Tom Shimota

Nate White

JJ Shephard

Jeff Sholian, SIOR

Stuart Williams

Gabe Smith

Josh Stohr Joe Vaughan

SOUTHEND:

TACOMA:

Les Boudwin, SIOR

Steve Crantz

Scott Carter

Mike Horner

Andrew Stark

Andrew Miller

Casey Trees

www.pacific-re.com | (425) 974-4000

OREGON


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