2Q11_Southend_Industrial_Flex_Market_PDF by Jones Lang LaSalle

2Q’11 PUGET SOUND MARKET REPORT

Pierce County Industrial Market

Southend Industrial/Flex Market INDUSTRIAL STRENGTH

HISTORICAL VACANCY RATES & RENTAL RATES

The Pierce County industrial market is comprised of seven submarkets, 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%

$0.33 $0.32

The Seattle industrial market continued to show

$0.31

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

150,000 SF of positive absorption and a 70 basis

$0.28

point decrease in vacancy to 5.1%, most of which

over the first quarter, settling in at 8.8%.

2.0%

2005

2006

Market Area

2007

2008

RentalRates

Pierce County Industrial Overview INVENTORY Buildings

signs of strength in the second quarter, with

$0.27

0.0%

Direct Vacancy

Sublet Vacancy

Total Vacancy

2009

2010

UNDER CONSTRUCTION Projects SF

quarter with little or no change in vacancy. Of the

GEORGETOWN/ DUWAMISH N GEORGETOWN/ DUWAMISH S

7.2%

0.0%

7.2%

103,740

(14,102)

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

4,770,761

7.3%

0.1%

7.4%

20,960

(118,345)

North End Tacoma

2,112,040

5.5%

0.0%

5.5%

2,242

(13,358)

SF was realized in the second quarter.

Spanaway

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

Tenant activity continues to be strong, as many

PierceCountyIndustrial/FlexSubmarket

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

companies are continuing their searches in the

PIERCE COUNTY INDUSTRIAL

1,150

62,053,101

8.7%

0.1%

8.8%

227,687

7,529

region too. Occupancy levels are beginning to rise

2005

2006

2007

2008

2009

2Q’10

Port of Tacoma/Fife

5.6%

Lakewood

6.3%

North End Tacoma Spanaway Puyallup/Sumner Tacoma CBD

3.2%

3.3%

4.8%

8.5%

9.0%

5.2%

13.9%

7.8%

4.0%

4.5%

1.2%

2.6%

1.9%

2.6%

2.1%

11.3%

2.1%

0.8%

10.8%

11.9%

4.0%

8.3%

6.2%

11.3%

5.0%

4.3%

6.8%

7.0%

Other Pierce County Markets*

3.9%

4.2%

5.2%

PIERCE COUNTY INDUSTRIAL

5.0%

4.8%

5.4%

Historical Total TEUs

3Q’10

4Q’10

FEDERAL WAY

9.4%

9.6%

4.4%

4.3%

4.1%

3.9%

5.6%

5.4%

14.5%

12.4%

5.5%

11.4%

2.3%

4.9%

6.9%

9.4%

institutional buyers and REITs eying the market’s

1Q’11

2Q’11

7.3%

7.9%

7.2%

4.8%

7.6%

7.4%

3.9%

4.0%

4.7%

5.5%

The Pierce County industrial market has been

6.0%

5.9%

6.2%

6.1%

12.2%

13.3%

13.0%

13.6%

13.3%

the most unwavering market in the Southend

13.3%

14.0%

13.8%

11.2%

10.2%

4.7%

5.6%

4.2%

4.4%

4.1%

4.6%

8.8%

9.0%

9.2%

9.1%

8.8%

Historical Total Absorption

NORTHEND TACOMA

future stabilized assets.

Prior years as of 4Q

2004

throughout the recession and once again finished

AUBURN

PORT OF TACOMA/ FIFE

OTHER PIERCE COUNTY 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

RENTON

KENT

in the market and stability is returning, with many

Historical Total Vacancy

SEATAC/ BURIEN

Vashon Island

existing tenants seek expansion space and new

Tacoma CBD

Market Area

LEGEND

SouthendIndustrial/FlexSubmarket

405 TUKWILA

18,705,677

108

ou tS

284

Lakewood

WEST SEATTLE

SODO

The Kent Valley was relatively flat in the second

Port of Tacoma/Fife

Market Area

BELLEVUE

lease at AMB/Prologis Portside

VacancyRates

ABSORPTION 2Q Absorption YTD

SEATTLE

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

$0.26

2011

SOUTHEND INDUSTRIAL/FLEX SUBMARKETS MAP

OTHER PIERCE COUNTY

PARKLAND/ SPANAWAY OTHER PIERCE COUNTY

2009

2010

2011-YTD

Market Area

2Q’10

3Q’10

4Q’10

2010

1Q’11

2Q’11

Port of Seattle

1,584,596

2,139,577

656,045

Port of Tacoma/Fife

(29,872)

290,444

430,998

725,230

(117,842)

103,740

Port of Tacoma

1,545,855

1,455,467

465,100

Lakewood

20,343

6,598

(23,588)

(11,147)

(139,305)

20,960

of the year was Amazon.com’s full building lease

Puget Sound Ports Total

3,130,451

3,595,044

1,121,145

North End Tacoma

4,800

600

(1,050)

3,210

(15,600)

2,242

of Sumner Corporate Park’s 492,000 SF Summit

market recovery underway, the limited amount of large blocks

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

building. In addition, Trader Joe’s is rumored to be looking in

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

Tacoma CBD

(23,070)

(10,468)

1,932

(34,966)

37,630

12,882

the South Sound area for a 500,000 SF build to suit option that

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

OtherPierceCountyMarkets*

88,890

146,945

(29,623)

28,270

34,562

48,180

PIERCECOUNTYINDUSTRIAL

310,764

186,581

454,771

657,559

(220,158)

227,687

could break 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.

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

$0.32-$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

the remaining available spaces there may be fewer than three

Rates/expenses are approximate

LEASE RATES (NNN) Shell Office

Market Area

market. The highlight of the quarter and possibly

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

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

(4 2 5 ) 9 7 4- 4000

w w w. pa c i fi c -re.c om

S EAT T L E | BEL L EV U E | TA COM A | PORTLA N D

( 4 2 5 ) 9 7 4 -4 0 0 0

w w w. p acific-re. co m

SEATTL E | B E L L E VUE | TACO M A | P O RT L AN D

2Q’11 PUGET SOUND MARKET REPORT

Seattle Industrial Market

Kent Valley 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.

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

HISTORICAL VACANCY RATES & RENTAL RATES

7.0%

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

6.0%

$0.46

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

9.0%

$0.45

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

5.0%

$0.44

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%

4.0%

$0.43

3.0%

$0.42

square feet. The overall vacancy rate for these submarkets remained

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

3.0%

2.0%

$0.41

feet.

1.0%

$0.40

unchanged at 7.6%.

1.0%

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

0.0%

2005

2006

2008

RentalRates

Seattle Industrial Overview INVENTORY Buildings

2009

Direct Vacancy

Sublet Vacancy

Total Vacancy

YTD

$0.20

0.0%

$0.39

2011

VacancyRates

ABSORPTION SF

2010

$0.30

$0.10

2005

2006

INVENTORY Buildings

Market Area

2008

RentalRates

Kent Valley Industrial Overview

UNDER CONSTRUCTION Projects SF

2007

Direct Vacancy

Sublet Vacancy

Total Vacancy

2009

2010

$0.00

2011

VacancyRates

ABSORPTION 2Q Absorption YTD

UNDER CONSTRUCTION Projects SF

SoDo

239

11,921,392

4.9%

0.0%

4.9%

54,719

12,112

Auburn

317

24,709,326

3.9%

1.3%

5.2%

2,313

605,163

Gtown/Duwamish N

285

14,205,445

7.1%

0.2%

7.3%

139,852

75,493

Federal Way

1,855,596

17.9%

0.0%

17.9%

(6,363)

(14,215)

Gtown/Duwamish S

141

4,428,407

3.0%

0.2%

3.2%

5,667

11,577

Kent

708

49,141,635

9.6%

0.1%

9.7%

(65,370)

161,852

Ballard

2,110,841

2.2%

0.0%

2.2%

(5,500)

4,549

Renton

153

13,188,823

5.7%

1.1%

6.8%

30,970

(8,673)

West Seattle

3,306,501

1.7%

0.0%

1.7%

(1,380)

(16,059)

Seatac/Burien

3,834,790

9.4%

0.0%

9.4%

(1,407)

9,047

Other Seattle Markets*

454

16,146,527

4.5%

0.6%

5.1%

(43,088)

3,301

Tukwila

259

19,873,485

4.6%

0.4%

5.0%

68,797

(3,439)

1,279

52,119,113

4.9%

0.2%

5.1%

150,270

90,973

KENT VALLEY INDUSTRIAL

1,579

112,603,655

7.2%

0.4%

7.6%

28,940

749,735

SEATTLE INDUSTRIAL

Historical Total Vacancy

Historical Total Vacancy 2004

2005

2006

2007

2008

2009

2Q’10

3Q’10

4Q’10

1Q’11

2Q’11

Market Area

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%

4.9%

Auburn

5.2%

4.8%

3.9%

6.0%

3.8%

4.2%

7.9%

7.8%

7.4%

5.0%

5.2%

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%

Federal Way

4.3%

2.4%

2.1%

2.6%

3.0%

7.6%

7.1%

6.8%

18.2%

18.7%

17.9%

Gtown/Duwamish S

2.0%

7.1%

2.9%

2.3%

4.2%

5.7%

5.1%

3.7%

3.6%

3.2%

Kent

9.1%

7.1%

5.5%

4.1%

3.8%

8.8%

9.5%

9.7%

10.2%

9.7%

Ballard

4.2%

4.1%

3.0%

2.2%

4.6%

4.2%

3.7%

2.2%

Renton

5.6%

2.9%

3.6%

1.1%

1.4%

7.6%

7.5%

7.4%

6.8%

7.2%

6.8%

West Seattle

3.5%

4.1%

1.1%

1.9%

40.0%

1.3%

2.0%

1.6%

2.0%

1.7%

Seatac/Burien

8.3%

5.0%

4.3%

12.2%

13.2%

11.4%

10.0%

9.7%

9.4%

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%

Tukwila

5.1%

5.3%

4.9%

5.1%

3.3%

5.6%

5.2%

5.7%

5.0%

SEATTLE INDUSTRIAL

5.1%

5.0%

4.0%

3.6%

3.9%

6.0%

5.9%

5.7%

5.8%

5.1%

KENT VALLEY INDUSTRIAL

7.1%

5.8%

4.8%

4.3%

3.7%

7.2%

8.2%

8.4%

7.6%

Historical Total TEUs

Historical Total Absorption

2009

2010

2011-YTD

Market Area

2Q’10

3Q’10

4Q’10

2010

1Q’11

2Q’11

Port of Seattle

1,584,596

2,139,577

656,045

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)

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

Ballard

LEASE RATES (NNN) Shell Office

Market Area

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

$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

Historical Total Absorption

2009

2010

2011-YTD

Market Area

Port of Seattle

1,584,596

2,139,577

656,045

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)

(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

Tukwila KENT VALLEY

Gross Asking Lease Rates by Class

$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

Market Area

2Q’11

LEASE RATES (NNN) Shell Office

Market Area

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

$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

Market Area

*Prior years as of 4Q

Market Area

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

(4 2 5 ) 9 7 4- 4000

w w w. pa c i fi c -re.c om

S EAT T L E | BEL L EV U E | TA COM A | PORTLA N D

( 4 2 5 ) 9 7 4 -4 0 0 0

w w w. p acific-re. co m

SEATTL E | B E L L E VUE | TACO M A | P O RT L AN D

Prior years as of 4Q

Market Area

2007

$0.40