Seattle Commercial Real Estate News of the Day

Friday, December 9, 2011

Seattle Times Daily Journal of Commerce Headline
Financial problems piling up at Smith Tower

Prologis eyes Fife site for distribution center

Bellingham developer Syre seeks Chapter 11 protection Prologis, a global developer and operator of distribution warehouses, is taking steps to build a 184,300-square-foot distribution center at 4512 70th Ave. E. in Fife.

Ken Sun, development manager with Prologis, said if the project moves ahead his company will work with Craft Architects and seek bids from contractors. Barghausen is doing civil engineering and Prologis has retained Bruce Valentine of Neil Walter Co. to market the space.

Sun said the building would have been about 35,000 square feet larger if Prologis had acquired adjacent land, but it couldn’t come to terms with the seller.

Construction probably won’t start without a user, but the company’s move is the latest sign of life in the South Puget Sound industrial market. Industrial development has all but stopped since the economy tanked in 2008.

Increased demand for large spaces is driving the market. The so-called big box market is healthier than it has been in three or four years, says CBRE broker Monte Decker, who’s not working on the Prologis project.

Earlier in the fall, Jones Lang LaSalle broker Scott Carter said there were about half a dozen large users looking in the market. That demand outstrips the supply of spaces larger than 250,000 square feet.

Demand ticked upward during the first nine months of the year, according to brokerage Kidder Mathews. Since the start of the year, nearly 3.1 million square feet of previously unoccupied space was leased regionwide. Pierce County has seen the biggest bump in leasing activity.

One hurdle to new development is the glut of smaller spaces available. Some tenants could take advantage of that by scattering operations, but if they need contiguous spaces in modern facilities and are willing to pay higher rents for it that could start some development.

“That’s the next step,” said Decker.

Rents would need to increase 7 percent to 10 percent to see speculative development of large warehouses, he said, but what will happen first is developers will instead line up users for build-to-suit projects.

Prologis and other developers are getting ready to respond to the potential demand.

Benaroya Capital Co. owns 25 acres in Sumner. The land is entitled for a 441,000 square feet. Last spring, Larry Benaroya said nothing would be built there on a speculative basis. He was not available yesterday.

Developer Ted Knapp could build two warehouses in Sumner totaling about 750,000 square feet, Decker said. Seattle developer Tarragon has completed the state environmental process for up to 400,000 square feet in Frederickson, according to company flier.

One build-to-suit project is teed up: a 350,000-square-foot plant in Randles Business Park in Frederickson for Carlisle Construction Materials.

Decker said the industrial market will continue to move forward slowly, similar to the overall economy. Like other brokers, he thinks the market will see some build-to-suit and possibly spec development of projects with 200,000 square feet or more.

Prologis is a publicly traded company that owns 600 million square feet of distribution center space worldwide and 9.6 million square feet in the Puget Sound region.

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About CRE Northwest

Specialist in office & investment real estate in Seattle & the Eastside
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