The Snohomish County commercial real estate market continues to benefit from a diversified mix of businesses and services.
While aerospace companies may dominate the headlines, a broad variety of company types who make up, or have recently leased and purchased office, industrial and medical buildings provide continued stability to Washington state’s third-largest county. This solid foundation bodes well for the county as the Puget Sound region’s economy gradually returns to its pre-recession activity.
Office, industrial and medical leasing activity during 2011 supports the notion of a diverse base. Education-based companies (University of Phoenix, DeVry University), government (Federal Emergency Management Agency), biotech (Seattle Genetics, Cepheid), distribution and warehousing (PODS), aerospace and manufacturing (Aviation Technical Services, Boeing, B/E Aerospace, TECT) and medical (Swedish, The Everett Clinic) have all recently completed or announced planned new leases in Snohomish County.
There has also been no shortage of building sale activity in Snohomish County. Investors and users of real estate are continuing to take advantage of historic low interest rates and the upward direction of the economy for office and industrial opportunities.
Examples of investment activity during 2011 include the Union Bank project on Everett Mall Way, the former Regence Building and the Columbia Pacific Building in Everett and Canyon Park I in Bothell.
Users have also been active. Companies such as Sterling Bank, JL Manufacturing, Travis Industries and Goodwill have solidified their position in the market with recent office and industrial building purchases.
Snohomish County’s job market has mirrored the national statistics, with the current unemployment rate hovering around 9.0 percent. The numbers have not deterred the workforce from moving to the area.
In fact, the county experienced 17.8 percent increase in population between 2001 and 2010, making it one of the fastest-growing in the state.
In addition, press reports note Boeing’s continuing surge in aerospace employee hiring. For the first time since December 1999, Boeing has more than 80,000 workers at its various Puget Sound-area assembly lines and engineering divisions.
The office market vacancy has stayed within a constant range over many years, currently sitting at 20.7 percent. However, that has not deterred the growth of the market during the past 11 years. Inventory has grown 44 percent since 2000 as investors consider the market a place for steady returns.
The industrial sector has experienced a greater fluctuation during the same time span, following the cyclical nature of the industries it supports. The current vacancy rate of 12.7 percent is trending lower as the economy takes hold. The Bothell submarket in Snohomish County has been a steady performer with five straight quarters of positive absorption and an office vacancy rate that has fallen to 16.7 percent.
Snohomish County looks to the future
The steady population growth and improving economy are allowing investors and users of real estate to show confidence in Snohomish County. The market is positioned for these businesses to take advantage of the multiple opportunities for lease or purchase that remain available. This continued increase in activity, coupled with the market’s recent lull in new construction for office or industrial product, should allow vacancy rates to move toward a more natural equilibrium over the next six to 12 months.
Ric Brandt and John Bauer are first vice presidents with CBRE. They have a combined 38 years representing clients in all aspects of the Snohomish County office and industrial commercial real estate market.