EVERETT — Industrial space for lease in Mukilteo and South Everett is becoming more expensive and difficult to find.
Vacancy rates are at an all-time low, hovering at about 3%. Meanwhile, rents have risen 15% or more in the last year, said Talor Okada, partner at NAI Puget Sound Properties.
Mosaic Homes, a builder that’s been constructing homes in the Pacific Northwest for more than 20 years, hopes to alleviate the crunch with a 66,000 square-foot industrial condominium project in Mukilteo.
It’s the first industrial condo project for Mosaic in the United States, a home builder based in Vancouver, British Columbia, Canada.
Called 526 Speedway, the project is located at 4301 78th St. SW in Mukilteo, a former vacant lot.
When completed next spring it will bring four industrial condominiums to market for purchase.
Each unit is about 16,000 square feet.
Like residential condominiums, industrial condos include an owners association and association fees, said Okada, project lead for 526 Speedway.
The association will be professionally managed by a management company to ensure that there are ample reserves for maintenance and other expenditures, Okada said.
Industrial condo owners typically share in the costs of common features, such as exterior landscaping and lighting, fire suppression system, parking lot and the building envelope which includes the roof and skylights, Okada said.
“Owning your space instead of leasing it allows business owners to build equity rather than servicing their landlord’s debt, Okada said. “And once the space is purchased, you’re able to forecast facility expenses much further out than a lease term.”
According to real estate experts, businesses considering whether to purchase a property should evaluate the pros and cons of ownership versus a lease term.
“An expanding or downsizing business demands flexibility in the size of its home. Leasing a property fits this scenario more than owning a commercial condo, where walls are fixed or bounded by other owners,” real estate agent Larry Westland wrote for the San Francisco Business Times.
A condo owner lacks the ability to negotiate with a landlord to make changes to the interior or relocate to a different space, Westland said. As a result, any improvements are on the owner’s ‘dime.’
On the upside, the purchase of an industrial condo offers a “stable, ‘base rent’ over a long period,” Westland said. “Beyond predictability, most entrepreneurs find it cheaper to own than to lease.
“There is, however, the added expense of ownership-association dues to help maintain the larger property,” Westland said. But the cost of interest expense, utilities, interior improvements and property taxes are an owner’s deductions to keep.
Mosaic is looking for other sites in the area that could support an industrial condo project of an even larger size, Okada said.
Mosaic is a co-founding partner of RISE Properties Trust, which has more than $2.8 billion of rental apartment assets under management throughout Puget Sound and Portland.
In the Vancouver, B.C., market, Mosaic has built over 6,500 homes and commercial spaces and has an active development pipeline of over $1.2 billion.