EVERETT — Port of Everett’s grand vision to build a complex of office, housing and retail space in the next five years is going through its first market reality check.
The port aims to determine whether office tenants are interested in leasing a new office building complex — the first part of the waterfront project between the port’s north and central docks.
On Feb. 1, officials of the Lincoln Property Company, which is developing the port’s Millwright District, began efforts to lease most of the space in three inter-connected planned office buildings.
But the developer and port officials said the three-story office buildings, with two additional parking levels, won’t be constructed unless 80% of the building is leased.
The building is the first phase of a 10-acre project that is supposed to also contain 315 units of housing and 60,000 square feet of retail space.
The new 10-acre Millwright hub is the latest initiative by the port to expand waterfront development to include office space, specialty shopping and add more apartments and more than double the existing 266 apartments.
The port is already building a restaurant row with a string of new eateries by its Fisherman’s Village area next to several existing restaurants, apartments and The Indigo Hotel.
Port officials believe the new office space, apartments and retail establishments that would make up the Millwright District would broaden the port’s appeal to a larger segment of the public.
The thinking is to make what was once only a working cargo and pleasure boat marina into a series of communities to live, work and play.
In December 2021, the port named Lincoln as the developer for the Millwright District after a national search.
The leasing requirement before the office building construction can begin is necessary because investors won’t finance the project otherwise in uncertain financial times for the office market, said Alex Aigner, the executive vice-president of the Northwest region for Lincoln.
‘Inflation, high interest rates and the uncertainty about workers returning to offices have made financing difficult for new office projects,” he said.
On the positive side, he said, return-to-work mandates, led by companies like Amazon, have had a positive effect on filling up office space regionally.
Since pre-leasing began, a handful of companies have inquired about renting the office space, Aigner said.
“There has been interest from smaller companies seeking from 1,0oo to 3,000 square feet of office space and one company that was interested in 12,000 square feet,” he said.
Aigner said prospective tenants have been intrigued by the location of the office buildings surrounded by water on three sides.
He said the building will include two levels of enclosed parking and three levels of office space.
One advantage the Port of Everett may have in seeking new office tenants is that the office building vacancy rate is much lower in Everett than in other parts of Snomohish County and Puget Sound where many workers have not returned to the office following COVID-19.
An analysis by real estate brokerage firm Cushman Wakefield found at the end of 2024 Everett had an 8.2% office vacancy rate, far lower than 17.6 % rate in Bothell/Woodinville or the 32.3% rate in downtown Seattle.
“The Everett market wasn’t as hard hit as Seattle,” Aigner said.
Aigner said he was optimistic about getting commitments from tenants, but it could take a year.
But managing around the difficult capital markets could be a challenge for the entire Millwright District.
High interest rates are also impacting funding for the 315 housing units. Rates have not dropped as expected, Port of Everett CEO Lisa Lefeber said at the port board meeting on Feb, 13.
She said Thursday the port was looking to see if it could use other funding, such as money allocated for port industrial development, but so far has been unsuccessful in finding an alternative funding source.
The housing portion of the project was supposed to break ground in early 2026.
The last phase, retail shopping, is supposed to be completed by mid-2029. Port officials want to fill the retail district with businesses offering experiences, such as mini-golf.
Existing retail at the port consists of marine supply businesses, financial institutions and medical offices.
Randy Diamond: 425-339-3097; randy.diamond@heraldnet.com
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