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Real estate investors to be busy here in '08
By JOURNAL STAFF
January 14, 2008
The Puget Sound Region's office and industrial markets will be among the top 10 in the country for investment potential this year, and its retail market will remain strong, according to Grubb & Ellis's 2008 Global Real Estate Forecast.
"I believe it is one of the strongest markets in the country, said Craig Hill, senior vice president and managing director for the firm's Seattle and Bellevue office.
Propelled by strong job growth and solid supply/demand fundamentals, downtown Seattle's office market is expected to tighten further this year, giving landlords substantial bargaining power, Hill said.
Despite likely layoffs in the financial services sector, the lack of new office space will push the vacancy rate to between 5.5 and 6 percent. Asking rates will rise between 5 and 15 percent, he said.
Downtown Seattle Class A asking rental rates rose more than 20 percent in 2007, Grubb & Ellis said. The firm forecasts an additional 12 percent increase in 2008.
Average asking rates for that class of space are projected to be $40 a square foot at year's end, up from $35.50 at the end of 2007, the firm said. Average asking rents in the greater Seattle area are projected to be $34 a square foot by the end of 2008, up from $31.50 a year earlier.
Given these dynamics, Seattle will be near the top of investors' buy lists for office assets, taking the No. 5 spot on Grubb & Ellis' Investment Opportunity Monitor, the firm said.
Rents for warehouse/distribution space in the Puget Sound region will remain flat in 2008 outside of the King County industrial core, Grubb & Ellis forecasts. Tenants seeking warehouse/distribution space will find substantial vacant space in the market in most other areas in the region.
The firm projects average asking rates for warehouse/distribution space in the greater Seattle area projected to be $5.52 a square foot at the end of 2008, level with current rates.
But Hill said the longer-term outlook for industrial is more rosy, given the power of the ports of Seattle and Tacoma to draw business. The firm ranks the area 10th in the country for industrial in 2008, largely because of the ports, Hill said.
It also reports that the Puget Sound retail market will continue to see higher rents and strong demand. Construction of new retail centers will be brisk this year because there is currently more than 6 million square feet of space under construction, it said.
Average asking rates for well-located inline shop space in Seattle are projected to be $40 a square foot at year end, up from $35 at the end of 2007.
