After the past couple of years being strong for industrial real estate activity throughout the Puget Sound region, the sluggish economy caught up with the sector. Sales have slowed, rents have stabilized and vacancy has increased, according to data from three separate brokerage reports.

The overall industrial vacancy rate has increased to 7.4%, with rates stabilizing at $1.11 per square foot. According to Wells Fargo Economics Team Report from September 2024, “some semblance of stability may have arrived for commercial real estate, but conditions remain soft, yet most major property classes performed relatively well during the second quarter of 2024.”

Between November 2021 and November 2023, the total spend of industrial projects grew more than 120 percent with reshoring and foreign direct investment jobs climbing and eclipsing the previous eight years combined. This activity is spurring demand for manufacturing space as well as associated demand for logistics facilities. According to CRE experts this generational shift is the second great industrial disruptor in the 21st century after e-commerce.

According to many economic reports, for 2024 and beyond, advanced manufacturing is a trend gaining traction with more than 44 advanced manufacturing projects in construction or planned going into 2025 totaling more than 112M SF. This will see a more than $290B total investment in advanced manufacturing projects in markets throughout the US, including the Puget Sound market. According to CRE experts, four main sectors are driving growth, they are:

1. High Tech/Digitalization

2. Automotive/Transportation

3. Reduced New Inventory

4. Anticipated Interest Rate Cuts

In response to the increasing vacancy rates, construction of new space has already slowed. In the 2nd quarter of 2023 there was 10.1 million of SF under construction. In contrast, there is 5.7 million of SF under construction for the 2nd quarter of 2024. This state of the market is a natural consequence of supply and demand equilibrium. However, with the decrease in supply the demand will eventually begin to rise again.

One of Alston’s most recent successes in the Pacific Northwest was the Ashley Distribution Center in Spanaway, WA. This massive industrial facility has a 1,110,000 SF foot print on a 73-acre site. The structure provides two 3-story office mezzanine systems on separate building corners. The building boasts a vast amount of vertical space with a 40’ clear height. To service the distribution needs of the tenant, the facility provides 573 car parking stalls, 1,052 trailer stalls and 172 dock doors.

One of the most interesting aspects of this project was the major change in the project’s scope. Initially, Alston was contracted to build a 715,000 SF facility for Ashley. However, the needs of Ashley changed during the construction process. Since they were satisfied with the work Alston had already completed for them in the project so far, they requested a major expansion of 395,094 SF to the initial plan. While there were some difficulties in expanding the project scope, Alston was able to complete the project on schedule and to the satisfaction of the tenant. This was accomplished through constant coordination and communication between all entities in the construction process.