A recently announced industrial development in Covington, WA is gaining the attention of many in the industrial real estate community. While major distribution centers are common place in the industrial corridors along Highway 167 and Interstate 5, they are a rare sight outside of these areas. Vector Real Estate Corporation saw an opportunity in this when presented with a 14 +/- acre site in Covington that is ripe for new development. Over the last few weeks the company has been securing the land and working with the city to establish plans for a 250,000 square foot distribution center at the Girard Resources and Recycling site. With all parcels now under contract and plans nearly finalized, they brought the project to market for lease or sale with Scott Price and Joel Jones of the South Sound Industrial Group, Neil Walter Company. Scott and Joel have made a great efforts in recent years to discover new development sites for industrial projects, playing a key role in developments in Frederickson, Summit, South Hill, and other periphery markets. This new project in Covington is in many ways a realization of those efforts, and will be the first of its kind along the Highway 18 corridor. The site will provide far easier access to I-90 than any of the existing industrial centers, greatly benefiting companies that need to move product to and from Eastern Washington, while maintaining a competitive drive time to the Port of Tacoma or Seattle. If this new project is well received by the market, it is likely that we will see a few more distribution centers pop up along Hwy-18 in the coming years. There are a handful of other sites between Black Diamond and Hobart that would be logical targets for redevelopment as the industrial market continues to expand. With major distribution centers getting leased up more than an hour and a half south of Seattle in Lacey and DuPont, it is only logical to look east for other opportunities that cut that drive time in half.
This brings up a larger trend of industrial development springing up well outside the existing industrial hubs of the Puget Sound region though. Most of the remaining parcels in the existing industrial pockets have been bought up already, and increased demand for inventory has not been met by an equal increase in supply. In the Kent Valley many developers are beginning to look at redevelopment of aging buildings as a solution to this problem, however this strategy does little to address the overall shortage of industrial space that has become apparent in this business cycle. With vacancy rates along the I-5 and Hwy-167 corridors reaching historic lows by a large margin, lease rates have skyrocketed. Shell rates in South Seattle have now reached over $1/sf/month for warehouses as large as 45,000 sf. The trend has continued into South King County and Pierce County, pushing shell rates for typical warehouses over $0.50/sf/month for anything that is reasonably functional. These new periphery developments have benefited greatly from this, making it financially realistic for companies to locate a few minutes farther from their markets in order to find a more friendly rate environment.
Vector will be breaking ground on their new development, Covington 18, later this year. Delivery is expected in the 2nd quarter of 2018 and they are ready to begin discussions now with potential tenants. You can find the marketing material for the new project here. If you would like additional information about this project, or any of the other new developments in the region please contact us.