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Q1 2025 Industrial Real Estate Trends You NEED to Know · Industrial Advisors

• 0:00
  The user market really came back in a big way last year.
• 0:02
  Mm-hmm.
• 0:02
  It seems like a lot of the investment world is just back and looking to
• 0:06
  get to, to buy deals in this market.
• 0:08
  It really is, and Q2 is gonna be huge.
• 0:10
  Q two's gonna be good.
• 0:11
  A lot of deals and, and it's, it's value add, it's core, it's across the
• 0:16
  board and you know, we have a couple deals out right now that are some
• 0:19
  value add opportunities, some core.
• 0:22
  We're getting a lot of calls, which is good.
• 0:24
  That's right, yeah.
• 0:25
  And no real calls and not just fishing for what's going on in the market.
• 0:43
  Welcome to our Industrial Advisors podcast.
• 0:45
  You have Bill Condon and Matt McGregor.
• 0:47
  We are doing our Q1 review of 2025, and so we wanna start with our three dynamic
• 0:53
  factors and, and, and one opinion.
• 0:55
  So let's jump into the, the three dynamic factors.
• 0:58
  Let's do it first.
• 0:59
  Capital markets are back, like really strong.
• 1:02
  First quarter, we'll get into the numbers, but strongest first quarter.
• 1:06
  And.
• 1:06
  Three years, right?
• 1:07
  So really good first quarter screaming back.
• 1:10
  And then, uh, as we know, we've got some big deals that'll be closing in Q2.
• 1:14
  So that's just gonna continue.
• 1:15
  Biggest deal of the year will close in Q2.
• 1:17
  And a lot of kind of singles and doubles that are on the market as well.
• 1:21
  That's right.
• 1:22
  Second one is we had positive absorption, slightly taking out the east side.
• 1:28
  So you know Seattle down through Thurston County.
• 1:31
  Yeah.
• 1:31
  Which are the main, you know, the markets people care about anyway.
• 1:33
  Yeah, exactly.
• 1:34
  We dropped from 8.1 to 7.9, so a little bit positive.
• 1:39
  Mm-hmm.
• 1:39
  And then.
• 1:41
  Related with that though, I would say that it's gonna continue to
• 1:44
  dip down 'cause we just signed a deal in Frederickson for three 17.
• 1:49
  Looks like the Prologis Auburn building's going to, if it hasn't
• 1:52
  signed, it's getting signed.
• 1:53
  That's 200.
• 1:54
  Got a couple other deals that are being signed around a hundred, so
• 1:56
  we're gonna continue to see that dip.
• 1:58
  Yeah, maybe, you know, I could see that.
• 2:01
  Drop a couple another, a couple more points and then it's gonna shoot back up
• 2:05
  and it's starting in a Q2 into the end of the year as all this product delivered.
• 2:08
  Yeah, I mean, we're hovering around eight ish percent right now.
• 2:12
  Maybe come down a little bit, but I think eight is, it's gonna be around eight
• 2:15
  for the coming, you know, few quarters.
• 2:17
  Yeah.
• 2:17
  Although I can see it shoot to eight and a half before it starts dropping again.
• 2:21
  Yeah, yeah, yeah, yeah.
• 2:22
  But in that general, general area, that's right.
• 2:25
  And then the one opinion that we have for the quarter is that South Seattle
• 2:30
  is continuing to tick up vacancy.
• 2:32
  We've been talking about it for a long time.
• 2:34
  I think it's 10.4%.
• 2:35
  Mm-hmm.
• 2:36
  South Seattle has to react in market rates.
• 2:40
  I'm talking across the board, not on specific projects to be able to stop this.
• 2:44
  Right.
• 2:44
  Yeah.
• 2:45
  There's a combination of reasons.
• 2:46
  We've killed it on this overtalked it, but they gotta come down on rates.
• 2:50
  Yeah.
• 2:50
  I mean they really need to start competing.
• 2:52
  You know, there's always been a big premium in South Seattle.
• 2:54
  Mm-hmm.
• 2:55
  To be in South Seattle from a location standpoint compared to the Valley.
• 2:59
  And that premium has, has gone down and gonna need to continue to kind of.
• 3:02
  Loosen up a little bit because the Kent Valley, you look, look at
• 3:05
  the North Kent Valley, it's really not that far from South Seattle.
• 3:08
  The product's more functional for the most part.
• 3:10
  And so, yeah, I agree that rates are coming down in South Seattle.
• 3:13
  They just have to given where the vacancy rate's at and we'll go into
• 3:16
  the south Seattle, close in in some of the submarkets, but it's gonna have
• 3:20
  to come down and landlord's gonna get, need to get more aggressive for sure.
• 3:23
  So let's jump into the market by market statistics.
• 3:26
  We had a. Tick up in South Seattle, so up to just under 10%.
• 3:32
  Yep.
• 3:32
  It jumped about a half a point, so it was 9.4%.
• 3:35
  It's now at 9.8% from a vacancy standpoint in a 46 million square
• 3:39
  foot market in, in South Seattle.
• 3:40
  That's right.
• 3:41
  And then Kent of the South Valley, Seattle down south is the only one
• 3:45
  that went down from 8.1 to 7.6.
• 3:47
  So yeah.
• 3:48
  Kent's rocking Kent Valley, you know?
• 3:50
  Mm-hmm.
• 3:51
  And then, uh, no, I apologize.
• 3:54
  We had, uh, Thurston, no, the other one that went down is Pierce
• 3:57
  County, slightly from 8.7 to 8.5.
• 4:00
  Thurston, uh, went up 4.6 to 4.9.
• 4:04
  So overall we went from 8.2 to 8.1.
• 4:08
  Yeah, so we're, we're going down, uh, which is, which is good.
• 4:11
  Totally.
• 4:12
  Um, and just to touch on the east side and north end, because we're, we have
• 4:15
  the numbers, uh, jumped up from 4.1 to 5.1 on the east side from a vacancy
• 4:20
  standpoint, and then stayed relatively flat in the north end from 8.3% to to 8.1.
• 4:24
  So overall, the east side north end stayed right at 7.9%, quarter over quarter.
• 4:29
  That's right.
• 4:30
  And then diving into the size ranges, 10 to 25 continues to be strong,
• 4:34
  although it went up to 4.4 from 3.9.
• 4:37
  The 25 to 50, no change, 50 to a hundred went down.
• 4:44
  Uh, so a few deals there from 7% to 6.6, and then unfortunately the a hundred
• 4:50
  to 200 jumped up from 9.4 to 10.7.
• 4:54
  Yeah.
• 4:55
  We've got a couple more buildings delivering in that.
• 4:57
  So that just continues to get ugly.
• 4:59
  Yeah.
• 4:59
  Fix the bill.
• 5:00
  Yeah.
• 5:00
  Well, I'll fix this.
• 5:01
  The 200 plus went from 10.6% to 9.5%, so that's why do you get the good news?
• 5:07
  Because you know, I focus on the big deals and you're Yeah.
• 5:10
  But no, so that is good to see that the bigger box market is
• 5:13
  starting to get some more traction.
• 5:14
  That's a really good thing.
• 5:15
  'cause that generates so much activity for the market.
• 5:18
  And I, I will say, I have noticed, I won't mention the names on this, but
• 5:21
  this last week, there's a. Few new deals in the market that are gonna
• 5:25
  absorb some big space activity level across the board is really good.
• 5:29
  Yeah, agree.
• 5:30
  You know, when you're 50 and above, I think that there's really good activity.
• 5:33
  And the other thing, you know, when you look at that 50 to a hundred
• 5:36
  range, that vacancies come down.
• 5:38
  I think that some of those buildings that have been sitting, I. Have
• 5:41
  looked at demising their spaces into more of the market that's healthy.
• 5:45
  Mm-hmm.
• 5:45
  And because of that, some of that stuff's getting absorbed, whereas in the past
• 5:48
  they weren't willing to demise it.
• 5:49
  Yes.
• 5:49
  And, and so we have personally done some of those deals and gotten
• 5:53
  aggressive and, and gotten deals done.
• 5:54
  That's right.
• 5:55
  And on the big size range, if you would've asked me a few weeks
• 5:57
  ago, it was really quiet, right?
• 5:59
  Mm-hmm.
• 5:59
  There's three deals in the market that, that I think
• 6:01
  will take 2 million feet down.
• 6:02
  Those are the ones that really move the needle right?
• 6:04
  For sure.
• 6:05
  So when you look at, you know, holistically at a market and
• 6:07
  you see the vacancy rate, it's.
• 6:08
  It's not the fifties that really move it.
• 6:10
  It's the big ones that move the vacancy, but.
• 6:12
  I think it tells a lot about the bread and butter of the market when
• 6:15
  you look at that kind of 50 to 150, 200,000 square foot range of just
• 6:19
  how, how active the market is overall.
• 6:21
  Agreed.
• 6:22
  So large move-ins, uh, moved out.
• 6:24
  Again, just so everybody's aware, we call a move in upon lease signature.
• 6:29
  We're the only firm that does that.
• 6:31
  So.
• 6:32
  We're reflecting move-ins, not on when they're recorded by Colliers,
• 6:36
  but actual move in this quarter.
• 6:37
  Mm-hmm.
• 6:37
  Right.
• 6:38
  So the largest one was floor decor, just over 1.1 million feet.
• 6:42
  The steel building picked up a, a subtenant on a move-in at 206, which
• 6:47
  would've been the second largest move-in.
• 6:49
  So the largest move out 205,000 feet.
• 6:52
  Samsung sublet.
• 6:53
  Yep.
• 6:54
  And then the second one at 170,000 feet, a CP phase one.
• 6:58
  What is that one?
• 6:59
  That's in Kent.
• 7:00
  That's in Ken.
• 7:01
  Okay.
• 7:01
  Yeah, that's in Kent.
• 7:02
  So it's 170,000 feet.
• 7:04
  Then there's uh, you know, there's a one 60, and then at the Adams
• 7:07
  building, there was 150,000 square foot move out as well in Sumner.
• 7:11
  Very good.
• 7:11
  So those are your bigger ones.
• 7:13
  So great news on the port.
• 7:14
  This is a crazy stat port overall up 19.3% over last year.
• 7:20
  Yeah.
• 7:20
  So that's a great sign.
• 7:21
  Really good news.
• 7:22
  Although that doesn't, as we've learned in the past, equate to
• 7:25
  least square footage 'cause a lot of it just gets railed outta here.
• 7:28
  Yeah.
• 7:28
  Truck.
• 7:28
  Yeah.
• 7:28
  You'd still rather have good port activity than not.
• 7:30
  Yes.
• 7:31
  Yeah, exactly.
• 7:32
  So overall good news on the port.
• 7:34
  Yeah.
• 7:34
  Jumping to investment sales through Q1, just under 400
• 7:40
  million, so huge increase there.
• 7:43
  Then, uh, I think more importantly, a big jump in square footage to 2 76.
• 7:48
  That's per square foot.
• 7:49
  Yeah, yeah.
• 7:49
  On a building price.
• 7:50
  That's right.
• 7:51
  Yeah.
• 7:51
  So 2 75 a foot per square foot on average is, is a healthy number, which is great.
• 7:57
  And I think that when you look at the Q one's, always the
• 7:59
  slowest quarter, I. Right?
• 8:01
  Yeah, that's right.
• 8:01
  And so it's, so it's a huge quarter.
• 8:03
  Y you know, the volume trends, trends upwards as you go throughout the year.
• 8:06
  And Q4 is obviously always the, the biggest one, but it's really a good start
• 8:10
  to the year on the capital market side.
• 8:12
  And we, we talked a little bit about this earlier.
• 8:15
  There's a fair amount of product, good product that's on the market now.
• 8:18
  That'll close Q2.
• 8:20
  So I like the momentum that we're seeing on the investment side across
• 8:24
  the board, you know, on, uh, you know, from institutional groups, which we knew
• 8:28
  would, would increase, or the user market really came back in a big way last year.
• 8:32
  Mm-hmm.
• 8:32
  It seems like a lot of the investment world is just back and looking to,
• 8:36
  to, to buy deals in this market.
• 8:38
  It really is.
• 8:39
  And Q2 is gonna be huge.
• 8:40
  QQ two's gonna be a lot of deals.
• 8:42
  And, and it's, it's value add, it's core, it's across the board.
• 8:46
  And you know, we have a couple deals out right now that are some value
• 8:49
  add opportunities, some core, we're getting a lot of calls, which is good.
• 8:53
  That's right.
• 8:54
  Yeah.
• 8:54
  And they're real calls and not just phish for what's going on in the market.
• 8:57
  They're taking a deep dive into the asset, like they really wanna buy it.
• 9:00
  And so I think, yeah.
• 9:01
  You know, volume wise, we're gonna see more and more offers as we
• 9:04
  continue to go throughout the year.
• 9:06
  And I don't know if we'll get back to where we were during like the pandemic
• 9:09
  volume, but, but we're on pace for it.
• 9:11
  The activity is really good and I feel great about what the investors are
• 9:15
  saying and, and their demand to be here.
• 9:17
  That's right.
• 9:17
  And the largest deal will.
• 9:19
  Well of the years so far will happen in Q2.
• 9:22
  In Fredson.
• 9:23
  Yeah.
• 9:23
  Fredson, yeah.
• 9:24
  Prologis back in the market after 12, 13 years of not buying core here.
• 9:29
  Yeah.
• 9:29
  This is their first major acquisition, so welcome back Prologis.
• 9:33
  Yeah, it's great to see.
• 9:34
  I mean, they got so big, it was hard for them, for them probably to move
• 9:37
  the needle with buying a 300 or 400 or 500,000 square foot building, and
• 9:41
  so it's great to see him back buying a Yeah, a, a big building in this market.
• 9:45
  Well over that time period they've been, you know, a huge
• 9:47
  developer of your product.
• 9:49
  Product.
• 9:49
  So they've done well there.
• 9:50
  Yes, they've done for sure.
• 9:51
  They've done really well.
• 9:52
  Yeah.
• 9:52
  Excellent.
• 9:53
  Well, overall, I think no big surprises.
• 9:56
  I think we predicted that it, we'd hit an equilibrium about now in
• 9:59
  overall absorption and vacancy.
• 10:01
  Yeah.
• 10:02
  And then before the market takes off again.
• 10:04
  So I think we're there, as we said earlier, it'll tick
• 10:07
  down before it ticks back up.
• 10:09
  But if we knock out the, these, you know, three tenants in the market, a
• 10:12
  couple more appear, maybe it won't.
• 10:14
  Head back up.
• 10:15
  Yeah.
• 10:15
  I'm really optimistic about where we are in the market from a, from a tenant
• 10:20
  demand, tenant velocity standpoint.
• 10:22
  Landlords are still in deal making mode, so deals are gonna happen.
• 10:27
  Right, for sure.
• 10:27
  And, and then on the investment side, we already talked about it.
• 10:30
  Great demand, good product out there.
• 10:32
  That volume's up.
• 10:33
  So things are happening and I think it's gonna be a really,
• 10:37
  really good second quarter.
• 10:38
  And we had a good first quarter, so let's just keep that momentum going.
• 10:41
  That's right.
• 10:42
  All right.
• 10:43
  Thank you very much.
• 10:44
  Thanks.