7b Real Estate Strategic Plan Presentation
Item No. 7b supp Date of Meeting March 10, 2020 2020 Real Estate Strategic Plan Overview 1. Review 2016 plan and resulting Port real estate development initiatives completed or underway 2. Highlight goals and outcomes for new updated R/E Development Strategic Plan 3. Orient Commissioners about key dates and project milestones 2 Why Port Real Estate Development? Leverage Real Estate to: 1. Support Century Agenda and top Port goals Grow as an international logistics hub Sustain fishing, cruise and other maritime industries Drive regional economic development opportunities Enhance and protect industrial lands Advance sustainability and energy efficiency 2. Generate revenue and jobs 3. Support Divisional Initiatives Real Estate Development is the Means to Several Ends 3 2016 Real Estate Strategic Plan Recap 1. Completed research on Port properties to identify zoning, assessed value, environmental history, previous uses, revenue generated, etc. 2. Identified highest and best uses for Port properties Developed specific plans for Port based on preferred development scenarios. 3. Evaluated non-Port property acquisition options Also prioritized sites adjacent to Port properties Created a Roadmap for Real Estate Investment and Development 4 Real Estate Development Plan Implementation Developed Des Moines Creek Business Park Panattoni ground leases property from Port and develops 1.3 MM square feet of light industrial and office space. 2016 economic impact study showed 3500 jobs supported at site. Developed North East RedevelopmentArea (NERA) property in Burien Panattoni ground leases property from Port and develops 459,000 square feet of light industrial warehouse space Developed Des Moines Creek North property in Seatac Trammell Crow/IAC Development ground leases property and develops 460,000 square foot light industrial building 2.3+ million square feet of facilities developed plus thousands of jobs 5 Port Development Projects Completed Near Sea-Tac NERA 1 NERA 2&3 International Airport DONE 200th Street FUTURE NEXT FUTURE Des Moines Des Moines 55 Acre Creek Business Creek North SAMP Park DONE DONE SASA SAMP L Shape SAMP Port Development Projects Completed Near Sea-Tac International Airport 6 Real Estate Development Plan Implementation cont. Pending developments at Terminal 106 and Pier 2 based on ground lease RFPs Completed infrastructure assessment for Terminal 91 Uplands and now designing 100,000 square feet of light industrial flex facilities Purchased Salmon Bay Marina Maritime Real Estate Development 7 2020 Real Estate Strategic Plan 1. Identify current market trends for industrial property within the Puget Sound region and key Seattle submarkets (Ballard/Interbay and SODO). 2. Determine highest and best uses for select Port properties Identify development objectives and outcomes for each property Determine whether any Port properties should be surplused/traded Pier 2 and Jack Block Park Updating Strategy and Focus for Port Real Estate Development 8 2020 Real Estate Strategic Plan 3. Identify strategic land acquisition opportunities and develop evaluation methodology and standards for prioritizing purchase opportunities 4. Evaluate funding options and opportunities to support priority Real Estate Development projects/initiatives 5. Provide implementation recommendations that support the Port's ongoing Real Estate New Light Industrial Building at Des Moines Creek North Property development initiatives 9 Strong Puget Sound Industrial Market Strengths 4.7% Vacancy Rate (End of 2019) Trends 6.71%average annual increase in rent over the last 5 years Growth 8,000,000sf of industrial leasing demand 64% of that industrial demand is for distribution/ecommerce* *based on responses willing to disclose use Average Monthly Rental Rates Per County ($/sf/mo as of Feb 2020) $1.40 $1.26 $1.20 $1.02 $1.00 $0.93 $0.80 $0.76 $0.71 $0.60 $0.40 $0.20 $0.00 King Kitsap Pierce Snohomish Thurston King and Pierce County are the primary industrial real estate centers of the Puget Sound region. The County average rates are based on new and existing product. 11 Ballard Interbay Submarket Summary $1.83/sf/mo + NNN for new flex product CoStar Q2 2017 Flex Submarket quoted rates of $22.14/sf/year. ~328,500sf to 547,500sf of industrial and flex real estate demand There is approximately 225,063sf of vacant space in the BINMIC No new industrial/flex product delivering in the next 12 months Majority of the BINMIC requirements are less than 10,000sf requirements Truck Access: Despite the prime location, truck access limits growth for larger tenants, but drives growth for users requiring space in the 10,000 SF range. 12 BINMIC Vacancy and Rental Rates (2010 to Feb 2020) 3.5% $1.60 3.0% $1.40 2.5% $1.20 2.0% $1.00 $0.80 1.5% $0.60 1.0% $0.40 0.5% $0.20 0.0% $0.00 Vacancy Rate Monthly Rental Rate 13 BINMIC vs Puget Sound Region (Percent Change in Total Available SF) 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 BINMIC Regional 14 Port of Seattle Properties Being Evaluated 200th Street NERA 1 Salmon Bay Marina Fishermen's Terminal Terminal 91 Terminal 91 Uplands Pier 69 Harbor Marina Corporate Center World Trade Center West Real Estate Development Supports the Century Agenda and Top Port Goals 15 Port-Owned Properties Are NOT Being Evaluated SAMP Impacted Fully Developed NWSA Properties 55 acre Des Moines Creek Business Park Terminal 5 L-shape Des Moines Creek North Terminal 10 13 acre NERA 2 and 3 Terminal 18 SASA Maritime Industrial Center Terminal 25 Terminal 30 Terminal 46 Terminal 103 Current /Pending RFPs Terminal 104 Des Moines Creek W (releasing RFP in May) Terminal 105 CEM (releasing RFP in May) Terminal 107 Pier 2 (negotiating ground lease) Terminal 108 Terminal 106 (negotiating ground lease) Terminal 115 Terminal 117 16 Planning Calendar Feb Mar April May June July August September October Port RE Team External Advisory Committee Port Commission The Real Estate Strategic Plan will be completed by October: An internal Port Real Estate team will meet monthly to guide the consulting team's work An external advisory group will meet three times during the planning project to review progress and provide input Staff will also brief the Commission three times to highlight plan progress and key findings Additional community engagement is anticipated as specific RE Development projects are authorized and implemented 17 APPENDIX 18 Development at Terminal 91 Designing two 50,000 square foot planned light industrial flex buildings at northeast end of Terminal 91 Uplands $39 Million earmarked -- Part of 2020-2024 Capital Improvement Plan Master planning will start in Q4 Will seek additional design funding in early 2021 Will start construction in 2022 and deliver new buildings by Q3 2023 19 Terminal 91 Uplands Infrastructure Study Square Footage of Building Development Infrastructure Costs Phase 1 100,000 $700k Phase 2 300,000 $5M Phase 3 300,000 to 600,000 $28.3M TOTAL 700,000 to 1,000,000 $34M Off-site connection to City sanitary sewer to north P1 New Port electrical transformer & communications pedestals Minor natural gas relocation New sanitary sewer main sized for full 1 million sf development P2 New regional storm drain water quality treatment facility New Port electrical transformer Construction of central arterial access road & associated utility corridor Replacement of existing 42" storm drain main within western P3 development footprint with new pipe in utility corridor Add cooling fans to 2 existing site electrical substations to increase site power capacity (by Seattle City Light) Defining Utilities and Infrastructure Needed to Support Future Development Pier 2 Basic Info Total Acreage: +/-5.5 Usable Acreage: +/-4.8 Zoning: IG-1 & IG-2 Current Use Boat and vehicle storage Jack Block Park Image Credit: Heartland Current Status: Negotiating long term ground lease with King County to support development of water taxi terminal Aerial of Pier 2. The Terminal. Photo: 2007 21 CEM Property Basic Info Total Acreage: 25 Usable Acreage: ~12 Zoning: IG-2/U-85' Current Use: Vacant Constraints Presence of the landfill cap. Existing truck access to site is limited. Site configuration is irregular. Current Status: Planning to issue RFP to redevelop CEM property in Q2 2020 Image Credit: Heartland 22 T106 Basic Info Total Acreage: 31.2 Usable Acreage: 17.4 Current Bldg Sqft: 598,030 Zoning: IG-1 85' Heavy industrial, 85' height limit. Current Status: Negotiating long term ground lease with preferred respondent to RFP issued in 2019 Image Credit: Heartland Image Credit: Port of Seattle. Marine Properties. 2014. 23 55-Acre (Under SAMP Review) Basic Info Total Acreage: 55.7 Usable Acreage: 31 Zoning: Aviation Commercial (AVC) Current Use City Park Ground Lease on a portion of the site. Constraints Wetlands and associated buffers. Steep slopes are present on the site. Image Credit: Heartland 24 L-Shaped (Under SAMP Review) Basic Info Total Acreage: 26.2 Zoning: Aviation Commercial (AVC) Current Use Raw Land Potential Alternatives Ground lease for port supportive uses. POS development of 375,000SF Air Cargo Facility. Image Credit: Heartland 25 200th Street Basic Info Total Acreage: 47.2 Usable Acreage: 27.7 Constraints Wetlands Steep slopes Potential access issues Potential Alternatives Support SAMP impacted airport facilities. Ground lease for Port supportive uses when SR509 extension is under construction or complete. Actions Study existing infrastructure and land grading feasibility. Wait for completion of SR 509. 26 Image Credit: Heartland SeaTac Properties Strategy Summary (2016) Development Alternative 375,000 SF new air cargo facility Relocate employee parking lots 350KSF on remaining usable land of the 55-Acre Site Site Specific Strategies 55-acre Site Ground lease for port supportive use. Develop 20,000 SF Food Innovation Center on the SW corner of the 55-acre site. 13-acre Site Relocation site for employee parking. 16th Ave South Site Relocation site for employee parking. L-Shaped Site Develop 375,000 SF class-A air cargo facility on the L-shaped site. Current Employee Parking Lot (12-acre) Develop as future expansion of air cargo facility. Image Credit: Heartland 27
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