8h Attachment 1 Appraisal Report
Item No. 8h_attach1
Date of Meeting February 9, 2021
Appraisal Report
SR 509 Surplus Land | Des Moines, WA 98198
as of August 10, 2018
Prepared for Prepared by Kidder Mathews
Valuation Advisory Services
Port of Seattle David Chudzik, Ph.D., MAI, CRE 601 Union Street, Suite 4720
Mr. Daniel Alhadeff Seattle, WA 98101
206.205.0222 l Fax 206.205.0220
dchudzik@kiddermathews.com
KM Job A19-0087 kiddermathews.com
March 8, 2019
Mr. Daniel Alhadeff
Port of Seattle
PO Box 1209,
Seattle, WA 98111
RE: SR 509 Surplus Land
XXX S. 216th Street
Des Moines, WA 98198
Dear Mr. Alhadeff:
At your request, we have prepared an appraisal of the above-referenced property, which is
described in the attached report. The subject is a 623,734 sq ft or 14.32-acre vacant land parcel
which is a portion of an earlier proposed extension of the SR 509 that was never built. We have
inspected the subject property and obtained data regarding other similar real estate in the area.
This report has been prepared in conformance with the current Uniform Standards of Professional
Appraisal Practice (USPAP), as formulated by the Appraisal Foundation. In addition, our services
comply with and are subject to the Code of Professional Ethics and Standards of Professional
Practice of the Appraisal Institute as well as the WSDOT ROW manual.
The intended use of this appraisal is to assist Port of Seattle to support setting a purchase price
for potential acquisition of the subject. This report may not be suitable for other uses.
As a result of our investigation and analysis, we have concluded on the following fee simple market
value, subject to the limiting conditions and assumptions contained herein:
"As Is" Value, as of August 10, 2018 .......................................................................... $2,900,000
Respectfully submitted,
David Chudzik, Ph.D., MAI, CRE
State-Certified General Real Estate
Appraiser #1102099
DMC/sh
601 Union Street, Suite 4720 Seattle, WA 98101 T 206.205.0200 F 206.205.0220 kiddermathews.com
SR 509 Surplus Land
KM Job A19-0087
Certification
I certify that, to the best of my knowledge and belief:
1) The statements of fact contained in this report are true and correct.
2) The reported analyses, opinions, and conclusions are limited only by the reported assumptions
and limiting conditions and are my personal, impartial, and unbiased professional analyses,
opinions, and conclusions.
3) I have no present or prospective interest in the property that is the subject of this report, and no
personal interest with respect to the parties involved.
4) I have no bias with respect to the property that is the subject of this report or to the parties
involved with this assignment.
5) My engagement in this assignment was not contingent upon developing or reporting
predetermined results.
6) My compensation for completing this assignment is not contingent upon the development or
reporting of a predetermined value or direction in value that favors the cause of the client, the
amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent
event directly related to the intended use of this appraisal.
7) The reported analyses, opinions, and conclusions were developed, and this report has been prepared,
in conformity with the Uniform Standards of Professional Appraisal Practice.
8) I have made a personal inspection of the property that is the subject of this report. The
comparables were all confirmed with appropriate sources as indicated in the report.
9) David Chudzik has not provided professional appraisal or consulting services concerning the subject
property once within the past three years.
10) No one provided significant real property appraisal assistance to the person signing this
certification.
11) The reported analyses, opinions and conclusions were developed, and this report has been
prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of
Professional Appraisal Practice of the Appraisal Institute.
12) The use of this report is subject to the requirements of the Appraisal Institute relating to review by
its duly authorized representatives.
13) As of the date of this report, David Chudzik, Ph.D., MAI, CRE has completed the continuing
education program for Designated Members of the Appraisal Institute.
David Chudzik, Ph.D., MAI, CRE
State-Certified General Real Estate
Appraiser #1102099
Kidder Mathews
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Limiting Conditions
Limiting conditions specific to this appraisal are:
1) The appraiser has made no survey of the property and assumes no responsibility in
connection with such matters. Any sketch or identified survey of the property included in
this report is only for the purpose of assisting the reader to visualize the property.
2) I assume that there are no hidden or unapparent conditions of the property, subsoil, or
structures (including asbestos, soil contamination, or unknown environmental factors) that
render it more or less valuable. No responsibility is assumed for such conditions or for
arranging the studies that may be required to discover them.
3) No responsibility is assumed for the legal description or for matters including legal or title
considerations.
4) The information identified in this report as being furnished by others is believed to be
reliable, but no warranty is given for its accuracy.
5) The appraiser is not required to give testimony or attendance in court by reason of this
appraisal unless arrangements have previously been made.
6) The allocation of total value to land, buildings, or any fractional part or interest as shown in
this report, is invalidated if used separately in conjunction with any other appraisal.
7) The appraiser is competent and qualified to perform the appraisal assignment.
8) Valuation Advisory Services is a subsidiary of Kidder Mathews, a full service commercial
real estate brokerage firm. On occasion, employees or agents of the firm have interests in
the property being appraised. When present, interests have been disclosed, and the report
has been made absent of any influence from these parties.
RESTRICTION UPON DISCLOSURE & USE:
Neither all nor any part of the contents of this report (especially any conclusions as to value, the
identity of the appraisers or the firm with which they are connected, or any reference to the
Appraisal Institute or to the MAI designation) shall be disseminated to the public through
advertising media, public relations media, news media, sales media or any other public means of
communication without the prior written consent and approval of the appraisers. No part of this
report or any of the conclusions may be included in any offering statement, memorandum,
prospectus, or registration without the prior written consent of the appraisers.
Kidder Mathews
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Table of Contents
Letter of Transmittal ................................................................................................................ i
Certification ............................................................................................................................ ii
Limiting Conditions ................................................................................................................ iii
Summary of Appraisal ............................................................................................................ 1
Introduction ............................................................................................................................ 8
Market Overview .................................................................................................................. 13
REGIONAL OVERVIEW ...................................................................................................... 15
NEIGHBORHOOD DESCRIPTION......................................................................................... 24
INDUSTRIAL MARKET OVERVIEW....................................................................................... 27
Property Description - After .................................................................................................. 38
Highest & Best Use - After ...................................................................................................45
Sales Comparison Approach After .................................................................................... 48
Property Description - Before ...............................................................................................56
Highest & Best Use - Before ................................................................................................ 60
Sales Comparison Approach Before ................................................................................. 62
Reconciliation & Final Value Opinion ................................................................................... 64
ADDENDUM
Appraiser's Experience Data
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Summary of Appraisal
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Summary of Appraisal
Identity of Property SR 509 Surplus Land
XXX S. 216th Street
Des Moines, WA 98198
Property Description The subject is a 623,734 sq ft or 14.32-acre vacant land parcel which is a
portion of an earlier proposed extension of the SR 509 that was never
built. The subject site is located at the north side S. 216th Street in Des
Moines. The subject lies to the east of 15th Avenue S. and to the west of
24th Avenue S. It extends northerly to a point where S. 212th Street
would intersect the parcel, but this street ends further west. A narrow
strip of subject extends toward S. 212th Street at the intersection 15th
Avenue S. The site irregularly-shaped and reasonably level in most
areas but moderately sloped toward the north. Wetlands and associated
setbacks appear to significantly impact the property. Based on the
wetland information available, it is estimated that wetlands and buffers
impact about 75% of the site, leaving about 25% or 4.3 acres as usable
area. The property is zoned Business Park (B-P) by the City of Des
Moines.
Based on the requirements in the WSDOT ROW manual, the appropriate
method to value the subject is to consider its value enhancement to the
adjoining property to the west which is owned by the Port of Seattle, the
potential acquirer of the subject. This method is essentially a reverse
Before and After appraisal. The difference between the value of both
assembled parcels (After) and the value of the abutting Port of Seattle
property's standalone value (Before) is market value for the subject.
Scope Comprehensive appraisal with sales comparison approach
Intended User/Use of The intended use of this appraisal is to assist Port of Seattle to support
Appraisal setting a purchase price for potential acquisition of the subject. This
report may not be suitable for other uses.
Property Rights Fee Simple Estate
Appraised
Extraordinary It is an extraordinary assumption that the information provided by the
Assumption client particularly information regarding property area, boundary line
delineation and potential wetland areas is reasonably accurate and as
described in this report. The use of this extraordinary assumption may
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have affected the results of this report.
Hypothetical None
Condition
Highest & Best Use As Vacant
Industrial use
Value Conclusion As Is
on August 10, 2018
After Value $11,600,000
Before Value $8,700,000
Difference /Subject Value $2,900,000
Date of Report March 8, 2019
Date of Last August 10, 2018
Inspection
Effective Dated of August 10, 2018
Appraisal
Exposure Time Three to six months
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Aerial Photograph of Subject (North at Top)
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Subject Photographs
Looking west along S. 216th
Street with the subject on the
subject
Looking north from S. 216th
Street at the subject
Looking north along trail
leading northward through the
subject
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Subject Photographs
Looking northward along trail
Wooded area in central part of
subject looking roughly
eastward
Wooded area in central part of
subject looking roughly
westward
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Subject Photographs
In central part of the subject
looking westward along a
primitive pathway
Trail in northern part of the
subject leading toward S. 212th
Street/15th Avenue S.
Stairway leading to trail in
northwestern part of the subject
at S. 212th Street
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Introduction
Kidder Mathews Introduction
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Introduction
Identity of Property The subject is a 623,734 sq ft or 14.32-acre vacant land parcel located in
Des Moines.
ADDRESS XXX S. 216th Street
Des Moines, WA 98198
ASSESSOR'S TAX The subject does not appear to be associated with a King County tax
PARCEL NUMBER parcel number. The parcel numbers corresponding to the Port of Seattle
property are 092204-9042 and 092204-9303.
LEGAL DESCRIPTION The legal description for the subject provided by the client is as follows:
Beginning at a point opposite Highway Engineer's Station (hereinafter
referred to as HES) 23+00 on the s 216th line survey of SR 509, SR 516
to Des Moines Way South and 60 feet Northerly, therefrom; thence
Northeasterly to a point opposite HES 766+00 on the SR 509 line survey
of said Highway and 220 feet Northwesterly therefrom; thence
Northeasterly to a point opposite HES 772+05 on said line survey and
178.39 feet Westerly therefrom; thence Westerly, a distance of 75 feet to
a point opposite said HES; thence Northerly 80 feet, more or less, to a
point opposite HES 10+28.42 on the F6 line survey of said Highway and
85.26 feet Westerly therefrom, said point being on the Northerly line of
the South half of the Northwest quarter of the Southwest quarter of the
Northwest quarter of Section 9, Township 22 North, Range 4 East, W.M.;
thence Easterly along said Northerly line to a point opposite HES F6
10+27.45 on said F6 line survey and 30 feet westerly therefrom; thence
Northerly to a point opposite HES F6 12+91.08 on said F6 line survey
and 25.45 feet Westerly therefrom; thence Northwesterly to a point
opposite HES F6 14+13.05 P.T. on said line survey and 30 feet Southerly
therefrom; thence Westerly parallel with said line survey to an
intersection with the West line of said Section 9; thence northerly, along
said West line 30 feet, more or less, to HES F6 19+84.89 A.P. on said
line survey; thence Westerly along said line survey to HES F6 22+04.83;
thence Northeasterly, to a point opposite HES F6 21+30 on said line
survey and 50 feet Northerly therefrom; thence Easterly, parallel with
said F6 line survey to a point opposite H.E.S. 777+00 on said SR 509 line
survey and 155.03 feet Westerly therefrom; thence Southerly parallel
with said Line Survey, to a point on the North line of the North 30 feet of
the North half of the North half of the Northeast quarter of the Southwest
quarter of the Northwest quarter of said section 9; thence easterly, along
said north line to an intersection with the Easterly margin of said
Highway, as described in Warranty Deed dated March 8, 1971, recorded
May 6, 1971 under Recording No. 7105060274, said point being 110
feet easterly when measured at right angles or radially from said SR 509,
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line survey; thence Southerly to a point opposite HES 775+00 on said line
survey and 110.85 feet Easterly therefrom; thence Southeasterly to a
point opposite HES 773+00 on said line survey and 175 feet easterly
therefrom; thence Southerly to a point opposite HES 766+00 on said line
survey and 295 feet Easterly therefrom; thence southeasterly to a point
opposite HES 30+22.76 on the s 216th line survey of said Highway and
60 feet Northerly therefrom; thence Westerly parallel with said line survey
to the point of beginning.
Containing 623,734 square feet or 14.32 Acres, more or less.
The adjoining Port of Seattle properties have the following abbreviated
legal descriptions:
Tax parcel 0922049303
S 170 FT OF E 130 FT OF N HALF NW QTR SW QTR NW QTR STR
09-22-04 LESS E 15 FT THOF FOR ROAD (18TH AVE S)
Tax parcel 092204-9042
POR SW 1/4 - NW 1/4 LY WLY & NLY SR 509 LESS S 170 FT OF E 130
FT OF N 1/2 - NW 1/2 - SW 1/4 - NW 1/4 LESS E 15 FT FOR RD LESS
POR FOR RD PER REC #'S 7204250337 & 7201070230 & 7210300307
& 308 LESS POR FOR RD PER SCC #'S 767788 & 753046
Ownership History The subject is currently owned by the Washington State Department of
Transportation. The owner is contemplating selling the subject to the
Port of Seattle. This appraisal will assist the Port of Seattle in
determining an offer/sale price.
Extraordinary It is an extraordinary assumption that the information provided by the
Assumption client particularly information regarding property area, boundary line
delineation and potential wetland areas is reasonably accurate and as
described in this report. The use of this extraordinary assumption may
have affected the results of this report.
Property Rights This is an appraisal of the fee simple estate. The definition of "fee simple
Appraised estate" is as follows:
Absolute ownership unencumbered by any other interest or
estate, subject only to the limitations imposed by the
governmental powers of taxation, eminent domain, police power,
and escheat.
Source: The Dictionary of Real Estate Appraisal, Sixth Edition. Chicago: Appraisal Institute, 2015.
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Purpose of Appraisal The purpose of this appraisal is to estimate the market value of the subject
property. The term "Market Value" is defined as:
The most probable price which a property should bring in a
competitive and open market under all conditions requisite to a
fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of a sale
as of a specified date, and the passing of title from seller to the
buyer under conditions whereby:
a. the buyer and seller are typically motivated;
b. both parties are well informed or well advised, and acting in
what they consider their own best interests;
c. a reasonable time is allowed for exposure in the open market;
d. payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
e. the price represents the normal consideration for the property
sold unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale.
Source: Office of the Comptroller of the Currency under 12 CFR, Part 34, Subpart C-Appraisals, 34.42 Definitions [g].
Scope of Appraisal This report has been prepared in conformance with the current Uniform
Standards of Professional Appraisal Practice (USPAP). In addition, our
services comply with and are subject to the Code of Professional Ethics
and Standards of Professional Practice of the Appraisal Institute as well
as the WSDOT ROW manual. Based on the requirements in the
WSDOT ROW manual, the appropriate method to value the subject is to
consider its value enhancement to the adjoining property to the west
which is owned by the Port of Seattle, the potential acquirer of the
subject. This method is essentially a reverse Before and After appraisal.
The difference between the value of both assembled parcels (After) and
the value of the abutting Port of Seattle property's standalone value
(Before) is market value for the subject.
It is presented as a comprehensive appraisal report. In this report, the
sales comparison approach is used as it is the primary method used to
estimate land value. The cost and income approaches are not utilized as
there are no significant improvements and land properties like the subject
are not typically valued on an income basis.
The subject was inspected on August 10, 2018.
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The research included both general and specific data. Sources of
general data included in the market trends and neighborhood
description are obtained from various sources that include Kidder
Mathews field investigation, as well as information from various
organizations and governmental resources.
Specific data concerning the subject were obtained from various
sources, including King County (assessed values and real estate
taxes), the City of Des Moines (zoning) and the owner (survey,
legal description, wetland information).
In the sales comparison approach, sales were researched of similar
land value properties in the surrounding areas. All the sales data
were confirmed with a party involved in the transaction and/or
through private sources or public records.
Intended User/Use of The intended use of this appraisal is to assist Port of Seattle to support
Appraisal setting a purchase price for potential acquisition of the subject. This
report may not be suitable for other uses.
Date of Report March 8, 2019
Date of Last August 10, 2018
Inspection
Effective Dated of August 10, 2018
Appraisal
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Market Overview
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Subject
Kidder Mathews
Valuation Advisory Services
601 Union Street, Suite 4720
Seattle, WA 98101-2355
Regional Map
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Regional Overview
Introduction The subject is located in the Puget Sound region of western Washington.
The core of the market is comprised of King, Snohomish, and Pierce
counties. Thurston is at the south end and Kitsap is on the west side.
National Overview The national recovery has now lasted eight years with job growth
continuing with only minor pauses during the past two quarters. The gain
outside of base wage jobs that started in 2015 has slowed but is still
trending upward. 2017 ended with 2.09 million new jobs, an increase of
1.4%. This follows 2.69 million in 2016 and 2.89 million in 2015. The
forecast for 2018 is a further increase by 1.4% for 2018, and 1.1% for 2019.
Unemployment was 4.1% in March 2018, 40 basis points (bps) down from
March 2017. The unemployment rate has held steady at 4.1% over the
past six months.
The GDP growth rate for 2017 was 2.3%, up from 1.5% in 2016.
Improvement to 2.8% is expected in 2018 and 2.4% for 2019. The change
reflects downturns in private inventory investment, non-residential fixed
investment, personal consumption, and in state and local government
spending. These were partially offset by higher federal government
spending and exports.
Inflation was up to 2.1% in 2017 compared to 1.3% in 2016 following 0.1%
in 2015 and 1.6% in 2014. The forecast is 2.1% for 2018 as well as in
2019.
Regional and National Economic Indicators Forecast
Annual Change 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Puget Sound Region
Employment -4.9% -1.7% 1.6% 2.3% 2.8% 2.8% 3.0% 3.2% 2.9% 2.3% 1.4%
Personal Income -1.6% 2.5% 6.1% 4.9% 2.6% 6.2% 4.4% 4.7% 4.3% 4.5% 5.2%
Consumer Price Index 0.6% 0.3% 2.6% 2.5% 1.3% 1.8% 1.4% 2.2% 3.0% 2.4% 2.3%
Housing Permits -50.1% 31.5% 11.9% 51.8% 8.9% 16.9% 22.5% -4.4% 9.4% -17.2% -1.4%
Population 1.5% 1.0% 1.0% 1.3% 1.4% 1.4% 1.7% 1.7% 1.5% 1.4% 1.2%
United States
Employment -4.4% -0.7% 1.2% 1.7% 1.7% 1.9% 2.1% 1.8% 1.5% 1.4% 1.1%
Personal Income -1.7% 3.7% 5.1% 4.2% 2.0% 4.4% 4.4% 2.4% 3.1% 4.5% 4.6%
Consumer Price Index -0.3% 1.6% 3.2% 2.1% 1.5% 1.6% 0.1% 1.3% 2.1% 2.1% 2.1%
Housing Starts -38.4% 5.6% 4.5% 28.0% 18.7% 7.8% 10.7% 6.1% 2.7% 5.2% 4.7%
Source: The Puget Sound Economic Forecaster, March 2018
Income and sales tax revenues continue a path of sporadic increases,
providing limited economic lift. Home sales continue to be strong, although
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new homes were restricted somewhat by low inventory throughout 2017, a
trend that has continued into 2018. Prices continue to move up, especially
in the top markets. Consumer confidence as measured by the Thomas
Reuters/University of Michigan Index of Consumer Sentiment edged
upward from 95.7 in January 2018 to 101.4 in March 2018. On average,
the index was higher in 2017 than any time since 2000. There is good
probability that the US economy will experience some downturn over the
next five years as the current expansion would be the longest in the past
150 years if the economy continues expanding over the next two years.
Prospects for renewed spending gains will depend on continued growth in
jobs and wages, low inflation, and low interest rates. The small increases in
interest rates in December 2017 had minimal impact on spending and,
combined with a mild slowdown in job creation, kept unemployment rates
lower. These changes are all anticipated to be small over the next year.
Real personal consumption increased by 3.0% in 2017 but is down 0.2%
through February 2018. The Measure of CEO Confidence, which bounced
back in the 4th quarter made further gains in the 1st quarter of 2018. The
measure now reads 65 up from 63 in the 4th quarter 2017. A reading of
more than 50 points reflects more positive than negative responses. In
other positive news, the help wanted online listings increased by 102,100 in
March 2018. This continued an upward trend that started in 2015. In April,
the head of the Federal Reserve announced that they will likely increase
interest rates at least three times in 2018, which could affect projected
employment and production growths.
Regional Overview The Puget Sound region continues to be one of the best performing areas
of the nation. Employment growth was nearly double (93%) the national
average in 2017 following 79% higher in 2016, 38% in 2015 and 47% in
2014 and 65% in 2013. Since the depth of the recession in early 2010,
the region has added 295,600 new jobs through the end of 2017. Year
over year (February 2017-February 2018) has gained 69,180 jobs. A
positive trend over the past year was an expansion of the job growth out
from the core companies, specifically Amazon and other tech firms. The
growth has also been strong in the lower wage categories, even with the
recent increases in the State and Seattle minimum wages. The retail
category has done well as retail sales have improved for 27 quarters year
over year. Employment growth was 2.8% in 2014 and 3.0% in 2015, 3.2%
in 2016 and 2.8% in 2017. Recent forecasts were revised upward to 2.3%
in 2018 and 1.4% in 2019. The prospect of Amazon creating a second
and equal headquarters potentially slows their growth in the Puget Sound
market in coming years. Regardless, the employment growth is
anticipated to continue.
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With the strong employment growth and geographic constraints, the region
is in demand for national and international investors. Apartments remain
at a plateau at the peak of the cycle as prices continue to increase even
as a large number of new units were delivered to the market and rent
growth has started to moderate. Most of the office-based employment
growth has occurred in the Seattle and Bellevue CBDs in King County,
and these two markets have seen the bulk of new development. Industrial
real estate has strong occupancy and high prices with institutions looking
for traditional warehouse product and owner users dominating close-in
Seattle markets. The retail market is strong in core trade areas. Daily
needs retailfood and drugsis the strongest sector. New home
inventories are low and infill construction is active.
Population During the past 40 years, the population of Washington has grown by an
average of approximately 20% per decade, according to the Puget Sound
Regional Council (PSRC). The five counties that comprise the Central
Puget Sound Region and account for 59% of Washington's 2017
population (7,310,300) experienced a population increase of 13.7% during
the previous decade. The region's growth rate was 2.0% in 2017, 2.2% in
2016, and 1.6% in 2015, with in-migration fueled by job growth. A minor
slowing was anticipated in 2017 to 1.5% (OFM data shows growth of
2.0%, June 2016-June 2017), then to 1.3% in 2018.
Employment Regional employment is at an all-time high, well above the previous high
in 2009. The recovery began in 2011. Year over year region wide
employment growth was a robust 3.1%; 4.0% in King, 4.0% in Snohomish,
1.4% in Kitsap, 1.3% in Thurston, and 0.9% in Pierce.
Non-Farm Employment
Feb-17 Feb-18
County Jobs Unemp. Jobs Unemp.
King 1,178,941 3.6% 1,225,543 3.7%
Snohomish 401,757 4.1% 417,729 4.2%
Pierce 390,988 5.9% 394,324 6.0%
Thurston 126,726 5.6% 128,423 5.6%
Kitsap 113,450 5.4% 115,023 5.5%
Region 2,211,862 4.3% 2,281,042 4.4%
Source: Washington State Employment Security Department
In the individual projections, King and Snohomish showed the fastest
recovery. Pierce and Thurston took more time with the cutback of
government jobs kicking the rate back up in 2012. In January, State Farm
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announced they will be leaving Tacoma by the end of 2018. 1,400 jobs
will be lost, although 800 of these are relocating to DuPont, so overall, a
net loss of 600 jobs in the County.
UNEMPLOYMENT RATE HISTORY
11.0%
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
King Snohomish Pierce Thurston Kitsap Region
Source: Washington State Employment Security Department
The unemployment rate has leveled off but remains at historic low levels
that continue to decline, moderated slightly by the return to the labor force
of those persons uncounted (unemployed but not actively seeking
employment) and under-employed, both of whom are not reflected in the
current calculation.
Amazon has been the biggest single contributor to employment growth.
The company's employment in the state is about 40,000, with more than
25,000 in Seattle. Amazon shows no signs of slowing anytime soon. The
company's confidence in that was underlined by the completion of two 1.1
million sq ft office buildings for its own use, and the starting of a third,
along with addition leases announced for over for 0.65 million sq ft in other
Seattle projects. As mentioned above, Amazon is currently searching for
a second headquarters location. Selection of the location is currently in
progress. Amazon current speculates that both headquarter sites will
have about 50,000 employees. Microsoft had more local employees at
47,113 as of June 2017 but the growth rate is much lower. The second
headquarters will likely cap Amazon's local growth. Significant expansions
are being made by Facebook, Tableau, Zillow, Apple, and Google.
The region's largest employer remains Boeing with a total of 65,829 in
Washington as of the beginning of January 2018, down nearly 5,300 jobs
in 2017. Almost all of those employees are in King, Snohomish, and
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Pierce counties. Boeing employment was 6.3% of the region in 1997 and
this has declined to 3.0% as of December 2017. There is less hope of
future growth as Boeing continues to diversify in other states.
Economic The finance, insurance, and real estate (FIRE) and construction sectors
Indicators have recovered as commercial and residential construction continues to
expand. Manufacturing losses were led by those Boeing jobs, with a
myriad of smaller companies cutting back by smaller amounts. Many of
those Boeing jobs have now been lost. Retail job gains follow the
increases in retail sales volume. Sales growth continues its fifth plus year
of increases with a robust gain in 2016. Growth was strongest in 2014,
tapering slightly in 2015 and again in 2016. Retail sales through the first
nine months of 2017 are up 6.1%.
Washington State Retail Sales ($,000)
2017 2016 2015 2014 2013 2012 2011
4Q 38,412,020 35,933,056 33,372,252 31,172,889 29,435,885 27,890,822
3Q 41,310,158 38,497,518 35,845,087 33,249,625 28,788,875 28,766,782 27,293,863
2Q 38,657,150 36,795,596 33,883,425 30,973,320 28,998,096 26,803,035 25,613,078
1Q 34,215,275 32,364,927 29,712,715 27,248,916 25,985,522 24,028,170 22,943,062
Total 114,182,583 146,070,061 135,374,283 124,844,113 114,945,382 109,033,872 103,740,825
Source: Washington State Department of Revenue
Personal income increased an average of 4.7% between 2010 and 2016,
spiking at 6.2% in 2014 and dropping to 4.4% in 2015, but increasing to
4.7% in 2016 and 4.3% in 2017. The forecast for 2018 is to be slightly
higher at 4.5% and 5.2% in 2019. These gains are amplified by low
inflation, which averaged 1.9% over the past five years. The CPI did
increase 3.0% in 2017 and is expected to increase to 2.4% in 2018 and
2.3% 2019.
Regional Housing The housing market has shown varying levels of recovery, based on
Market location and price point. Sales started to recover in 2012 with a 20%
increase in King and Snohomish Counties. Pierce County remained soft,
increasing only 3.5%, reflecting a lack of job growth. Values also first
started to recover in 2012. These trends have continued through 2017.
Median prices in King County increased by 14.4% over 2016, with new
home sales up 7.1%. Snohomish was up 13.0% (also up 8.6% in new
home sales) and Pierce gained momentum, up 11.6% (up 20.8% in new
home sales). Smaller increases were experienced in Kitsap and Thurston
counties. Sales volume in December 2017 totaled $3.34 billion, up 15.2%
from one year ago. Sales volume in March 2018 was $3.38 billion up 9%
from one year ago. This growth is across the board, felt in all five
counties.
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Case-Shiller Home Price Index
240.00
Seattle Metropolitan Region S&P/Case-Shiller Home Price Index National 20-City Composite
220.00
200.00
180.00
160.00
140.00
120.00
100.00
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Standard & Poor's Case-Shiller Index improved for each month since May
2012 except for some minor seasonal dips during the 3rd quarters of select
years. Improvement was 11.8% in 2013, 8.5% in 2014, 7.9% in 2015,
10.9% in 2016, and 12.7% in 2017. Prices surpassed the peak reached in
July 2007 in March 2016. As of January 2018, the Seattle index was
234.19, up 12.9% over the past 12 months and now 20.4% above the
2007 peak. The national prices are also increasing but are still down 0.2%
from their peak, but still up 6.4% over the past 12 months. Improvement
has been stronger in Seattle's close-in neighborhoods and on the Eastside
around Bellevue. In those markets, inventory levels are very low, creating
over-bids in popular neighborhoods.
Housing-permit activity increased by 16.9% in 2014 and 24.4% in 2015.
This reversed in 2016 with a 4.4% decrease in permits but increased 9.4%
in 2017. That trend is expected to drop 17.2% in 2018 and -1.4% in 2019
as single-family and multi-family permits are expected to drop with all of
the projects already in the pipeline and the expected slowdown in
employment growth.
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Commercial Real The region ranks in the top five national investment markets. Class A core
Estate Markets apartments, office, retail, and industrial properties are all still on the
institutional buyers' list with strong demand and pricing. Apartments have
been at the top of the cycle for several quarters now. The other categories
are still ascending. Vacancy rates in the region are as follows:
Regional Vacancy Rates-1Q 2018
Segment Seattle King Pierce Snohomish Kitsap Thurston
Office 7.1% 7.2% 6.4% 7.2% 7.6% 6.5%
Industrial 1.6% 3.4% 2.7% 4.5% 1.0% 3.3%
Apartment 6.8% 6.1% 4.4% 4.8% 4.7% 4.6%
Retail 1.9% 3.4% 5.4% 5.1% 6.8% 4.5%
Source: CoStar
Even though rent growth in the apartment market has started to moderate,
prices continue to increase as cap rates remain very low, tied to low
interest rates and the low perceived risk. This will be tested as new
construction deliveries peak in 2018 in both the apartment and office
categories. The apartment market continues to expand with nearly 19,000
units under construction in the region. The bulk of those are in larger
projects in the area around the Seattle CBD, but development has begun
to increase in the suburban markets as well.
The office market has seen most demand in the core markets like Seattle
and Bellevue CBDs. Amazon is building for itself and remains one of the
top lessees as well. Developers are building space for Facebook, Google,
and Tableau.
Industrial leasing is strong but saw a slight slowdown in the 1st quarter of
2018. Rents continue to increase. Retail has shown improvement, with
vacancy down and rental rates moving up in stable and strong trade
areas. Both industrial and retail markets have been boosted by increased
retail sales.
The lodging market saw improvement, reflecting the tourist draw of the
region and strong conference business. However, occupancy rates are
beginning to decline slowly in areas with rapid hotel development. Long
term, each sector's expansion is limited by available land, a major reason
that investors rank the region so highly.
Investors have begun to back off on some pricing parameters with fewer
rent spikes and increased terminal capitalization rates as eventual interest
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rate growth is acknowledged. That factor will likely have an effect on
going-in rates at the next increase as the previous one was absorbed via
lower equity return. Many investors do not plan to repeat that adjustment.
Area Market The long-term outlook for the region continues to be better than most
Summary markets nationwide. The recovery has been strong for five years. Job
growth in 2017 was 2.9% following the 3.2% growth in 2016. Both of
these were better than expected. The forecast for 2018 and 2019, but
expected growth is to be lower. Retail sales have increased between
7.9% and 8.6% per year between 2014 and 2016. Through the first nine
months of 2017, retail sales are up 6.1%. The region is expected to
outperform most of the nation, based on the diversified core of the
economy anchored by Microsoft, Amazon, and Boeing as specific
examples. Even though Microsoft and Boeing shed jobs in 2014 and 2015
(and Boeing again in 2016 and 2017), those losses were covered by the
growth of Amazon and other tech companies. The impact of Amazon's
second headquarters on the regional economy remains to be seen, but it
is sure to moderate growth.
Most of the local real estate markets are in some level of ascendance, or
extended peak-plateau. Apartments are perched at a plateau. Pending
supply is a major concern and there are some initial signs of vacancy
increase and growing use of concessions. Still there are limited signs of
descent near-term. Investment activity continues to increase primarily in
the best quality properties in all categories by institutional investors. Sales
have increased in the value-add sector of the office, apartment, and retail
markets as the returns available on Class A properties are squeezed by
high demand.
Slowing job growth in 2018 will test the apartment market since a large
number of units are scheduled for completion in 2018 to 2019. This
should have less effect on the office and retail categories where demand
for space tends to lag job growth by a few quarters. The real estate
markets in the region have solid fundamentals due to the broad-based
economy.
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Subject
Neighborhood Map
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Neighborhood Description
Introduction The subject is located in the city of Des Moines in southwest King
County. The city is about 13 miles south of Seattle, 10 miles north of
Tacoma, and 1.5 miles southeast of Seattle Tacoma International Airport.
The city is located on the shores of the Puget Sound and includes six
miles of shoreline and an active marina. The strategic placement
between the region's two strongest ports has led to this being one of the
more convenient bedroom communities in the region. Residents have
relatively short commutes to either CBD and very easy access to the
industrial Kent Valley.
Neighborhood The immediate neighborhood consists primarily of retail, professional
Character services, residential and industrial uses. Commercial uses are located
along primary arterials particularly SR 99 known alternatively as
International Boulevard and Pacific Highway S. Single family uses are
located off of arterials.
The older downtown core of Des Moines is located to the west along the
shore of Puget Sound. It comprises older storefronts and retail strips that
include a mix of retail uses including restaurants, flower shops, hair and
nail salons, an older single screen movie theater, and clothing shops.
There is a mix of older office spaces and newer office buildings and fuel
service stations located along this street as well. Almost all of the tenants
are local businesses often owned by city residents.
The subject is west of a significant new industrial development known as
Des Moines Creek Business Park which is being constructed by
Panattoni. This an 87-acre business park with about 2 million square feet
with distribution warehouse uses as well as offices for the FAA. This
project is significant and has greatly increased the stock of newer
industrial buildings in the immediate area.
To the west of the subject are primarily single-family residential
neighborhoods.
Access Des Moines has good regional access, with proximity to I-5 and Pacific
Highway South (SR 99), which serves as a primary arterial on the eastern
border of the city on which many retail services are located. The subject
is located along International Boulevard (SR-99) the principle north-south
arterial through the eastern portion of the city.
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Demographics Seattle and surrounding areas continue to grow reflecting the relatively
good economic conditions and high quality of life of the region that
stimulate native growth and continued in-migration. Population growth
within the three- and five-mile rings are below the county and state.
Income levels and home values within the subject's immediate area, as
seen in the one- and three-mile ring are below the county and state,
reflecting a significant working class component.
Summary of Demographics
Radius From Subject
Demographics 1-Mile 3-Mile 5-Mile City County State
2010 Population by Census 14,516 72,794 180,580 29,673 1,931,249 6,724,540
2018 Population Estimate 16,247 79,666 198,881 32,264 2,199,247 7,452,102
2023 Population Projection 17,477 84,393 210,949 34,096 2,375,574 7,950,929
Average Annual Growth Rate ('10-'18) 1.9% 1.5% 1.6% 1.4% 2.2% 1.7%
Projected Annual Growth Rate ('18-'23) 1.5% 1.2% 1.2% 1.1% 1.6% 1.3%
Current Estimates 2018
Number of Households 5,657 30,496 74,470 12,466 789,232 2,620,076
Number of Housing Units 6,245 32,937 79,696 13,541 949,319 3,142,423
% Owner Occupied 37.4% 49.5% 48.1% 55.0% 53.2% 57.5%
% Tenant Occupied 53.2% 43.1% 45.3% 37.1% 40.7% 34.0%
% Vacant 9.4% 7.4% 6.6% 7.9% 6.2% 8.5%
Average Household Size 2.71 2.57 2.63 2.55 2.42 2.54
Median Age 33.3 37.4 36.8 40.4 38.3 38.4
Median Household Income $51,840 $59,751 $60,923 $68,902 $84,072 $68,734
Per Capita Income $25,222 $31,045 $31,184 $34,784 $47,839 $36,796
Source: STDB, August 2018
The demographic is generally less affluent than the broader region. Home
ownership rates are also lower than the broader region.
Major areas of employment in Des Moines include manufacturing (13.4%)
retail (9.2%), transportation/warehousing (9.9%) and health care (11.7%).
This is a more blue-collar demographic and reflects a location close to
Boeing facilities, Southcenter Mall and SeaTac airport.
Highline Highline Community College was founded in 1961 and is the first
Community College community college in King County, Washington. The main campus is
located on 80 acres. As of 2015, there were approximately 17,000
students and 350,000 alumni of the college.
Summary The subject is located along an arterial in the city of Des Moines west of
SR 99. The immediate neighborhood consists primarily of retail,
professional services, multi-family residential and some industrial uses.
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Commercial uses are located along primary arterials particularly SR 99
known alternatively as International Boulevard and Pacific Highway S.
Single family uses are located off of arterials and primarily to the west.
Demographics are somewhat below average, but the central location
between Seattle and Tacoma is appealing to both businesses and
residents.
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Industrial Market Overview
Introduction The subject is a vacant site with the most likely use as an industrial
property. An overview of the region's industrial market is presented first
followed by a discussion of the subject's sub-market focusing first on
industrial trends followed by a brief discussion of the flex market.
Regional Overview The Puget Sound region's industrial market saw an increased level of
activity from the construction and leasing sides. Construction volume
increased to 7,004,711 sq ft now under development (38 buildings)
compared to 6.1 million sq ft (24 buildings) last quarter. The second
quarter also saw delivery of 1.36 million sq ft of new product with the
overall market supply standing at nearly 333 million sq ft. After a slow
first quarter, net absorption totaled nearly 1.2 million sq ft this quarter,
keeping close pace with deliveries. The region's vacancy rate held
steady at 3.3%. During the quarter there were over 1.1 million sq ft of
leases signed, but most of these will not be moving into their new spaces
until the third or fourth quarters, so we expect the vacancy to continue to
approach 3%. With 7.1 million sq ft under construction and another 14.4
million sq ft in the pipeline, the region is poised for additional growth
assuming our economy continues to expand. The bulk of these proposed
projects are in Pierce, Snohomish, and Thurston Counties. While the
consensus is that at some point the market will likely hit some dips, the
immediate outlook is still positive.
For starters, port activity is doing well. The Northwest Seaport Alliance
reports the May 2018 imports reached their highest level since 2010 at
131,067 TEUs (20-foot equivalent units), an increase of 0.7% over last
May. At 114,227 TEUs, export volumes were down 11.2%, but above the
five-year average. Breakbulk cargo volume grew 34.8%, year to date,
while auto volume continues to be down, currently at 15% year-to-date.
The region's employment also continues to perform well. Year over year
growth (May 2017 to May 2018) grew by 3.0% (nearly 64,000 jobs). The
key sectors that have an impact on the industrial market include
Construction (+3,900 jobs), Transportation & Warehousing (+600 jobs)
and Wholesale Trade (+1,600 jobs). Manufacturing, which has been
showing declines in employment, actually was on the positive side at
+1,500 jobs over the past 12 months. Looking ahead, The Puget Sound
Economic Forecaster's 2nd quarter 2018 report projects employment
growth of 2.4% in 2018 and 1.0% in 2019. The latest growth projections
of 2018 are slightly above their prior projected growth of 2.3%, while the
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2019 projection is below the prior estimated growth of 1.4%. Wholesale
and retail trade are expected to grow by 8,400 jobs followed by
Construction at 1,700 jobs and Transportation at 2,200 jobs.
Manufacturing is expected to lose another 2,700 jobs, primarily in
Aerospace.
Looking at key employers, while Boeing has been trimming jobs, they are
planning to boost monthly production of the 737 and 787 jets in 2019 and
the 767 in 2020. The biggest backlog on jet orders is the 737 at 4,656
jets. Microsoft is planning to expand their existing campus in Redmond
with 18 new buildings over the next five to seven years, remodel several
others, and demolish some. The end result is potentially adding 8,000
more workers. Amazon continues to hire in Seattle despite the recent
drama of the approval, then repeal of the Seattle head tax. Nationally,
the trade tariffs by the Trump administration and the potential impacts on
our local economy will need to be watched as that is played out over the
next several months.
Regional Industrial Inventory- 2nd Qtr 2018
% of New
Sub-Market Size (Sq ft) Market Construction
Seattle Close-In 58,222,992 17.5% 661,075
South King County 111,377,876 33.5% 1,978,352
East King County 21,756,297 6.5% 65,000
Snohomish 51,621,658 15.5% 446,863
Pierce County 76,818,329 23.1% 3,243,593
Thurston County 13,023,304 3.9% 609,828
Total 332,820,456 100.0% 7,004,711
Source: KM & CoStar
Regional Vacancy / As noted above, absorption was positive at 1,196,710 sq ft for the 2nd
Absorption / Rent quarter. Pierce County led the way (772,921 sq ft), followed by South
Forecast Kling (360,955 sq ft) and Snohomish County (281,561 sq ft). A list of
notable 2nd quarter leases is included in the Significant Transactions
section.
A total of 1,355,847 sq ft was delivered in the 2nd quarter. In addition,
some older buildings were removed from the total supply (approximately
67,000 sq ft). With positive net absorption of 1,196,710 sq ft, the region's
vacancy held steady at 3.3%. There are several leases signed but the
tenants have not yet moved in, which should continue to boost the
market.
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Rental rates over the past three months saw an increase in three of the
six markets. Overall, for the region, the average asking rental rates
continue to grow on a quarterly basis.
Regional Industrial Vacancy
Sub-Market 2013 2014 2015 2016 2017 1Q 2018 2Q 2018
Seattle Close-In 3.3% 2.1% 1.7% 2.0% 1.5% 1.6% 2.09%
South King County 5.9% 4.7% 4.1% 2.3% 3.4% 4.0% 3.66%
East King County 7.9% 6.6% 5.3% 2.7% 3.2% 3.2% 3.33%
Snohomish 8.3% 5.6% 5.7% 5.0% 4.7% 4.5% 4.30%
Pierce County 5.3% 6.2% 6.9% 5.9% 2.2% 2.7% 3.18%
Thurston County 8.1% 7.5% 5.7% 2.9% 3.0% 3.3% 2.01%
Total 5.9% 4.9% 4.7% 3.5% 3.0% 3.3% 3.29%
Source: KM & CoStar
Regional Industrial Absorption
Sub-Market 2013 2014 2015 2016 2017 2Q 2018 YTD 2018
Seattle Close-In (107,094) 565,919 183,596 (402,455) 337,373 (322,746) (381,764)
South King County 975,514 1,731,629 1,951,046 2,191,388 -90,309 360,955 (32,908)
East King County (172,671) 118,399 329,707 706,020 -73,717 (62,960) (68,226)
Snohomish 372,391 1,409,096 539,023 446,803 639,719 281,561 373,727
Pierce County 1,911,425 1,106,767 1,670,102 3,030,113 4,635,584 772,921 693,207
Thurston County (39,591) 69,164 262,934 339,472 800,273 166,979 155,527
Total 2,939,974 5,000,974 4,936,408 6,311,341 6,248,923 1,196,710 739,563
Source: KM & CoStar
Submarket Review Seattle Close-In Review
The Seattle Close-In market vacancy rose to 2.1% this quarter. The
biggest challenge in this market is for tenants to find space and ultimately
many end up looking south for opportunities. Absorption was a negative
322,746 sq ft for the quarter, but the outlook remains positive. Two
projects are under construction, including Prologis Georgetown
Crossroads (589,615 sq ft) targeted to be completed later this year. West
Woodland Business Center (71,460 sq ft) recently broke ground. One
notable sale this quarter was Village Investment Partners purchase of the
Hathaway Building for $12,250,000 ($306/sq ft). Also, Seattle Goodwill
Industries purchased the Brick Building for $5,175,000 ($187/sq ft).
The forecast for the Seattle Close-In market for the next six months is for
lease rates to range from $1.00 to $1.80/sq ft/month, NNN for mediumand
high-grade buildings. Overall, where rents are actually quoted, the
average asking rent increased from $1.06/sq ft to $1.09/sq ft, blended.
Demand for sale properties continues to remain high with a very limited
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supply. Better quality buildings will sell between $200 and $300/sq ft.
When available, depending on size and whether it is paved, graveled,
and fenced, yard rates will vary from $0.22 to $0.25/sq ft going south to
north.
South King County Review
After seeing a slight rise in vacancy last quarter, the South King
submarket's vacancy rate dropped back down to 3.7% with positive net
absorption of 360,955 sq ft. Notable recent leases include Talking Rain
(95,533 sq ft) at North Valley 64, and Dealer Tire (84,251 sq ft) at Auburn
Distribution Center. Development continues to be active, with Seattle
Gateway Center 1 & 2 (458,490 sq ft combined), DCT Hudson
Distribution Center (287,832 sq ft), Des Moines Creek Business Park
Phase IV, Buildings A & B (514,121 sq ft), North Auburn Logistics
(261,553 sq ft), and 234 Distribution Center (125,400 sq ft). All are
approaching construction completion and experiencing significant leasing
activity. Pacific Logistics North (163,894 sq ft) also just broke ground.
There were no deliveries in the quarter, but nearly 1.8 million sq ft are on
target to be completed this year. On the sales side, LBA Realty was
active buying side, with the $19.5 million purchase of 200 SW 34th Street
in Renton ($133/sq ft) and two smaller buildings at 720-790 Andover Park
East (Tukwila) and the Allied Building (Kent) for a combined $14.5 million
or $141/sq ft. We also note that Blackriver Corporate Park sold ($28.8
million or $121/sq ft), but that project is comprised primarily of office
buildings with a few flex buildings. Laird Norton Properties was the
buyer.
Average asking rents (blended) continue to climb, now at $0.72/sq ft,
$0.02/sq ft higher than last quarter. Shell rates on newly constructed
buildings are in the mid $0.60s/sq ft with office add-on now $1.00/sq ft.
Older existing buildings are achieving rents in the lower to mid $0.60s.
Office add-on rates vary from $0.75 to $0.95, depending on age and
quality of the build-out. Building sale prices are expected to range from
$115 to $170/sq ft. Land values will range from $25 to $28/sq ft for fully
improved sites, with the higher prices further north.
East King County Review
East King County had mix results this quarter. Total supply shrank due to
some older buildings removed from the inventory (about 32,000 sq ft).
Net absorption was a negative 62,960 sq ft for the quarter resulting in a
slight increase in vacancy from 3.2% to 3.3%. The majority of leases
signed are under 10,000 sq ft, which is typical for this predominantly flex
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market. One project in Redmond (7310 185th Ave. NE) is underway and
totals 65,000 sq ft. Delivery is expected before the end of this year.
Kennedy-Wilson purchased Redmond East Business Campus, an 8-
building office and flex development from The Blackstone Group for
$52.125 million ($179/sq ft). Compact Information Systems purchased
the Nexus Corporate Park in Snoqualmie for $16 million or $209/sq ft.
Nexus Properties, Inc. out of San Diego was the seller.
The forecast is for NNN warehouse lease rates with high-bay warehouse
manufacturing space to range between $0.70 and $1.00/sq ft/month, with
most in the $0.75 to $0.95/sq ft range. In some markets such as
Bellevue, the rate is pushing closer to $0.95/sq ft and above. Office rates
are in the $1.40 to $1.65/sq ft range. Flex space rents to range between
$1.00 and $1.40/sq ft/month, NNN. Building sale prices are between
$175/sq ft to $220/sq ft of building area for industrial (owner/users at the
high end) and over $200 to close to $300/sq ft for flex properties. Land
prices will run from $15 to nearly $40/sq ft for a premium site, although
there is a limited amount of available land ready for development.
Snohomish County Review
Snohomish County continues to be very active on the industrial side.
Seaway West Buildings A & B were delivered this quarter (186,977 sq ft).
Net absorption totaled 281,561 sq ft, outpacing deliveries. End result is a
drop in vacancy to 4.3%. On the development side, Dermody
Development's LogistiCenter @ Woodinville, Buildings A & B (409,500 sq
ft) broke ground earlier this year, while Leifer Industrial Park 2 (37,363 sq
ft) is nearly done. Also, GS Venture Partners last quarter announced that
their Gateway Business Park, a 54-acre development of the former
Northwest Hardwoods and Weyerhaeuser log mill site in Arlington was
nearly pad ready for a 300,000 sq ft industrial building and should start
construction soon. Up to 1.0 million sq ft is planned. Harbour Point Tech
Center in Mukilteo was acquired by a local investment group for $25
million or $76/sq ft. The Bauman Family Investment acquired two smaller
properties in Monroe for $4.4 million ($110/sq ft) and $3,925,000
($109/sq ft).
The forecast over the next six months is for warehouse lease rates to
range between $0.60 to $0.70/sq ft/month, NNN in the closer-in
submarkets and lower ($0.50 to $0.55/sq ft) in the outlying markets.
Office rents are $1.25 to $1.35/sq ft for second generation space and
$1.35 to $1.40/sq ft for new space. Building sale prices are predicted to
range from $140 to $170/sq ft for buildings in the 5,000 to 20,000 sq ft
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range; $110 to $150/sq ft for buildings in the 20,000 to 60,000 sq ft
range. Flex space will be higher (over $200/sq ft). There is a lack of
larger buildings offered for sale in the market. Land values should range
from $5 to $16/sq ft with an ample supply of industrial-zoned sites,
particularly up north in Arlington and Marysville.
Pierce County Review
Pierce County's net absorption for the quarter was nearly 773,000 sq ft.
However, with nearly 1.2 million sq ft in deliveries, vacancy rose from
2.7% to 3.2%. The County remains very active on the construction front
with 11 projects totaling 3,243,593 sq ft or about 46% of the total for the
region. Development hot spots include Port of Tacoma/Fife, Puyallup,
Lakewood, and DuPont. The largest project completed this quarter was
IPT Tacoma Logistics Buildings A & B (1,109,145 sq ft), with SBS
Transportation leasing 444,428 sq ft in Building B. Another large tenant
moving in this quarter was Tiger Logistics at Building D-Prologis Park
Tacoma. Three notable sales this quarter include Fife I-5 Commerce
Center for $37,250,000 ($149/sq ft). Blackrock is the buyer and The
Carlyle Group the seller. Sumner West sold on a sale/leaseback for
$19,750,000 or $160/sq ft by DCT Industrial Trust. In another
sale/leaseback, Jesse Engineering Company sold their building at 1840
Marine View Drive for $16.7 million ($27.58/sq ft on the land area) to
CenterPoint Properties.
Pierce County's forecast is for shell rates to range between $0.55 to
$0.62/sq ft/month, NNN, plus add-on office rates of $0.90 to $1.00/sq
ft/month. Industrial building sale prices will range from $80/sq ft for older
buildings to $155 to $165/sq ft for new or smaller buildings. Land values
typically range between $16/sq ft and $18/sq ft.
Thurston County Review
Thurston County saw its vacancy rate drop to 2.0% from 3.3% with
166,979 sq ft in positive net absorption. Construction activity picked up
this quarter with two projects at Hawks Prairie III Lots 10 and 19 (226,550
sq ft) and Meridian Campus Corporate Park (9045 Polaris) at 318,028 sq
ft. Total construction volume stands at 609,828 sq ft. With an
abundance of land, the County has a substantial amount available for
development. Currently, there is about 5.0 million in the pipeline with a
potential of about 1.8 million sq ft that could start before the end of 2018.
Endangered gopher habitat issues continue to have an impact on
development.
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Shell rents are ranging between $0.38 to $0.40/sq ft on larger spaces and
office add-on rates from $0.75 to $0.90/sq ft. Smaller spaces are $0.45
up to $0.55/sq ft on the shell with office add on at $0.85 to $0.90/sq ft.
Building sales are expected to range from $50 to $100/sq ft. Land values
range from $4.00 to $7.00/sq ft, with some smaller lots being offered at
up to and over $8.00/sq ft.
Investment Market Sales activity through the first half of 2018 was active with 118
transactions totaling $917.4 million. Cap rates are now in the 4% to 4.5%
range. Notable sales over $20 million that sold this quarter include
Redmond East Business Campus ($52.125 million or $179/sq ft) to
Kennedy-Wilson Properties. Fife I-5 Commerce Center ($37.5 million or
$149/sq ft) to Black Rock (The Carlyle Group was the seller). Harbour
Point Tech Center acquired by MRM Mt. Vernon LLC & GT Mukilteo LLC
for $25 million ($76/sq ft). The seller was Prescott Realty Group; Sumner
West at $19,750,000 ($160/sq ft) to DCT Industrial Trust on a
sale/leaseback.
REGIONAL INDUSTRIAL SALES
Avg Avg
Year Sales Total SF Total $ Volume Size SF $/SF Cap Rate
2018* 118 5,238,434 $917,413,190 47,193 $175.53 5.49%
2017 205 6,221,386 $1,031,004,151 31,905 $153.73 6.42%
2016 250 10,507,780 $1,458,135,537 43,601 $133.06 6.46%
2015 222 10,134,650 $1,609,337,910 48,032 $121.60 6.69%
2014 233 9,916,744 $926,615,006 43,686 $89.33 6.97%
2013 172 6,553,111 $712,341,402 39,477 $105.53 6.28%
2012 200 8,195,968 $920,922,952 43,829 $87.68 6.82%
2011 113 6,927,319 $528,284,088 64,142 $74.51 7.78%
2010 99 4,115,634 $361,919,782 41,996 $86.86 7.84%
2009 94 3,317,301 $281,514,709 35,670 $84.66 8.54%
2008 201 6,993,731 $751,544,060 35,501 $105.86 6.21%
Source: CoStar
* 2018 through June 23, 2018
Other Development Development News & Trends
News, Trends &
Notable projects under construction include:
Significant
Panattoni's Lakewood Tacoma Gateway (467,526 sq ft)-expected
Transactions
delivery-3rd quarter 2018
IPT Sumner Distribution Center (229,016 sq ft)-expected delivery
3rd quarter 2018
DCT Blair Logistics-Buildings A & B (542,750 sq ft and 428,228 sq
ft)-expected delivery 3rd quarter (Building A) 4th quarter 2018
(Building B)
Seattle Gateway Center 1 & 2 (325,290 sq ft & 133,200 sq ft)-
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expected delivery 3rd quarter 2018
Prologis Georgetown Crossroads project (589,615 sq ft) is
underway, delivery by 3rd quarter 2018
Des Moines Creek Business Park Phase IV-Buildings A and B
(514,121 sq ft)-delivery by 4th quarter 2018
North Auburn Logistics (261,553 sq ft) is targeted for 3rd quarter
2018 delivery
LogstiCenter @ Woodinville-Buildings A & B (275,500 sq ft and
134,000 sq ft)-expected delivery-4th quarter 2018.
DCT Hudson in Auburn (287,832 sq ft)-delivery expected by 3rd
quarter 2018
The Viking in Pierce County (438,065 sq ft)-delivery expected by
1st quarter 2019
Gayteway Business Park in Arlington is ready to move forward
with 300,000 sq ft. A 12-month construction period is projected
DCT 167 Landing, Buildings A & B (360,955 sq ft)-delivery
expected by 1st quarter 2019
Meridian Campus Corporate Park (318,028 sq ft)-delivery by 3rd
quarter 2018
Hawks Prairie III-Lots 10 and 19 (226,550 sq ft)-delivery by 1st
quarter 2019
Fennell Creek Industrial Park in Pierce County (257,000 sq ft)-
delivery by 4th quarter 2018
Significant Transactions-2nd Quarter 2018
Notable Sales include:
Redmond East Business Campus sold for $52.125 million
($179/sq ft). Buyer is Kennedy-Wilson Properties and the seller is
The Blackstone Group.
Fife I-5 Commerce Center sold for $37.5 million ($149/sq ft).
Buyer is Black Rock. Seller is The Carlyle Group.
Harbour Point Tech Center sold for $25 million ($76/sq ft). Buyer
is MRM Mt Vernon LLC GT Mukilteo LLC and seller is Prescott
Realty Group.
Sumner West sold for $19,750,000 ($160/sq ft). Buyer is DCT
Industrial Trust Inc. and the seller is Sound Sleep.
Notable leases include:
SBS Transportation (444,428 sq ft) at IPT Tacoma Logistics
Center
Tiger Logistics (160,000 sq ft) at Prologis Park Tacoma, Building
D
Talking Rain (95,533 sq ft) at North Valley 64
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Conclusion The region's industrial market continues to perform well and is very active
with 7.0 million sq ft currently under construction and another 14.4 million
sq ft in the pipeline. The majority of the pipeline are in Pierce and
Thurston Counties. In addition, several notable leases have been signed
with targeted move-in dates in the next six months should provide a
continued boost to the market, which saw nearly 1.2 million sq ft of
positive net absorption in the 2nd quarter. The Northwest Seaport
Alliance reports that May import volumes reached their highest volume
since 2010, but export volumes were down. Finally, rental rates continue
to increase in most markets and holding steady in others.
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Burien/Seatac Industrial Submarket
Vacant Under
Inventory Vacant SF Net Absorption Deliveries Under All Service Type
Quarter Inventory SF Percent % Deliveries SF Construction
Bldgs Total SF Total Bldgs Construction SF Rent Overall
Total Bldgs
QTD 122 4,530,457 64,070 1.4% 5,516 0 0 1 246,108 $7.78/nnn
2018 Q2 122 4,530,457 69,586 1.5% 233,500 1 268,013 1 246,108 $7.91/nnn
2018 Q1 121 4,262,444 35,073 0.8% 3,364 0 0 2 514,121 $7.97/nnn
2017 Q4 121 4,262,444 38,437 0.9% 9,808 0 0 2 514,121 $8.85/nnn
2017 Q3 121 4,262,444 48,245 1.1% (24,129) 0 0 2 514,121 $7.80/nnn
2017 Q2 121 4,262,444 24,116 0.6% 566,056 1 150,103 0 0 $7.62/nnn
2017 Q1 120 4,112,341 440,069 10.7% 7,390 1 352,800 1 150,103 $7.62/nnn
2016 Q4 119 3,759,541 94,659 2.5% 147,572 0 0 2 502,903 $7.24/nnn
2016 Q3 119 3,759,541 242,231 6.4% 5,361 0 0 2 502,903 $6.96/nnn
2016 Q2 119 3,759,541 247,592 6.6% 374,973 0 0 2 502,903 $6.43/nnn
2016 Q1 119 3,759,541 622,565 16.6% 65,648 0 0 0 0 $6.34/nnn
2015 Q4 119 3,759,541 688,213 18.3% (24,213) 3 501,659 0 0 $6.12/nnn
2015 Q3 116 3,257,882 162,341 5.0% (19,827) 0 0 3 501,659 $7.95/nnn
2015 Q2 116 3,257,882 142,514 4.4% 51,153 0 0 3 501,659 $8.10/nnn
2015 Q1 116 3,257,882 193,667 5.9% (22,813) 0 0 3 501,659 $7.71/nnn
2014 Q4 117 3,263,842 176,814 5.4% (4,919) 0 0 2 267,956 $7.77/nnn
2014 Q3 117 3,263,842 171,895 5.3% (487) 0 0 2 267,956 $6.99/nnn
2014 Q2 117 3,263,842 171,408 5.3% (10,671) 0 0 2 267,956 $6.16/nnn
2014 Q1 117 3,263,842 160,737 4.9% 84,808 0 0 0 0 $6.32/nnn
2013 Q4 117 3,263,842 245,545 7.5% (12,011) 0 0 0 0 $6.15/nnn
2013 Q3 117 3,263,842 233,534 7.2% 35,475 0 0 0 0 $5.99/nnn
2013 Q2 117 3,263,842 269,009 8.2% 29,850 0 0 0 0 $5.87/nnn
2013 Q1 117 3,263,842 298,859 9.2% (19,996) 0 0 0 0 $5.61/nnn
2012 Q4 117 3,263,842 278,863 8.5% (36,804) 0 0 0 0 $5.63/nnn
2012 Q3 117 3,263,842 242,059 7.4% 17,730 0 0 0 0 $6.10/nnn
2012 Q2 117 3,263,842 259,789 8.0% (5,678) 0 0 0 0 $6.25/nnn
2012 Q1 117 3,263,842 254,111 7.8% 36,243 0 0 0 0 $6.51/nnn
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Burien/Seatac The subject is located within the Burien/Seatac submarket. This district
Submarket is part of the South King County industrial submarket, which is the largest
of the five submarkets that comprise the greater Puget Sound industrial
market. The table on the previous page summarizes inventory trends
over the past seven years by quarter from 2012 through the current
quarter.
EXISTING As of the current quarter, there is about 4.5 million sq ft of industrial
INVENTORY & NEW building stock with one 246,108 sq ft project currently under construction.
CONSTRUCTION
Since 2014, about 1.3 million sq ft were delivered across six
developments include nearly distribution warehouses developed by
Panattoni. Increasing demand from the strong economy and increase in
internet retailing has spurred increased industrial development. Many
new projects have been delivered recently in South King County. Since
2015, Panattoni delivered about 800,000 sq ft of new warehouse space
in the Des Moines Creek Business Park on land leased from the Port of
Seattle to the south Sea-Tac International Airport. This project is east of
and close to the subject. Lease-up was rapid. To the south, several
large distribution warehouse developments have been constructed in the
past four years as noted previously.
VACANCY & Vacancy rates have declined steadily and current vacancy at 1.4% is a
OCCUPANCY slight increase over the 0.8% reported at the beginning of the year.
ABSORPTION, DEALS Since the beginning of 2012, nearly 1.5 million sq ft have been absorped.
& LEASE RATES Average asking rates declined to $0.47/sq ft/month in late 2012 but have
generally been increasing since. Current asking rental rates are now
$0.65/sq ft/month NNN.
Conclusion The subject submarket remains healthy and weathered the downturn
associated with the 2008-2009 recession relatively well. Limited new
construction and a desirable location allowed the market to stabilize
relatively quickly. Recent new development has absorbed rapidly.
Demand for industrial space continues to remain strong. The area is
well-positioned to remain a healthy industrial submarket.
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Property Description - After
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Parcel Map - After
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Site Description - After
Introduction Based on the requirements in the WSDOT ROW manual, the
appropriate method to value the subject is to consider its value
enhancement to the adjoining property to the west which is owned by
the Port of Seattle, the potential acquirer of the subject. This method is
essentially a reverse Before and After appraisal. The difference between
the value of both assembled parcels (After) and the value of the abutting
Port of Seattle property's standalone value (Before) is market value for
the subject. In this report, the subject in the After condition when
assembled with the adjoining property owned by the Port of the Seattle
is first valued. Then in the Before scenario, the adjoining Port of Seattle
property is valued. The value for the subject is reconciled as the
difference between the Before and After values. This section and
subsequent sections pertain to the After condition. Later in the report,
corresponding sections pertain to the Before condition.
Street Address XXX S. 216th Street
Des Moines, WA 98198
Site Dimensions & In the After scenario, the subject is a 1,300,796 sq ft or 29.86-acre
Land Area vacant land parcel. The site is about 1,300 feet north to south and
1,300 feet east to west at its greatest extent at the north. As discussed
in this section, the subject's wetlands are limiting factors in development.
Streets, Access & The irregularly-shaped site is located at the north side S. 216th Street in
Exposure Des Moines. It has about 1,025 lineal feet along S. 216th Street. A
narrow strip of subject at the north end of the subject extends toward S.
212th Street at the intersection 15th Avenue S. Visibility from S. 216th
Street is good. Access to I-5 is via the S. 200th Street or SR 516
interchanges each about 2.2 miles away. The subject's access and
exposure are good.
Topography & Soil Much of the subject is fairly level in its southern extent but has a
Conditions downward grade at the northern portion of the subject. The maximum
grade change is about 100 feet across the entire site with the highest
point in the southeast and lowest in the northwest part of the subject.
No soils reports were provided for review. It is an assumption that soils
are sufficient to support the proposed building improvements. The client
provided the following map indicating potential wetlands impacting the
subject. This information appears is based on a 2007 draft
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Map of Potential Wetlands
Environmental Impact Study (EIS) for the Des Moines Creek. As shown,
three areas of suspected wetlands impact the site. According to Port of
Seattle documents, the two wetland areas on the west side are Class III
wetlands. With setback buffers included, about 45% of the property
appears to be impacted. The potential presence of wetlands appears to
significantly impact the use of the subject. This information from the
client is the best available and is presumed to be accurate. Mr. Glenn
Price a Review Appraiser at WSDOT has reviewed the wetland and
determined the following areas:
Area (SF)
Upland 717,796
Southwest wetland + buffer 74,900
West wetland + buffer 67,000
East wetland + buffer 441,100
Total 1,300,796
I have reviewed Mr. Price's estimates and they appear to be sufficiently
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accurate and are used in this report. About 717,796 sq ft is dry upland
area. The remainder comprises wetland in three separate locations.
The largest wetland is along the entire east side of the property. Two
smaller wetlands are along the west side of the property. It is an
extraordinary assumption that the wetland impact and resulting usable
area conclusion are accurate.
Flood Zone The site is located in an area not prone to flood risk, per FEMA
community panel 53033C0966F. This is a non-printed panel. The
subject is located in Zone X, which is an area determined to be outside
the 100-year floodplain.
Earthquake Zone The International Building Code (IBC) is the building code in Washington
State. The IBC uses a parameter called the Seismic Design Category
rather than seismic zones used in previous building codes. The Seismic
Design Category is a function of three parameters: ground motion, soil
type and building occupancy. The typical Seismic Design Category in
the Puget Sound is category "D" or greater, but because these
parameters interact, this category can vary. The higher the category (A
is lowest, F is highest), the more stringent the structural requirements.
As the appraiser does not possess the expertise in seismic, structural &
geotechnical engineering, further analysis is required to determine the
subject's degree of risk.
Utilities Public utilities are available to the subject include sewer, water, storm
drainage and electricity.
Easements, No title report was provided. The City of Des Moines' Des Moines Creek
Encroachments, Trail passes through the subject and there may be an easement
Covenants & associated with that use. It is an assumption of this report that no
Restrictions easement, encroachment, covenant or restricts negativity impacts the
use or marketability of the subject.
Recognized Environmental reports were not provided. For the purpose of this
Environmental appraisal, it is assumed that the subject property is free of contamination
Conditions of any kind. This assumption should not be construed as a guarantee
that such conditions do not exist. The reader is referred to Item 2 of the
Limiting Conditions at the beginning of this report. The subject is located
south of the central runway at Sea-tac International Airport. During the
inspection, with aircraft take-offs to the south over the subject, frequent
aircraft noise was observed.
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Zoning The subject is zoned B-P (Business Park) by the City of Des Moines.
(1) The primary purpose and objective of the Business Park (B-P) Zone
is to provide areas of the City for development of compatible business,
professional office, light industrial, research and development, service
uses, wholesale trade, and limited retail uses. Such uses shall be
developed within master planned sites in park-like settings pursuant to
development standards.
(2) It is also the purpose of this zone to ensure compatibility between
business parks and adjacent uses in terms of height, bulk, scale, and
design; to mitigate potential adverse environmental impacts and
nuisance effects on-site and off-site through careful planning, the use of
buffering and screening, and the imposition of environmental
performance standards and appropriate off-site mitigation requirements;
to provide for the planned economic development of the City; to ensure
that business park development is coordinated with the provision of
adequate infrastructure by private applicants and the City, such as
roads, drainage, and other utility systems; to require that business park
developments pay their fair share of the costs of needed services and
facilities; and to ensure that development occurs consistent with the
goals and policies of the City of Des Moines Comprehensive Plan.
(3) Further, it is the purpose of this zone to establish standards to
ensure that development occurs in a manner that is compatible with the
Des Moines Creek Park, Des Moines Creek Trail, Steven J. Underwood
Memorial Park, City of Des Moines Activity Center and adjacent
residential-designated properties.
In this zone, development by master plan is required. Allowable uses
include a variety of commercial uses including retailing, office,
warehouse and light manufacturing uses. Residential use is not
permitted. Development standards include a minimum lot size of 2
acres; maximum coverage ratio is 75%, building height limit of 75 feet,
setbacks of 20 feet along the arterials, 30 feet from adjacent residential
properties, and 15 feet from non-arterial streets and 10 feet from
properties other than residential properties.
On-site parking is required depending upon use. For manufacturing and
warehousing uses, the minimum is two parking spaces for each three
employees or one space for each 1,500 sq ft of gross floor area; use
whichever is greater. For office use, the minimum is one stall per 350 sq
ft of gross floor area.
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Taxes & Assessment The subject property is government-owned and exempt from property
Information taxes except for minor special assessments. These potential minor
assessments are unknown.
Conclusion In the After scenario as assembled with the Port of Seattle properties,
the subject is a 1,300,796 sq ft vacant land parcel with an irregular
shape. It has reasonably level areas, but the northern portion is
impacted by moderate slopes. All typical utilities are available.
Surrounding properties are a mix of industrial uses to east, then
commercial uses along SR 99. To the west are mainly single-family
residences. Based on the wetland information available, it is estimated
that wetlands and buffers impact about 45% of the site. However, the as
discussed previously, a portion of the wetlands appears to be suitable
for mitigation. It is important to note that this conclusion is based on the
best available information at hand and no formal wetland delineation
was been performed. It is an extraordinary assumption that this
information is accurate. The subject's irregular shape, particularly the
extension to the west in the northern part, is a limiting factor in
development. Apart from the wetlands and shape, given the location,
size, utility and topography of the site's usable area, the subject is
conducive to any permitted use under zoning.
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Highest & Best Use - After
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Highest & Best Use - After
"Highest & Best Use" is defined by the Appraisal Institute as:
The reasonably probable use of property that results in the
highest value. The four criteria that the highest and best use
must meet are legal permissibility, physical possibility, financial
feasibility, and maximum productivity.
Source: The Dictionary of Real Estate Appraisal, Sixth Edition. Chicago: Appraisal Institute, 2015.
The subject is zoned B-P (Business Park) by the City of Des Moines.
AS VACANT
Allowable uses include a variety of commercial uses including industrial
uses. Residential use is not permitted. Development standards include
a minimum lot size of 2 acres; maximum coverage ratio is 75%, building
height limit of 75 feet, setbacks of 20 feet along the arterials, 30 feet from
adjacent residential properties, and 15 feet from non-arterial streets and
10 feet from properties other than residential properties.
In the After scenario when assembled with adjacent Port of Seattle
property, subject is a 29.86-acre vacant land parcel with an irregular
shape. It has reasonably level areas, but the northern portion is
impacted by moderate slopes. All typical utilities are available.
Surrounding properties are a mix of industrial uses to east, then
commercial uses along SR 99. To the west are mainly single-family
residences.
With setback buffers included, about 45% of the property appears to be
impacted. The potential presence of wetlands appears to significantly
impact the use of the subject.
Area (SF)
Upland 717,796
Southwest wetland + buffer 74,900
West wetland + buffer 67,000
East wetland + buffer 441,100
Total 1,300,796
The largest wetland is along the entire east side of the property. Two
smaller wetlands are along the west side of the property. The west
wetland is smallest and based on data from the Port of Seattle, the actual
wetland (not including buffer) is only 2,316 sq ft. Given its orientation in
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the midsection of the property with upland areas all around as well as its
relatively small size and category III type, it is financially feasible to
mitigate this wetland. Based on data from Ms. Megan Webb of King
County Water & Land Resources Division, wetland mitigation fees
depend on a variety of wetland characteristics including the size and type
of wetland. Category I wetlands are rarely mitigated with Category III and
IV more commonly mitigated. The likely cost to purchase mitigation
credits ($50,000 per credit) for this wetland will range from about $40 to
$50/sq ft or between $92,640 and $115,800. Mitigation costs are not the
only cost to mitigate and convert wetlands to uplands. Other costs
include consultant fees, permit fees, overhead and a reasonable profit to
incur the risk and effort of eliminating wetlands. However, as shown in
this report, the value of the subject usable land is $15/sq ft suggesting a
potential value of $871,000 for this wetland and associated buffer.
Assuming this wetland and buffer were mitigated, total upland usable
area would be 784,796 sq ft.
The subject has good visibility and access to I-5. Surrounding uses
include mainly industrial and commercial uses. The larger industrial
market is healthy with a low vacancy rate and rising rents. Speculative
industrial development has been on-going and successful in the larger
Seattle industrial market. It is currently financially feasible. In recent
years, Panattoni has successfully developed and sold several industrial
buildings directly east as part of the Des Moines Creek Business Park.
Retail, office and services are also possible in this area, but industrial
development is more likely given the location adjacent to other new
industrial development and the impact of airport noise.
AS VACANT Considering all factors, the highest and best use of the subject in the
CONCLUSION After scenario is industrial use with mitigation of the west wetland.
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Sales Comparison Approach - After
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Sales Comparison Approach - After
Introduction The Sales Comparison Approach is based on the premise that market
value of the property is directly related to recent sale prices of
competitive properties and the availability of substitute properties with
similar utility and desirability. The most similar sales of properties within
this area were investigated and compared to the subject in this analysis.
A summary of pertinent details to the comparable sales selected is
presented on the facing page with a location map and photographs on
the preceding pages.
Comparable Sales The value of land is strongly influenced by its potential highest and best
Data use. Therefore, land is customarily valued as though unimproved and
available for development for the use, which would justify the highest
price and the greatest net return. Land valuation involves the same
principles and methodology of the physical unit of comparison method
discussed later in the Sale Comparison Approach. Sales of unimproved
land similar to the subject are investigated and the most appropriate
transactions are analyzed and compared to the subject.
As noted previously, the subject site comprises land zoned for
commercial and industrial use and is located in Des Moines. The highest
and best use will be for industrial use. Four sales of similar properties
located in the area were selected for analysis. The comparables are
analyzed by the price per square foot of usable land area, the most
common indicator of value for properties of similar value and utility when
compared with the subject.
As discussed in the Highest and Best Use section, mitigation of the west
wetland is financially feasible. The Sales Comparison Approach is
performed assuming the west wetland and associated buffer are
converted to usable upland area bringing the total upland area to 784,796
sq ft. Then costs to mitigate the wetland are deducted to yield the After
value indication.
SALE This is the sale of a 6.7-acre regular site in an industrial area in Pacific.
COMPARISON The property was assembled by the seller for owner use, but the seller
NO. 1
decided to sell after recognizing the challenge of relocating his business.
The broker approached Panattoni directly without listing the property for
sale. Panattoni made an offer that was accepted. Wetlands reduced
usable area is about 5.85 acres. The property sold for $17.45/sq ft of
usable land in May of 2018.
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Subject
Sale 2
Sale 3
Sale 1
Sale 4
Comparable Land Sales Map
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Land Sale Photographs
Comparable 1
942 Valentine Avenue
Pacific, WA
Comparable 2
NEC of S. 216th Street & 24th
Avenue S.
Des Moines, WA
Comparable 3
6600 & 6603 S. 287th Street
Auburn, WA
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Land Sale Photographs
Comparable 4
2801 78th Avenue E
Fife, WA
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Land Sale Comparisons
Address
City Land Area (Sq ft) Sales Buyer
No. Tax Parcel Zoning Land Area (Acres) Sale Date Price Price/Sq ft Seller Comments/Confirmation
1 942 Valentine Avenue LI 254,826 May-18 $4,446,483 $17.45 Panattoni Development Purhcased for development of a proposed warehouse.
Pacific, WA 5.85 A-1 Pallets Inc. Site is about 6.7 acres but impacted by wetlands to
449540-0130, -0100, -0120, -0110 reduce usable to about 5.85 acres.
Jeff Crane, Andover, (206) 336-5336
2A Portion of Property
21202 - 21402 24th Avenue S PR-C 15,842 Jul-17 $800,000 $50.50 Panattoni Development Sale of a portion of the site improved with a single
Des Moines, WA 0.36 Jaspal & Parneet Cheema family residence.
092204-9399 Internal Files/Costar
2B Portion of Property
21202 - 21402 24th Avenue S PR-C 601,087 May-17 $9,000,000 $14.97 Panattoni Development Sale of a portion of the site improved with a nursery.
Des Moines, WA 13.80 Robert Furney Internal Files/Costar
092204-9083, -9053, -9069, -9126, -9135, -9320
2C Portion of Property
21202 - 21402 24th Avenue S PR-C 15,561 Jun-17 $560,000 $35.99 Panattoni Development Sale of a portion of the site improved with a single
Des Moines, WA 0.36 Shirley Stalgis family residence.
092204-9134 Internal Files/Costar
2D Portion of Property
21202 - 21402 24th Avenue S PR-C 351,672 May-17 $6,015,000 $17.10 Panattoni Development Sale of a portion of the site
Des Moines, WA 8.07 Ono Yoshikatsu Internal Files/Costar
092204-9003
2E Portion of Property
21202 - 21402 24th Avenue S PR-C 10,005 Jun-17 $600,000 $59.97 Panattoni Development Sale of a portion of the site improved with a single
Des Moines, WA 0.23 Wayne Carlson family residence.
092204-9142 Internal Files/Costar
Total Property PR-C 994,167 Nov-16 $16,975,000 $17.07
Des Moines, WA 22.82 to
Jul-17
3 6600 & 6603 S. 287th Street M-1 666,300 Nov-16 $9,715,840 $14.58 Panattoni Development Purchased for development of a proposed distribution
Auburn, WA 98001 15.30 SVR South 287th Auburn LLC warehouse. Price incluced plans, SEPA, land, building
352204-9024, -9016 permit.
Internal Files/Costar
4 2801 78th Avenue E I 574,052 Jul-16 $7,710,374 $13.43 Trammell Crow Company Purchased for industrial development. Sale price
Fife, WA 13.18 Benaroya Company included included compensation for pre-development
042008-4088, -4089, -4090 costs and office mitigation fees.
Internal Files
After Scenario B-P 784,796 Appraisal $11,771,940 $15.00
XXX S. 216th Street 18.0 (Rounded) $11,800,000
Des Moines, WA 98198 Less: Wetland Mitigation $200,000
"As Is" Value $11,600,000
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Upward adjustment is warranted for location. Downward adjustment is
made for site condition and shape/topography. The shape adjustment
will be significant given that the northern portion of the usable land area
is elongated and of little value apart from access and potentially
assembling with the adjacent parcel.
SALE This is the sale of a site located just east of the subject that includes five
COMPARISON separate sale transactions that closed between May and July of 2017.
NO. 2 The overall price is $17.07/sq ft although three of transactions reflect
sales of single-family residences with indicated price based on land at or
above $35/sq ft. The other two sales indicate prices between about
$15/sq ft and $17/sq ft. The overall sale price is analyzed. This is a
reasonably level and mostly cleared and graded site between Pacific
Highway S. and 24th Avenue S. north of S. 216th Street.
Downward adjustment is made for site condition and shape/topography.
Upward adjustment is made of sale date.
SALE Sale 3 is the November 2016 sale of a 15.3-acre industrial site in Auburn
COMPARISON for $9,715,840 or $14.58/sq ft. The buyer, a partnership that includes
NO. 3 Panattoni Development, plans to develop the site with a proposed
distribution warehouse. The regularly-shaped site is in an area with
minor flood risk. The developer will add fill to raise the grade somewhat.
Upward adjustment is warranted for sale date and location. A downward
adjustment is made for shape/topography.
SALE Sale 4 is the July 2016 purchase by Trammel Crow of a site on the west
COMPARISON side of Freeman Road E., south of 26th Street E. in Fife. It consists of an
NO. 4 11.51-acre development site that is zoned Industrial by the City of Fife.
The buyer is developing a speculative 250,010 sq ft distribution building.
The confirmed sale price is $7,710,374, or $13.43/sq ft which included
compensation for pre-development costs and office mitigation fees to the
City of Fife. The site will be ready-to-build and is located within the
Benaroya Business Park in Fife.
Upward adjustment is warranted for sale date and location. Downward
adjustment is made for shape/topography.
Adjustments to Pertinent market factors, along with property characteristics, were taken
Comparable Data into consideration in the analysis, and all sales were adjusted to account
for the differences between the comparables and the subject. In the
table below, adjustments are made to the indicated comparable sales
prices as previously described.
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Land Sales Approach Adjustment Grid
Name Sale Sale Current Site Shape/ Final
No. $/sq ft Conditions Date Indicator Location Zoning Size Condition Topography Indicators
092204-9003 0.0% 0.0% 0.0% 5.0% 0.0% 0.0% -5.0% -10.0% -10.0%
1 $17.45 $0.00 $0.00 $17.45 $0.87 $0.00 $0.00 ($0.87) ($1.74) $15.70
21202 - 21402 24th Aven 0.0% 3.0% 3.0% 0.0% 0.0% 0.0% -5.0% -10.0% -12.0%
2 $17.07 $0.00 $0.51 $17.59 $0.00 $0.00 $0.00 ($0.88) ($1.76) $14.95
6600 & 6603 S. 287th Str 0.0% 5.0% 5.0% 10.0% 0.0% 0.0% 0.0% -10.0% 5.0%
3 $14.58 $0.00 $0.73 $15.31 $1.53 $0.00 $0.00 $0.00 ($1.53) $15.31
2801 78th Avenue E 0.0% 7.0% 7.0% 10.0% 0.0% 0.0% 0.0% -10.0% 7.0%
4 $13.43 $0.00 $0.94 $14.37 $1.44 $0.00 $0.00 $0.00 ($1.44) $14.37
Average $15.08
Median $15.13
Conclusion $15.00
Land Value After adjustments, comparables indicate a range of values from
Conclusion $14.37/sq ft to $15.70/sq ft with an average of $15.08/sq ft. Most
emphasis is placed on the average indicator and Sale 2, the sale of the
site closeest to the subject indicating $14.95/sq ft. Overall, considering
all factors, the market value of the subject site is estimated $15.00/sq ft of
usable land area.
784,796 sq ft @ $15.00/sq ft of usable land = $11,771,940
(Rd) $11,800,000
As discussed, mitigation of the west wetland is financially feasible and
assumed in this analysis. Mitigation credits are estimated to cost $45/sq
ft or $104,220. Other costs include consultants, permit fees,
management oversight as well as a reasonable profit for the risk of
mitigating the wetland. While it difficult to precisely estimate these costs
an estimate of $50,000 is used. A profit of 25% is deemed appropriate
bringing to total cost to mitigate the west wetland to $192,775 which is
rounded to $200,000.
Wetland Mitigation Credits $104,220
Other Costs $50,000
Subtotal $154,220
Profit at 25% $38,555
Total $192,775
Deducting $200,000, the indicated "as is" value in the After scenario is
$11,600,000.
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Property Description - Before
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Parcel Map - Before
Kidder Mathews Property Description - Before
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Site Description Before
Street Address XXX S. 216th Street
Des Moines, WA 98198
Site Dimensions & This section and following sections pertain to the Before scenario. In the
Land Area Before scenario, the property comprises only the adjoining Port of
Seattle property which totals 677,062 sq ft or 15.54-acrea. The site is
about 1,250 feet north to south and 675 feet east to west at its greatest
extent. The subject's wetlands are limiting factors in development.
Streets, Access & The irregularly-shaped site is located at the north side S. 216th Street in
Exposure Des Moines. It has about 310 lineal feet along S. 216th Street.
Map of Potential Wetlands
Kidder Mathews Property Description - Before
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Topography & Soil Much of the subject is fairly level in its southern extent but has a
Conditions downward grade at the western and northern portions of the subject.
The maximum grade change is about 65 feet across the entire site with
the highest point in the southeast and lowest in the northwest part of the
subject. With setback buffers included, about 22% of the property
appears to be impacted.
Area (SF)
Upland 529,062
Southwest wetland + buffer 74,900
West wetland + buffer 67,000
East wetland + buffer 6,100
Total 677,062
Two wetlands are along the west side of the property. The west
wetland is smallest and based on data from the Port of Seattle, the
actual wetland (not including buffer) is only 2,316 sq ft. Given its
orientation in the midsection of the property with upland areas all around
as well as its relatively small size and category III type, it is financially
feasible to mitigate this wetland as previously discussed. The east
wetland is minor. It is an extraordinary assumption that the wetland
impact and resulting usable area conclusion are accurate.
Conclusion The subject is a 677,062 sq ft vacant land parcel with an irregular shape.
It has reasonably level areas, but the western and northern portions are
impacted by moderate slopes. Based on the wetland information
available, it is estimated that wetlands and buffers impact 22% of the
site. However, the as discussed previously, a portion of the wetlands
appears to be suitable for mitigation. Apart from the wetlands, given the
location, size, utility and topography of the site's usable area, the subject
is conducive to any permitted use under zoning.
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Highest & Best Use - Before
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Highest & Best Use - Before
"Highest & Best Use" is defined by the Appraisal Institute as:
The reasonably probable use of property that results in the
highest value. The four criteria that the highest and best use
must meet are legal permissibility, physical possibility, financial
feasibility, and maximum productivity.
Source: The Dictionary of Real Estate Appraisal, Sixth Edition. Chicago: Appraisal Institute, 2015.
AS VACANT In the Before scenario, the subject is a 677,062 sq ft vacant land parcel
with an irregular shape. It some reasonably level areas but the northern
and western portions are impacted by moderate slopes. All typical
utilities are available. Surrounding properties are a mix of industrial uses
to east, then commercial uses along SR 99. To the west are mainly
single-family residences. Based on the wetland information available, it
is estimated that wetlands and buffers impact 22% of the site. However,
the as discussed previously, the west wetlands appears to be suitable for
mitigation. Assuming this wetland and buffer were mitigated, total
upland usable area would be 596,062 sq ft.
AS VACANT Considering all factors, the highest and best use of the subject in the
CONCLUSION Before scenario is industrial use with mitigation of the west wetland.
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Sales Comparison Approach - Before
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Sales Comparison Approach - Before
Comparable Sales The subject in the Before scenario will be sufficiently similar to the After
Data scenario. The same sales comparables and unit value conclusion of
$15.00/sq ft of usable land are appropriate.
Land Value Overall, considering all factors, the market value of the subject site is
Conclusion estimated $15.00/sq ft of usable land area.
596,062 sq ft @ $15.00/sq ft of usable land = $8,940,930
(Rd) $8,900,000
As discussed, mitigation of the west wetland is financially feasible and
assumed in this analysis. Total wetland mitigation cost is estimated at
$200,000. Deducting $200,000, the indicated "as is" value in the Before
scenario is $8,700,000.
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Reconciliation & Final Value Opinion
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Reconciliation & Final Value Opinion
Introduction Based on the requirements in the WSDOT ROW manual, the appropriate
method to value the subject is to consider its value enhancement to the
adjoining property to the west which is owned by the Port of Seattle, the
potential acquirer of the subject. This method is employed in this
appraisal and is essentially a reverse Before and After appraisal. The
difference between the value of both assembled parcels (After) and the
value of the abutting Port of Seattle property's standalone value (Before)
is market value for the subject.
As Is
on August 10, 2018
After Value $11,600,000
Before Value $8,700,000
Difference /Subject Value $2,900,000
Value Conclusion It is concluded the evidence best supports the following "as is" value
conclusion for the subject property:
$2,900,000
Exposure Time The definition of "exposure time" is as follows:
The estimated length of time the property interest being appraised
would have been offered on the market prior to the hypothetical
consummation of a sale at market value on the effective date of
the appraisal; a retrospective opinion based on an analysis of
past events assuming a competitive and open market.
Source: The Dictionary of Real Estate Appraisal, Sixth Edition. Chicago: Appraisal
Institute, 2015.
Brokers are reporting more market interest with most land properties
selling within 1 to 3 months. Sale 1 sold immediately. The subject, with
its irregular shape and wetland impact, is less appealing. An exposure
time for the subject of 3 to 6 months is reasonable.
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ADDENDUM
Kidder Mathews
Valuation Advisory Services Addendum
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Appraiser's Experience Data
Kidder Mathews
Valuation Advisory Services Addendum
David M. Chudzik, Ph.D., MAI, CRE
Vice President
Valuation Advisory Services
CAREER SUMMARY 601 Union St, Suite 4720
Seattle, WA 98101
Since joining Kidder Mathews' Valuation Advisory Services in October of 2004, David has T 206.205.0222
provided valuation and consultation services for a wide variety of commercial property types F 206.205.0220
including office, industrial, retail, multifamily, hospitality, marina, and development properties. dchudzik@kiddermathews.com
His experience includes complex properties like biotechnology research facilities, data
centers, sawmills, shipyards, and other specialized property types. He has performed
biotechnology valuation and market analysis on a national basis and authored the National
Biotechnology Real Estate Market Analysis for GVA Worldwide. Assignments have included
valuation of leasehold interests, air rights, condemnation compensation, conservation
easements as well as market rent studies.
David's professional experience includes venture capital investing with emphasis in the life
sciences industry. He has also worked as a development analyst and project manager at
Seattle area real estate development companies. His development experience includes
multifamily residential, commercial office, and marina developments.
David brings unique qualifications to real estate valuation and consulting making him wellqualified
in the analysis of some of the most complex and sophisticated real estate.
EDUCATION
Doctor of Philosophy, Biochemistry, University of Washington
Master of Business Administration, Management, University of Washington
Bachelor of Science, Biochemistry, University of Washington
Bachelor of Arts, Spanish, University of Washington
PROFESSIONAL LICENSES
Washington Certified General Real Estate Appraiser (No. 1102099)
Oregon Certified General Real Estate Appraiser (No. C00182)
California Certified General Real Estate Appraiser (No. 3004403)
Idaho Certified General Real Estate Appraiser (No. CGA-4877)
Virginia Certified General Real Estate Appraiser (No. 4001017780)
Washington Real Estate Broker (No. 127896)
PROFESSIONAL AFFILIATIONS
Member of Appraisal Institute (MAI)
Counselors of Real Estate (CRE)
kiddermathews.com
David Chudzik, Ph.D., MAI, CRE continued
PARTIAL CLIENT LIST
Allstate Life Insurance Co. KeyBank Puget Sound Bank
Alexandria Real Estate Equities King County Puget Western
Archdiocese of Seattle Low Income Housing Institute San Juan County Land Bank
Bank of America Memorial Medical Center Schnitzer West
BECU Merrill Lynch Seattle BioMed
Bloch Properties Morgan Stanley Seattle Monorail Project
Citibank Morton McGoldrick, PS Server Farm Realty
City of Seattle Moss Adams Stockbridge Capital Group
City of Renton National Real Estate Advisors Todd Shipyards
Davis Wright Tremaine Nexus Properties Unico Properties
East West Bank Northwest Diabetes Research Center Union Bank
First Sound Bank Northwest Kidney Center University of Washington
First Mutual Bank Novartis US Bancorp
GE Capital Olympus Real Estate Partners Vulcan Real Estate
H5 Capital Overlake Medical Center Washington Federal
Heritage Bank Perkins Coie Washington Trust Bank
Jefferson County Port of Port Townsend Wells Fargo
JPMorgan Chase Bank Portland State University
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DEPARTMENT OF LICENSING 7
BUSINESSAND PROFESSIONS DIVISION
THIS CERTIFIES THAT THE PERSON OR BiSINESS NAMED BROW IS AUTHORIZID ASA
CERTIFIED GENERAL REAL ESTATE APPRAISER5
DAVID MATTHEW CHUDZIK
7047 51ST AVENUE NE
SEATTLE WA 98113
1102099 03/17/2011 11/02/2020 "Trea2Fs
License Number Issued Date Expiration Date Teresa Berntsen, Director
PL.630-159pri
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