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January 31, 2017

Pierce County office market has strong 2016 Q4

Business Examiner

According to real estate firm Kidder Mathews, the Pierce County office market closed out 2016 with the strongest quarter in five years, with 160,672 square feet of market absorption during the three-month period.

The robust fourth quarter added to the total of 338,854 square feet for the year. The vacancy rate ended the year at 7.46 percent, down 101 basis points over the year. The availability rate bumped up slightly in the fourth quarter to 11.60 percent - still down 130 basis points over the year.

The Tacoma CBD vacancy rate ended the year at 8.1 percent, up over the fourth quarter; the availability rate is 10.1 percent, up slightly over the past quarter. Significant improvement in both CBD rates are expected next quarter as the nearly vacant 124,000-square-foot vintage Washington Building sold to Seattle's Unico Properties, which plans to convert the building to residential use.

Removing that building from the office inventory would reduce the vacancy rate by 120 basis points and the availability rate by 144 basis points. Other non-functional vintage buildings are getting closer to redevelopment, which will further reduce these rates.

Rental rates in the market have been hovering around the $21.50/s.f./year full service rate for the past year, but did move up about 1.0 percent in the quarter.

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