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June 22, 2017

Bartell Drugs pre-leased big new building before the developer even bought the land

Puget Sound Business Journal

Marc Stiles

There are myriad deals that show how super-charged the Puget Sound region's industrial real estate market is, and a deal this week in Des Moines is a prime example.

Development company Panattoni pre-leased a large building before it even closed on the purchase of the land. This is practically unheard of, said Bart Brynestad, the Panattoni partner who runs the company's Seattle-area office.

The tenant leased a 266,000-square-foot building that is rising in the fourth phase of Des Moines Creek Business Park. Brynestad declined to name the tenant but two real estate industry sources who asked not to be named said the tenant is Bartell Drugs. A spokesman for the Seattle-base pharmacy chain said Thursday the Bartell executive who works on property leasing was unavailable to comment.

At 266,000 square feet, this the largest South King County lease so far this year.

Earlier this week, two other Des Moines Creek Business Park buildings that make up the third phase of the project sold. Brynestad said the price was $67.9 million.

Panattoni started developing Des Moines Creek Business Park - which is just off Highway 99 about three miles south of Seattle-Tacoma International Airport - several years ago. The buildings have been leasing up almost as fast as Panattoni can build them, and in Bartell Drugs' case, even faster.

It's not just the Des Moines Creek project that's doing well. According to commercial real estate company Kidder Mathews, only about 3 percent of the region's industrial space is vacant, the lowest rate ever. A key reason is e-commerce. Companies want to have distribution warehouses close to population centers.

Once buildings at Des Moines Creek are full, Panattoni and its Des Moines Creek equity partner, MetLife Real Estate Investors, sell them.

In the previous deal this week, global real estate adviser Bentall Kennedy bought the third phase, according to public records. Brett Hartzell of real estate services company CBRE marketed the property for sale. This phase totals 500,700 square feet and is fully leased to companies ranging from a pharmaceutical distributor to a cracker maker.

Earlier, Panattoni and MetLife sold the first phase for $68 million, and landed the Federal Aviation Administration's new regional headquarters where 1,600 people will work in the second phase. Based on the rent that the federal government will pay over the course of the long-term lease, it is estimated that the FAA deal is worth up to $210 million.

Panattoni last month started buying land for the fourth phase, paying a total of nearly $16.2 million, according to public records, and landing Bartell Drugs before closing the land purchase. Part of the site was occupied by longtime business Furney's Nursery, 21215 International Blvd. S.

The fourth phase also includes a 244,000-square-foot building. Kidder brokers Chris Corr and Peter Wooding are marketing the space for lease.

For the full story, go to Puget Sound Business Journal.

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