Industrial developers looking farther south for new storage sites

Winlock is more than 75 miles from the Port of Tacoma and about 105 miles from the Port of Seattle. Yet that's where Seattle developer Benaroya Co. wants to build a 510-acre industrial park with distribution centers and warehouses.

Benaroya is one of several industrial developers scrambling to build warehouses and distribution centers to accommodate growth at Tacoma and Seattle ports. Increased container traffic from Asia has spurred growth at other West Coast ports, too.

Pacific Maritime Association's latest report shows that container traffic at the Port of Seattle jumped 22 percent from 2004 to 2005; at the Port of Tacoma, it rose 15.6 percent.

While most industrial development has been focused in the Kent Valley, developers are moving steadily farther south to accommodate this growth.

"In five or 10 years, we might find our southern boundary is Portland," said Matt O'Brien, an associate at commercial real-estate brokerage CB Richard Ellis.

Although warehouse construction in the Kent Valley continues, industrial land there is more expensive and harder to come by. Cities in the area are in no hurry to rezone other land for industrial use because warehouses and distribution centers provide little tax revenue and bring relatively few jobs.

Industrial land in the Kent Valley costs $7 to $10 a square foot, O'Brien said. Around Centralia and Chehalis, in Lewis County, it costs $2 to $3.50 a square foot, depending the size of the parcel and proximity to Interstate 5, he said.

So developers are heading farther south to avoid city traffic, snapping up available land near I-5 almost as fast as they find it.

The demand for industrial space is so high that developers are willing to take the risk of building before they line up tenants. The risk seems to be paying off.

"In a lot of cases, they're fully leased before the building is even ready for a tenant," O'Brien said.

Some of the largest developments include a 715,000-square-foot distribution center being built in Centralia and leased to Michaels, the national chain of crafts stores, and a 766,000-square-foot speculative site in Auburn.

Booming trade with Asia, rising fuel prices and congestion at ports in Los Angeles and Long Beach, Calif., have brought more cargo to Seattle and Tacoma.

"We're a full two days closer to North Asia than Southern California," said Mike Wasem, Port of Tacoma spokesman.

The Port of Tacoma has added container terminals, but officials there say port expansion alone can't accommodate the increasing flow of goods.

Extending roads and building overpasses to separate rail traffic from cars and trucks will help, but there is little money to pay for those improvements.

Developers face obstacles, too. "It is getting tougher to find land — land that works and land that you can afford," said Bart Brynestad, partner of Panattoni Development.

Panattoni has 13 industrial projects, nine of them under construction, totaling about 3 million square feet in the Puget Sound area.

Finding industrially zoned land is a chore.

Cities such as Auburn and Sumner are exploring rezoning options to attract retail to industrially zoned land.

"There's virtually no economic benefit to these types of development except a limited number of jobs and property-tax revenue," said Paul Rogerson, Sumner's community-development director. "With the 1 percent annual cap on property tax, it's problematic."

Cities not only get less tax revenue from industrial developments, they also have to deal with deteriorating roads.

"Roads get beat up, and cities have to foot the bill," said Derrick Urquhart, industrial real-estate manager at the Port of Tacoma.

But Brynestad said he hadn't faced much hostility from governments.

"Most cities that have industrial land want to see good quality industrial developments," Brynestad said.

While distributing from the Pacific Northwest might be cheaper and more efficient for shippers and consumers, Rogerson questions how much cities have to gain.

"It benefits more folks in Kansas than it benefits folks here," Rogerson said. "We really are looking for ways to share the land with more retail-oriented uses than simply serve the national thirst for warehousing."

Sumner is studying whether industrial development near an interchange makes a city less attractive for retail development. To accommodate the study, it has a moratorium on distribution centers on about 10 percent of its industrially zoned land. The moratorium expires in November.

Bibeka Shrestha: 206-464-2436 or bshrestha@seattletimes.com