Tenant demand for high-quality functional space combined with limited supply has driven Puget Sound industrial rents to record levels, according to a new Colliers’ report. Asking rents in the first quarter of 2023 have increased 26.7% compared to a year ago, rising from $0.85 to $1.08 per square foot triple-net.

Interestingly, net absorption for the quarter was -366,000 square feet, despite several large tenants moving into space. Colliers considers the negative number an anomaly, and is forecasting an above average year for net absorption in 2023, although not as high as the record years of 2021 and 2022. Vacancy also increased slightly in Q1 to 3.7% after two buildings delivered without any leasing.

On a submarket level, Kent Valley saw the highest year-over-year asking rent increase, popping 31.8%, followed by Pierce County at 19.5% and Northend at 18.8%. Colliers predicts most industrial leasing activity in 2023 will be focused on new supply and 2nd generation space in Pierce and Snohomish Counties.