National discount grocer signs record deal for Washington state distribution center

California-based Grocery Outlet to occupy nearly 700,000 square feet in Vancouver, near Portland

Panattoni Development and LaSalle Investment Management last year opened the Burnt Creek Logistics Center in Vancouver,Washington. (CoStar)

By Randyl Drummer CoStar News

September 18, 2024 | 11:54 AM

National discount supermarket chain Grocery Outlet signed one of the biggest leases on record for an industrial property in Vancouver, Washington.

Panattoni Development Co., based in Irvine, and Chicago-based LaSalle Investment Management leased the 681,780-square-foot Burnt Creek Logistics Center to an undisclosed national grocer, according to a statement from Colliers, which represented the owners.

Vancouver, Washington, 8 miles north of downtown Portland, is a fastgrowing industrial submarket of greater Portland.

A person familiar with the transaction conrmed to CoStar News that Grocery Outlet, based in Emeryville, California, signed the long-term lease valued at $51 million. The deal marks one of the largest industrial deals on record for greater Portland ranked by square footage and lease value.

The growth of discount chains such as Grocery Outlet and WinCo Foods has driven strong demand for retail, logistics and food preparation space, including cold storage, as new entrants such as Amazon have ramped up their grocery delivery business.

The surge in online grocery sales since the COVID-19 outbreak in 2020 has fueled cold storage growth, prompting grocers and restaurants to expand storage capacity for perishables.

Grocery Outlet has over 400 grocery stores across the United States supplied by distribution centers in Sacramento, California; Clackamas, Oregon, Tacoma, Washington; and two warehouses in Pennsylvania.

The company did not immediately respond to a request to comment about the new location's role in the chain's logistics network.

Largest commitment

The lease for the building that nished construction last year at 5920 NE 162nd Ave. is the largest on record for a warehouse in greater Portland built by investors on speculation, according to Colliers.

“This is the largest industrial space commitment we ' ve seen in the Portland region, looking at newer assets built after 2020,” added John Gillem, director of market analytics in CoStar’s Portland ofce.

The Vancouver area has seen heavy construction over the past ve years that had pushed the availability rate in the newer facilities to more than 50%, prior to the Grocery Outlet lease, Gillem said.

The Colliers team of Jerry Matson, Brian Yoakum and Tom Knecht represented Panattoni and LaSalle Investment in the project, from brokering the land sale to overseeing development and landing the tenant, according to the brokerage's statement.

"This transaction is a testament to our team's ability to spot future trends and execute resilient business plans that can achieve exceptional results, even in turbulent times," Matson said in the statement.

The leasing of the 39-acre Vancouver development "has served as a muchneeded bellwether for southwest Washington as a logistics hub," and "underscores the strength of the market and the demand for high-quality, big-box industrial space," Matson added.