Panattoni Development Co.

Specialty: Industrial, office and retail development
Management: Bart Brynestad, partner in charge of the Seattle office
Founded: 1986 (Seattle office founded in 2004)
Headquarters: Sacramento, Calif.
Current projects:84,600-square-foot medical building for Hammes Co. and Swedish Health Services; 22,000-square-foot build-to-suit warehouse/distribution center with some office and 128,000-square-foot build-to-suit manufacturing facility, both in the Kent Valley

Image courtesy of Mahlum Architects Panattoni Construction expects to finish this medical building in Redmond this month. Hammes Co., a third-party development partner of future tenant Swedish Health Services, is the project owner and manager.

Bart Brynestad is feeling “much better” about the market in general than a year ago. Now that it has survived the Great Recession, Panattoni is ready to start building and investing in 2011.

After “hunkering down” during the last two years — when Brynestad said he didn’t make any money — Panattoni is “very much ready to go from a defensive mode to an offensive mode.” With debt and equity in place, Panattoni is “ready to start spending it and reinvesting in the marketplace.”

Projects starting up

Panattoni hopes to begin building two build-to-suit industrial projects in the Kent Valley next year for users that Brynestad declined to name. In addition, the company plans to branch out by buying assets and repositioning them. Historically, the company has been a developer, not a buyer.

“We want to do value-added” projects, said Brynestad. That means acquiring vacant or partially leased properties that can be improved and leased up. He’s looking for industrial properties primarily in the Kent Valley, though he said Panattoni also would seek opportunities elsewhere in the region. He expects the company will probably focus on suburban office assets and seek retail properties throughout the region.

Bottomed out

Brynestad said the markets started to recover at the end of the third quarter. “I think we hit bottom in terms of vacancy and negative absorption,” he said, adding he believes job growth will start to occur.

Further boosting the market is the lack of speculative office and industrial development, he said. After two difficult years, his company’s buildings are filling up, so he is feeling optimistic, too.

In 2009, Panattoni finished the two-building, 81,000-square-foot Monroe Corporate Park. A year ago it was vacant, representing most of the 100,000 square feet of space the company needed to fill in all of its buildings. Now 20,000 square feet remain vacant.

Concessions

Like other landlords, Panattoni had to drop rates and offer some free rent. It’s necessary to do so to compete in this market, Brynestad said, noting that “a full building is much better than an empty building.”

Two years ago, Panattoni developed a city hall and fire and police station for the city of DuPont. Panattoni has since pursued similar opportunities. “The competition for projects like that has gone up tremendously,” Brynestad said. Those vying for the deals make up “a very strong who’s-who list.”