What’s the State of Commercial Real Estate in Seattle?
Squint long enough on the cranes that tower through the Seattle skyline these days, and they might start to look like middle fingers. On the way between hotels and office buildings that have been vacant for months, new developments seem brazen, even reckless projections of normalcy in our home state. Of course, some of these projects were already well underway by the time Covid-19 began to spread into their shadows. It is difficult to pull the plug from 40 floors. But construction in the making raises the question: Should clients be so optimistic about the future of the city center?
For developers and brokers looking for a quick return on investment, the answer is no. A backlog in condominiums has signaled that it could take a while for inventory and prices to approach comfortable levels for brokers. And the speed of this recovery in residential areas depends to some extent on the return of office and commercial work. As beautiful as the view of Puget Sound is, its proximity to the company’s conference room has usually been a big draw for downtown life. The Downtown Seattle Association’s dire economic rebound numbers, including a sharp drop in office rental activity (down 73 percent year over year last month), don’t suggest an overnight recovery once people get their shots.
Colliers International’s latest Puget Sound Office market report has more information on commercial real estate in the area. As supply continued to rise, demand fell in the third quarter of 2020. Rents in Seattle’s central business district fell 4.1 percent and a total of 657,000 square feet, many of which moved, in northern and downtown Seattle and the East Side smaller companies were. “It was really kind of a story about the belongings,” says research analyst Nicholas Carlsen, one of the report’s authors. Not that great players escaped their wrath in this or any other city. “Obviously the pandemic was a net negative,” says Carlsen, “and I think that was the case everywhere.” Nobody would deny that. “
There is evidence that Seattle has become less attractive than other cities. As reported by the Seattle Times earlier this month, the estimated Emerging Trends in Real Estate report for 2021 ranked 34th in the Overall Perspective for Real Estate in Emerald City. In 2020 the city was 10th.
“The pandemic was a net negative, and I think it was everywhere. Nobody would deny it.”
Yet Seattle has cut emerging trends for “18-hour cities” that “are popular migration destinations because of their lifestyle, culture and job opportunities.” This award bodes well for brokers and developers who can afford to take a short break. Propose term for long term profit. The Colliers report also sounds optimistic. “It’s easy to say there is a demand problem instead of a supply problem, but tenant demand has not even decreased, just hit the pause button,” it said. “Future demand for the Puget Sound looks good as the foundations for its growth have not changed.”
Over the phone, Carlsen cited the continued success of tech giants as one reason he expected the Puget Sound area’s commercial real estate scene to recover. However, it doesn’t go without saying that Seattle will be the city that gets that boost. The new corporate tax could push some employers to the Tacoma area, where some businesses have already relocated, or the Eastside, where Facebook and Google have recently made major investments. “This tax will hurt a lot of companies because it’s not a little money. This is real, ”said Brian Hatcher, President and COO of Kidder Matthews.
Hatcher frequently travels between the commercial real estate company’s offices in Seattle and Bellevue. He says it is “a story of two cities”. “It looks like Seattle is preparing for a hurricane with all the boarded-up windows … and downtown traffic is pretty quiet. Unlike Bellevue, with all of the new buildings they are building on the Eastside, it just seems like Covid never happened. “
However, Hatcher has no idea about Seattle’s long-term prospects. Like many brokers, he expects workers to return and an urban “renaissance” to take hold. “This is my fourth recession in the industry. The bigger cities with the really high rents get hurt first, but they are always the first to recover. It won’t be any different. Most companies want to be where their employees are. And most employees want to be downtown, young people outside of college want to be downtown. “
The Colliers report reflects this feeling. “It would be foolish to write off Puget Sound’s outstanding skyline market,” he concludes. “Businesses will continue to want access to the University of Washington’s steady stream of talent and the prestige that comes with filling trophy office towers.”
Or, as some of them once were, middle fingers.