Real Estate Buzz: Seattle looks great for '08: property report
By LYNN PORTER
Journal Real Estate Editor
October 18, 2007
Seattle is the second hottest commercial real estate market in the country for 2008, according to the Emerging Trends report by PricewaterhouseCoopers and the Urban Land Institute.
It trails only New York City for commercial and apartment investment and development prospects.
"Twenty- and 30-year-olds focus on only a few places to settle and that's it" — and Seattle is among them, according to one respondent contacted for the report. More than 600 real estate experts were interviewed and surveyed, including investors, developers, property managers, lenders, brokers and consultants.
The report ranks The Emerald City as best for industrial, office and apartment investment, and second for hotel and retail.
Seattle is developing into an exciting 24-hour city "smack-dab" on key Asian shipping routes with a diversifying brainpower economy, led by corporate heavyweights Microsoft, Boeing, Washington Mutual, Amazon and Costco, the report said.
"Seattle is a city on the come," said Jonathan D. Miller, author of Emerging Trends.
This year Emerging Trends ranked Seattle first for office investment, and near the top for retail, apartments and industrial.
Now, Seattle office rents are accelerating as in other parts of the country and office property prices are near or exceeding replacement costs. Both can't keep rising, said Miller.
"It's not going to continue the way it has," he said.
The Emerald City is the nation's best home building market, the report said, and housing prices continue to rise, making it an expensive place to live. While the report focused on apartments, Miller said Seattle "should be a good condo market too because it's a very popular, growing place."
Traffic congestion around the city is intensifying, according to Emerging Trends. This in part has helped create a satellite office market in Bellevue. Because of this, expect to see further growth in other urban nodes.
"The biggest problem for Seattle that we see is the lack of mass transit alternatives to the car," Miller said.
Nationally, growth in commercial real estate will slow next year, the report said. These are the highlights:
- Housing reversals may torpedo consumer confidence and upend the economy. The housing market outlook may stay poor into 2009. Investors will seek bargains as home builders sell down land inventories.
- Twenty-four-hour coastal gateways with multifaceted environments, major international airports and shipping ports — such as Seattle — will remain the most coveted locations for investment and development.
- Property prices may fall because of tighter credit markets and a slowing national economy. Recent buyers who paid peak prices may be susceptible to reversals.
- Income-generating industrial and apartment sectors will remain favored investments. Office properties in dominant downtowns will perform better than in the suburbs. Hotels will slide past their peak. Tapped-out consumers may restrain their spending at malls. The outlook will fall most dramatically for housing-related categories: Condos will land in the basement.
- Lenders and fixed-income investors will retrench, and stricter underwriting will take hold. Debt will cost more and cash investors will regain their footing. Pension funds, REITs and foreign investors will step up activity. The market will shift from sellers to buyers.
- Development should remain relatively controlled as investors back off new projects. High land, labor, material and entitlement costs will temper new construction.
- Emerging Trends also said Canada should be a hot property market in 2008. It should benefit from a more conservative investment environment than in the United States — having avoided the consequences of lax underwriting — and from the demand for energy. All property sectors there are good prospects, especially industrial and retail. Housing prices will skyrocket.
25% of for-sale condos are new
Nearly a quarter of King County condos listed for sale by the Northwest Multiple Listing Service are new construction.
The total is understated, however, as not all new units show up on the NWMLS, said spokeswoman Cheri Brennan.
The service recently reported 3,319 condos for sale in the county, of which 793 are new, which means they are presale, under construction or recently completed.
Areas with the highest percentage of new condos are Kent; the Renton neighborhoods of Benson Hill, Highlands and Kennydale; downtown Seattle; north Seattle (including Northgate); and downtown Bellevue, she said.
