Seattle Commercial Real Estate Ranked #1 – “Bellevue Thrives”

A recent report from The Urban Land Institute placed Seattle commercial real estate top of it list

Despite dipping short-term prospects attributable to the economic slowdown, premier coastal markets will continue to shoulder ever-increasing import/export activity in the burgeoning global marketplace.

The Seattle Times wrote:

On a scale of 1 (abysmal) to 9 (excellent), participants gave Seattle an overall rating of 6.15 for commercial and multifamily housing investment next year. Next, in order, were San Francisco; Washington, D.C.; New York; and Los Angeles. Last year, when Seattle finished No. 2, its rating was 6.86.

Seattle is described by the report authors:

This Northwest magnet for brainpower industries grows into one of America’s important gateways and job incubators. “It’s a city of great creation, new ideas, and new businesses.” More than just Microsoft and Boeing, Seattle boasts a diversified group of corporate giants and cutting-edge companies. But this sturdy market braces for some buffeting. Sub–10 percent downtown office vacancies will rise—3.5 million square feet (325,160 sq m) of new supply plus more tepid job growth equals flattening rental rates and more concessions. Owners scramble to find tenants as Washington Mutual collapses and Starbucks downsizes. Bellevue thrives in an office building splurge filled mostly by Microsoft. This satellite office market remains vulnerable to any future layoffs by the software giant. Areawide housing demand drops and prices slip, staying well above national averages. Outer suburbs suffer greater pricing erosion—a lack of mass transportation and high gasoline costs affect perimeter areas. Condo builders suffer agitation; sales and presales “fall dramatically.” But interviewees rate the market a strong buy for apartments— rents move up, vacancies head down, and new projects are limited. Low retail vacancies buffer shopping centers in any consumer pullback—“owners may come down with sniffles, but no pneumonia.” Surveys rank the area’s Puget Sound ports as the nation’s number-one buy among industrial markets.

The report opens with this paragraph:

For 2009, U.S. commercial real estate faces its worst year since the wrenching 1991–1992 industry depression. Values will drop substantially, foreclosures and delinquency rates will increase sharply, and a limping economy likely will crimp property cash flows. The aftershocks of rampant “over-the-top lending” that batter the entire credit system leave property markets substantially over-leveraged and vulnerable to significant depreciation.

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