According to the Urban Land Institute’s recent Emerging Trends in Real Estate report, the Seattle MSA might not be the champion of all commercial real estate markets, but it is the sixth-strongest in the United States, certainly making it no slouch.
What it has going for it are an expansion in aerospace manufacturing, growth in its strong technology sector and high rate of education. That makes investors especially enthusiastic about the multifamily, industrial, office and retail sectors of commercial real estate.
Job-and-payroll-growth as well as a high cost of home ownership is driving the demand for apartments in Seattle, says a Marcus & Millichap report on multifamily’s fourth quarter. Developers are following suit, and 8,000 new units were built, increasing inventory by 2.4 percent. Rents rose 9.1 percent last year, the third year of increases, Marcus says.
On the industrial front, the market has the enviable position of supply not keeping up with demand, according to a recent Colliers International report. “We should expect to see rising rents, vacancy rates well below seven percent, and a slew of construction and sales as investors and developers try to capitalize on the high demand for industrial real estate,” the report says. Asking rents were at 48 cents per square foot across the Puget Sound region.
For offices, vacancy rates went down to 11.34 percent, the lowest seen in the region since 2008’s first quarter, says another Colliers report. This leads to an environment where a whopping 52 proposed office projects totaling 18 million square feet.
The retail market in Seattle “continues to improve with moderate positive absorption, new construction, and a strong investment climate for stabilized centers,” according to a Kidder Matthews report. Though the vacancy rate was essentially flat in the fourth quarter over Q3, it hovered at just more than 5.5 percent. Rents are improving, though, and there is 440,000 square feet of retail real estate under construction, not including several mixed-use developments in urban core areas, the report says.
So, while football fans in Seattle have a lot to cheer about with that franchise’s first Super Bowl win, commercial real estate investors in the area are probably feeling pretty good right now as well.
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