In the 60’s the folk song had a lyric which said, “the times they are a changing” and again it is true. Some of these changes will materially impact the shape and form of commercial real estate. Seattle Commercial Real Estate is constantly evaluating and speculating on these trends, so let us look at a few of these things going forward. Start with the dream of an average American, which is a stable income and a single-family home. The supply and demand curve shows quite simply that there is a truly limited supply of land. They are not making any more. In 1990 Washington State passed the Growth Management Act which mandated municipalities to plan for growth within their urban service boundaries to stop urban sprawl. This has clearly led to limiting supply when coupled with growth, and the trend must be to develop multi-family. At the same time, we became a technology hub competing with California and that meant the fabulous growth of the Seattle office market.
The most significant change with the advent of Covid is working from home. The office market in the fall of 2020 has enjoyed a resurgence with an occupancy running about 20% of leased space. The corollary to this was the fabulous growth of the e-commerce industry. This industry has experienced 10 years of projected growth as of this year. 34% of retail sales are online and e-commerce is used by 75% of the US population. This facilitated the devastation of the conventional retail real estate industry primarily in non-grocery anchored centers. That is the bad news, but the good news is that these were/are prime locations and as such, they are being repurposed into live/work centers. Close in industrial real estate has benefited materially.
In Washington State the Covid Restrictions imposed by government have devastated the child-care industry. 61% of young children live in households where parents work. Our current capacity of licensed day care represents the ability to serve only 41% of young children and 5% of school age children. 18.3% of parents have turned down job promotions due to the need to care for their families and 47% have the need for day care as a barrier to employment. The projection is that half of the current facilities might not survive and will close. This is an area of huge potential growth when the economy finally turns around.
Seattle Commercial Real Estate sees problems as issues in search of solutions. In our recognition of problems, the flip side is opportunity. Commercial real estate is cyclical and astute investing for future growth is our forte.
