As we celebrate being locked up or down, heading into the end of 2020, a careful look at what the future holds for commercial real estate is well worth our time. Nationally, there is cause for concern in commercial real estate lending. Commercial Backed Mortgage Securities, total over $5 Billion. Of these loans, approximately half are owned by banks. Seattle Commercial Real Estate has carefully noted the issues of Landlords today who have office tenants, multi-family projects and other commercial real estate projects populated with tenants who cannot or (as in the case of no evictions) will not pay rent. Owners thus cannot pay mortgages. The first wave initially hit the retail and Mall owners, then multi-family and for sure offices as work from home is a mandated lifestyle. The real danger here is the potential effect on the financial health of the entire banking system. A failure here on a national level spells the likes of a depression one can only imagine.
All of the money issues relate to political issues. A Biden administration is dedicated to more spending and more taxes. The implications of this policy on the continued growth having rebounded so dramatically from the downfall of March of 2020 can not be calculated. Until the Senate races are concluded, there is no way to prognosticate much further.
Locally, Seattle commercial real estate is, in the opinion of our professionals, teetering. Yes, Amazon renews a lease near Lake Union for a 668,000 square foot building and owns 5.5 Million square feet in Seattle. On the other hand, their needs project to about 18.3 Million square feet and they have committed to about 5.5 Million in Bellevue. Tacoma is rumored to be in play for space. To assist in this rosy picture we have a City Council who has defunded police, are considering a policy of using “homelessness” as a defense for criminal activity, a sharp rise in shootings, camping on streets and parks and a tax on Big Business while tourism is going in the toilet. The politics of Seattle mandate close watching and Seattle Commercial Real Estate believes that we could be looking at coal in our Seattle Stockings hung above the fireplace for several years to come. We are looking into Snohomish, Pierce and Thurston counties and not “competing” for product East of Lake Washington for our investment clients. It will be an interesting sleigh ride.