The socialist-oriented Seattle City Council passed a “Head Tax” to fund homeless services. It was reduced from a proposed $500 per employee, to only $275 per employee, and then was reversed altogether. In commercial real estate there is inherently a gamble. It is a slave to the economy. Wright Runstad is gambling by building for occupancy in 2020 of 316,000 square feet without a tenant in the Spring District project in Bellevue. (link to article about impact on Bellevue and Tacoma).
So here is what the odds makers are doing. They are getting up funding to fight the tax, support alternative candidates and seeking to remove the tax which, as written, only has a five year life. (One has to wonder how easy it is to renew a tax. Note that the Federal Income Tax was only a “temporary” solution to an issue in its day). King County and the State of Washington not only sailed through the ’98zdownturn, but spurred by Amazon’s phenomenal growth has lead us to only 3% unemployment in King County in April of 2018. The disease of this tax has reared its head up and down the West Coast with other cities, always looking for new revenue streams, looking to copy Seattle. Tacoma has jumped on the bandwagon to spur its commercial real estate base by offering a bonus to new businesses locating there of $275 per employee. This is in an area that spent $1 BILLION on the homeless issue.
The issue of the impact of this tax, coupled with an increase of the minimum wage to $15 in a labor short market is going to hurt all areas of commercial real estate. How much and when are the only legitimate questions.
