Seattle Commercial Real Estate is not shy about identifying specific areas of real estate and their problems. We have addressed issues with affordable housing creation, office space use, work requirements, the demand for industrial real estate, and the issues that are coming to the fore with the potential for defaults on major projects. San Francisco property owners with $9 Billion in outstanding loans are facing default to the tune of $1.2 Billion. This is only one flag waving in the wind. Seattle is in the same position with some thirty-plus hotels in Seattle that have CMBS loans as well as almost all of the major office buildings.
What is as important as the magnitude of the major loans is the collateral effect on all commercial as well as residential real estate. The first rule of banking is that you always loan to those who don’t need it. Just like the doctor’s hammer hitting your knee, the first reaction of a banker is to tighten lending requirements and cut the amount of money loaned. The collateral effect is materially impacting retail in the downtown core areas as well as multifamily.
Demand in multifamily particularly is continuing to increase. Now supply is constrained by the cost of money and construction. Inevitably this will lead to a wave of inflation in multifamily. We are actively looking for future development opportunities for our clients and investors. The only issue is going to be the cost of holding as a function of inflation.
Seattle Commercial Real Estates sees the chaos in real estate as an opportunity. Buckle up. It should be an interesting ride.