Seattle Commercial Real Estate has expressed a clear concern for the commercial real estate business in Seattle since well before the advent of Covid. A recent spate of articles is worth visiting. The first article was in the editorial section of the Seattle Times on May 2nd. The title was “Homeless Amendment Should Center Seattle Politics”. To understand the editorial, you first need to look at the numbers: $150 Million in 2021 is the current City expenditures for “homeless” which also means, people in need of mental and addictive services. (King County is spending $4,500+/ month to house homeless and the City rents hotel rooms for $55,000-62,500/year). In contrast, the City just bought a 76 unit project for $240,000 per unit (pays that cost off in less than five years). The proposed “Compassion Seattle” initiative will require the creation of 2,000 new housing units in one year with treatment services. The editorial supports the initiative and then qualifies the need to turn the political tide with offices up for election in the City starting with Mayor, Prosecuting Attorney, two at large seats and a recall of Socialist, Kshama Sawant, all on the ballot.
Another Times article followed with the headlines that Seattle office demand is soaring to the same pre-pandemic levels. Based upon an index of 100, Seattle had an average score of 90 Pre-Covid and then plummeted to 17 with Covid and riots. In March 2021, it jumped to 107, leading the country. The lead time for lease signing and taking occupancy can be months (and longer) even with the vacancy rate exceeding 17% in downtown Seattle’s office market. The interest is not just from tech, but health, legal, and professional office users.
Another article ranked Seattle last among major metro areas for job growth, far behind the lead of Texas, Florida, and cities like Phoenix. The issue is with small and medium sized businesses having problems finding people to work. This same issue exists is on a national level were the benefits offered through job stimulus and unemployment exceed the return to labor for going back to work.
All of this is confusing. What does it mean for commercial real estate? The answers are clear when you put the pieces together. Demand for space and increasing employment requires a safe and sane city, clean streets, active support of businesses in the service and food areas and a material easing of Covid restrictions to foster a vibrant, exciting, and dynamic city filled with tourists and residents. Commercial real estate will respond to the demand, but the demand will not exist until the Seattle City Council and business collaborate and change the trajectory of the distaste created by the City Council and 2020 season of riots and protests. The filing for the key offices closes at the end of May and it remains to be seen if the slate of candidates will be dedicated to the future of the City of Seattle or wallow in the legacy of the summer of 2020.