Seattle Commercial Real Estate’s professionals have over 200 years of real estate expertise and we have seen both the highs and lows of our industry. We now appear to be heading into a period of “adjustment,” but in this case it is a tad different than some of our historical market changes. Some of us still remember the sign on the freeway with the huge Boeing-inspired dip, “Will the last one leaving Seattle please turn out the lights.” This time seems to be different than a change driven by a major employer or the bursting of the tech bubble in the last national downturn.
The leading down indicator right now is multi-family housing. As we predicted starting several years ago on the Seattle Commercial Real Estate website, multi-family housing is due for an adjustment as a function of a looming oversupply. Where developers and investors were paying a premium to acquire and build a site with approvals, in today’s market place sites that are “vested” are begging for someone to take them. The economics of building today for market rate rents simply do not work. Another force has affected multi-family, which is the wave of inflation in the single family market. This too has slowed, but there is a collateral affect, which is that a lot of long-time owners of greatly appreciated homes are afraid to move. On the other hand, there are those who have seen the appreciation and look at their life styles and now want to have nothing to do with home maintenance. They are moving into the high-end condominium market, which is experiencing a boom. The other end of the condominium market, which is entry level (now defined in Seattle as about $500,000) is also booming.
The looming effects of rising interest rates are still just being felt in this market and for an investor in multi-family we suggest caution.
