For Seattle Commercial Real Estate to put forth thoughts about the future in 2022 we need to address multi-family and industrial real estate on Day Three. Uniquely multi-family is almost always out of synch with major downtown office development. This is more particularly true today where lead times can be two years for permitting and another 18-24 months for construction. Unlike industrial and office real estate, long term leases on residential properties are not the norm. The supply/demand curve coupled with time adds up to more risk/reward. The strength of multi-family rents during Covid and the supply of new product coming to the market-place lead to a leveling off and somewhat of a drop in rents towards the end of 2021. This was not the case for the sale of single family and multi-family housing and this trend is expected to remain healthy and dynamic in 2022 with the almost certain increase in interest rates becoming a potential mitigating factor.
The demand for industrial real estate is strong and most likely to remain strong going forward. Seattle Industrial is a pioneer in vertical industrial development and proximity to the CBD is the clear driver for delivery of goods and services. Disruptions in the supply chain and international supply issues for shipping, transportation and redistribution are highly unlikely to mitigate in 2022. Quite simply industrial real estate is in short supply and the need for distribution sites has stimulated material growth in outlying counties lying between major cities, such as Portland and Seattle. Amazon personifies the issue with major distribution facilities outside of core areas and servicing becoming a huge factor in the inflation of zoned industrial land and in particular, large parcels.
Seattle Commercial Real estate takes a risk in making any kind of forecast to its clients and investors. It is what we cannot control that gives us pause and concern. On balance we are cautiously optimistic, and advise our clients accordingly. Philosophically, we will always calculate risk and advise our clients in any manner that can reasonably mitigate that risk. Our perspective is that we always wish to be able to look back over a five-year time frame and determine that the job we did five years ago was the best decision based upon the information available to us at the time. Only fools and fishermen come to the table with unbridled optimism.