America of the 50’s was a car in your garage and a house of your own. Today’s growth in Seattle commercial real estate has spawned a new series of problems and issues. The lack of inventory in the single family sector has created the classic supply/demand scenario. The number of houses in the $2M and up price range has jumped by 30 per cent. This segment represents approximately 13.2% of all homes in the Puget Sound area. These facts significantly impact multi-family and development.
The vacancies in multi-family in 2018 in Seattle are rising, rents are falling and with the costs of construction rising, there is a slow-down which is simply part of a typical real estate cycle, but maybe this time is not so typical. We have approximately 1,000 people a week moving into Seattle and the new buzzword is “affordable” housing. In its infinite wisdom, the State of Washington in response to consumer issues amended the Condominium Act many years ago. This law is a clear example of the “Law of Unintended Consequences”. The modification addressed moisture issues in building envelopes and in fact guaranteed almost 100% of the time that the developer would be party to a law suit. There are some forms of insurance, but never enough and this risk was quantified in the price and that price was passed on to the consumer. And the consumer who could afford to pay the price, was in the high end of the market.
A common sense solution is to build an apartment and wait the mandatory 10 years and then convert the apartment to a condominium. That does not work in an era of rising rents. The obvious solution to “affordable” is to modify the Condominium Act and make the lack of risk of litigation so minimal that affordable becomes the solution to the problem. Seattle Commercial Real Estate LLC can counsel and suggest, but we can only influence the decision making process, not change the law which is the solution to the problem.