On Wednesday, February 17, attendees of the monthly Breakfast meeting were treated to the Capital Markets Forecast. The breakfast was sponsored by US Bank, JLL, and Intervest Mortgage Investment - we sincerely thank them for their continued support. President John Teutsch gave the assembly an update on the new members and watched a video regarding the Real Estate Challenge.
Mike Wood, Principal with Norris Beggs & Simpson, moderated the panel consisting of:
- Lori Hill – Managing Director at JLL
- Jamie Zadra - Principal at Prudential Financial
- Jay Thomas – Managing Director at Walker and Dunlop
Jamie began with a review of 2015 which was one of the most active years for Prudential in Seattle. The biggest sectors were Multifamily and Office. Jamie indicated that although Prudential is bullish on Seattle, 2016 has started off a little “choppy” due to the issues in the stock market.
Lori echoed a lot of what Jamie had to say and gave some specific numbers for the different sectors. Office properties are selling between $642 and $792 per square foot. In the retail sector, owners are holding onto property, but there was a notable sale at Pacific Place for $849 per square foot. In the multifamily market, unit prices are hovering around $600,000.
Jay related that bridge loans are in high demand, currently mainly focused on multifamily. There is a significant amount of office and retail mortgage maturity in 2016 and 2017. Jay expects that the Fed rate will be stable with a gradual increase over the next three years.
Mike asked the panelists if we were at a bubble in the market. Lori replied that the underlying land costs have increased and that the Seattle market had diversified. Therefore, Lori opined that we were not at in a bubble currently and that JLL is very bullish on Seattle.
Jamie indicated that growth and diversification are hallmarks of the Seattle market, the employment numbers are very good and that the deals that have been written in Seattle have performed well. These factors augur well for the future.
Jay talked about how Fannie and Freddie have caps on them in 2016 and that certain types of properties are excluded from those caps. The excluded properties are affordable housing and green certifications. Jay felt that 2016 would be a good year.
The panelists spoke of the current state of the Seattle market as a seller’s market. However with the amount of maturing loans in 2016 and 2017, we should expect a slight shift to a buyer’s market.
Foreign investment, especially Asia and Canada, play a large and growing role in the Seattle market.
In conclusion, the Seattle marketplace appears poised for another good year, albeit with some storm clouds on the horizon. However, with a more diversified economy and the new companies sprouting from the likes of Amazon, Boeing and Microsoft, Seattle is uniquely positioned to ride out the storm. Barring a major downturn in the stock market, or calamitous international events, we should be okay.
This article was written by NAIOP Washington State member Edward Scherer, Account Executive, Avidex Industries, LLC.
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