Capital Markets 2018 [February 2018 Breakfast Recap]

men on stage at a presentationDespite the cold weather, NAIOP Washington State members and supporters came in full force on Wednesday, February 28, to learn more about capital market trends in our region and what they mean for the future.

Mike Wood of NBS Financial Services moderated the panel and the Q&A discussion following. He kicked the event off with a confident and positive summation of real estate investments in the region.

Reid Rader of Eastdil Secured began the panel by giving a broad look at what companies make up our DNA since the office market is a gateway market. Seattle is seen as an “innovation center” and 10 Fortune 500 companies are headquartered in Seattle. Bay Area companies continue to move into the Pacific Northwest and have reportedly done so with so much success that they continue to expand their operations. Rader believes this investment in labor and real estate will continue. In fact, Seattle has outperformed other gateways and remains cheaper in both median home prices and rent for Class A office space. Alongside that, Rader exemplified the “ingredients that form long-term, enduring value” in economics and real estate for Seattle against other notable gateway markets of San Francisco, Los Angeles and New York. That said, the availability of new supply in office space will diminish, and demand will outpace supply, making way for an uptick in rents. Rader closed by reiterating that the eastside and suburban office markets will continue to be strong. Overall, we are seeing a diversified set of buyers today and, most significantly, Seattle was included as a Top 10 Global City for real estate investment in the 2018 AFIRE Foreign Investment Survey, a telltale sign of viability.

Dylan Simon of Colliers Seattle took the stage next and discussed the pipeline and emerging trends in multi-family housing. Since 2012, job growth has driven the economy, and just as importantly, wage growth. There is a healthy amount of disposable income in the area as well. He also discussed how the changing dynamics in rent, vacancy and sales will hold some surprises for us. Simon also made the point throughout the presentation that we will really need to watch the granularity of the markets, and especially the submarkets—with each submarket reacting differently. Areas to watch for a lot of additional units are Greenwood (1,299), Northgate (942), Lake City (873), Bothell (1,068), Newcastle (1,484), Overlake (1,842), Totem Lake (1,680) and Redmond (3,137).

In the development pipeline, there are a lot of deliveries coming; there are a lot of opportunities via emerging markets with a constricted supply; and demand for micro/efficiency units will grow. According to Simon, things to watch for this year are a steady job growth (45,000 jobs/year), increased apartment deliveries (10,000 units/year), rent growth coming at a cost to occupancy, sales volume (more than last year, but not as much as two years ago), and interest rates versus cap rates (“a 3% treasury will change the game!”).

Josh Sutter of Lincoln Financial Group ended the panel with the company’s strategies in deploying more capital in the region’s market from hiring more staff to offering a broader range of product types and loan options to meet borrower needs. Lincoln Financial Group is bullish on industrial opportunities and Sutter reviewed other capital trends and stances from the company. The perspective of the capital market from a lender was a perfect way to end the morning.

Be sure to check out the slides from the morning’s presentation by going to the NAIOP WA State app. Look for the paperclip icon (materials) for the 2017 February Breakfast.

If you have not yet downloaded the app, you can search for NAIOP Washington State in the Google or Apple app stores or click here. Your login is your email address and password, which is set to your last name unless you have changed it. To update your password, click here to request a password reset link or contact [email protected].

Thank you to our 2018 Breakfast Sponsors: Centerpoint, Gateway Construction Services and JLL. 

This post was written by NAIOP WA and Marcom committee member Sarah D. Fischer, CallisonRTKL.

Share this post: