The following article was written by two real estate investment brokers at Kidder Matthews. Jason Rosauer and Rob Anderson (collectively Team Rosauer) lead an investment brokerage team that specializes in property sales of office, industrial, and retail buildings, as well as land development sites throughout the West Coast. They also publish monthly market reports that detail the commercial real estate market in the greater Seattle area. The report offers an inside look at the current real estate trends around Seattle’s neighborhoods and projections for future trends. We’ve broken up the Team Rosauer September Market Report into three posts: the first detailed East King County and Pierce County; the second detailed South King County and Snohomish County; and today’s post (the last in the September Market Reports) looks at the trends in West King County.
West King County
Commercial real estate in west King County is largely headed in the same direction as Amazon, Microsoft, Boeing, and the rest of the companies that serve those giants: up. Tighter market conditions and higher competition for office space in the area has allowed property owners to more easily retain tenants, which, according to Price Waterhouse Cooper, has resulted in the retention rate moving up to 67.5% from 65.8% this time last year. Discount rates, overall cap rates, and residual cap rates for office properties have all dropped over 130 basis points in the last two years and appear poised to continue in that trend.
Financial institutions are also beginning to recognize a healthier real estate market outlook by increasing their lending. National commercial mortgage origination has increased 25 percent over this time last year. Office property lending mortgage origination has increased 66 percent. With money to invest in real estate becoming easier to come by, current office owners in the area are happy. Low vacancy rates and high demand suggest rental rate increases in the near future, and easy (relatively) money provides a market full of buyers should owners look to capitalize on their property’s cash flow.
The Seattle CBD is ready to grow. Property valuations are still not as high as they are in the San Francisco CBD, but if San Francisco is any indicator of where things could go, which it has been over the past decade, then Seattle will continue to take off. But the Seattle CBD property owners are not the only winners in the area; economists expect the submarket property values in the area to grow by 4% in the next 12 months (compared to the 2% national average). Expect transactions to heat up in the region for the next 12 months.
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