Office

As the Puget Sound region (along with many other parts of the country) faced headwinds caused by the pandemic, it continues to remain one of the most active markets in the US, with 51 active cranes and 8.3M SF of office space under construction – 66% of which has been leased.  

While the future of the office market in general remains uncertain, large tech companies in the region have not shown indications that they will extend remote work indefinitely.  Amazon (extending work from home until Jan 2021) announced new leases of 2M SF in the Bellevue CBD, bringing their total footprint to 19.5M SF in the region.  Facebook (extending their work from home policy until July 2021) acquired Building A in the Spring District from REI, which increases their regional footprint to 3.8M, up from only 200K back in 2015.

In total, only $806 million traded in the third quarter of 2020, less than half of the over $1.9 billion traded in the third quarter of 2019.  The decrease in volume may not have been caused by a lack of buyers as many of the owners of existing office assets are well capitalized institutional players that are not apt to sell when conditions are not favorable.

Notable Trades (Property | Seller | Buyer | Price):

  • Spring District, Bldg 2| REI | Facebook | $378M
  • The Net Development Site |  Martin Smith | Urban Visions JV Mitsui Fudosan | $128M

Industrial

The Puget Sound industrial market saw positive absorption of 1.46M SF, driven by e-commerce as fulfillment of everything from groceries to electronics are being shipped directly to the consumer from the warehouse while retail locations remained largely closed.

As large blocks of industrial space have increasingly become a rare commodity close in, a big shift in development south of Kent Valley is occurring at an astounding pace in Pierce and Thurston Counties.  Pierce County led the region at 1.59M SF of absorption while the Southend came in second at 421K SF.

1.4M SF delivered this quarter, 95% of which was warehouse product in Pierce County. Despite delivering more than 1M SF, construction levels in Pierce County increased substantially in Q3 with 5.3M SF in the pipeline.  The current pace of developments is a sign that institutional players are bullish on the industrial market in the region, who accounted for 79% of all industrial real estate purchased in Pierce county this year.

Notable Trades (Property | Seller | Buyer | Price):

  • Harbour Pointe Technology Center | MRM | Systima Technologies | $46.8M
  • Iron Mountain Kent | Iron Mountain | Centerpoint Properties | $44.5M

Multifamily/Residential

Occupancy for the region remains at 95%, with the region experiencing a population growth of 1.2%.  Construction for multifamily in the Puget Sound region showed no signs of slowing as 113 properties are currently under construction, scheduled to bring 22,000 additional units by year-end 2022.

Net absorption in the Everett market for multifamily led all areas in the Puget Sound region at 423 units, in part because of the affordability of the area compared to other markets. 

Rents for multifamily in the Greater Seattle region decreased on average 1.5% over the last three months with negative absorption in the urban core.  At the same time, existing SFH sales were up 10.3% at 53.5K vs 48.5K last year.

James Young, director of the Washington Center for Real Estate Research at UW commented that “People working from home, especially those with kids being schooled at home, seek both space and value.  Those who already have a home have little incentive to leave.” 

With the current months of supply as of Sep 2020 at .89 months, coupled with supply for the region down 43% YoY, the region saw a 19% increase in prices for SFH and condos combined.

According to the NWMLS, the median price for a SFH in King County was $753,600.  The NWMLS tracks 30 different submarkets in King County, of which six submarkets had median prices over $1M.

Notable Trades (Property | Seller | Buyer | Price):

Kiara | Holland Partner Group | Oxford Properties Group | $320M

Modera First Hill | Mill Creek Residential Trust | Global Asset Capital | $125M