Why this spells continued growth for residential real estate
The recent slight dip in residential housing prices has spawned numerous articles questioning if this is the moment where our local economy starts to diminish. Listings are up, many sellers are willing to make a deal, and buyers are starting to feel some relief from a market that has typically been in favor of sellers. As a result, many folks are starting to worry that this shift spells bad news for housing prices.
However, the residential housing market is only one small piece of the puzzle. We spoke with Matt Hermsen, a commercial real estate broker with over 16 years of experience in the Puget Sound area, to get his take on what may happen in 2019.
Number of cranes citywide increasing
If you live, work or next time you’re in downtown - look up! Seattle once again leads the nation with the highest crane count in America. The cranes contribute to our constantly changing skyline accounts for residential, mixed use development and commercial projects.
Increased hiring will drive demand for housing
The Emerald City’s tech market is strong and growing especially with dominant key players: Amazon, Google, Facebook, Oracle, and Microsoft. “These largest occupiers continually invest in Seattle/Puget Sound Area” says Mr. Hermsen.” In addition, demand for space for smaller tech companies such as UBER and Indeed are also expanding. UBER plans an 115,000 SF expansion at Second and Seneca building doubling their headcount and will be ready for occupancy this summer.
Meanwhile, Indeed (job search engine), secured a 200,000 SF lease to accommodate an additional 1,000 employees at 2+U tower, currently under construction in the central business district. They will be the first to occupy the building on 10 floors, making it one of Seattle’s biggest real estate deals of 2018.
Additionally, companies like WeWork are in the process of doubling their presence in Seattle, suggesting continuing demand for coworking space. Coworking spaces are ideal for startups and other small companies looking for workspace without construction or design costs, or the commitment of a lengthy lease.
Beyond our growing tech presence, Alaska Airlines have recently announced plans to increase hiring in our area. With that comes more demand for office space, and it also has a positive impact on residential housing.
Rapidly expanding companies are profitable and publicly traded
Unlike past bubbles, the companies constructing or leasing new office space are well-established, brands like Amazon, Facebook, Oracle, Google, Apple and Microsoft. “These companies have profitable products and appear to be at a lower risk of collapse than a recently-funded startup.” “Having such organizations as cornerstones of our local economy will help shield our region from an economic slowdown.” cited Mr. Hermsen.
Cost of living in other cities is relative
Before Amazon announced the location for HQ2, there was speculation the Puget Sound would experience a mass migration of talent away from this region. However, due to the cost of living in the HQ2 regions, the potential outflow should be limited.
Local appeal has not diminished
Or, to put it simply: people still want to move here. Washington State has no state income tax, vasts investments in transportation infrastructure, and continues to hold appeal for businesses in the tech industry and beyond. The cost of living is high, but it’s not as high as the San Francisco Bay area or New York City, and would-be residential home buyers can still get a lot of bang for their buck in the Puget Sound.
Seattle economy shows few signs of slowing
While we can’t predict what will happen with the larger economy, all the signs we see right now appear to show that the region is still doing well. And as Matt Hermsen pointed out, “Regardless of what’s going on with the economy, interest rates, or the stock market, demand for space is often a precursor of what’s going to happen to our local market, and that demand hasn’t subsided.” We think that all of the factors above may contribute to a strong residential housing market this year.
If you’re thinking about purchasing a home in 2019, we’d love to help you. Get in touch with our team today.
We would like to thank Matt Hermsen of Flinn Ferguson for his valuable input on this piece.