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Seattle apartment rents exceed the averages for Washington State and the U.S.

Seattle a ‘Must Have’ on Institutional Investors’ Shopping Lists

National investment sales volume across all property types totaled $570.6 billion in 2019, a drop of 1.6% year-over-year, according to NKF’s latest Capital Markets report. Yet, the Seattle market continued to remain among the most desirable for investors. Seattle attracted a record $25.7 billion of investment in 2019. Seattle’s office market has become the second largest in the country, with in excess of $11 billion in sales volume in 2019, notes NKF.

Sales volume by market for the year reflects a division between primary and secondary markets that is becoming less defined as the cycle progresses with markets such as Seattle, Dallas, Phoenix, Denver and Austin all attracting far greater institutional capital, compared with the previous cycle. Higher costs of living and doing business in the coastal gateway markets have helped fuel population and employment growth in these markets, providing a boon to multifamily, office, and e-commerce related industrial product.

NKF Co-Head of U.S. Capital Markets, Kevin Shannon, broke down the investment activity for Connect Media. He says, “The Puget Sound has emerged as arguably the best office market in the country over the last few years. It is clearly one of the four healthiest global gateway office markets in the United States, along with the San Francisco Bay area, West Los Angeles and Boston.”

Shannon notes the key factors driving activity include, “The combination of existing powerful growth engines like Microsoft and Amazon in conjunction with other FAANG tenants replicating their Silicon Valley footprint in Seattle has led to incredible absorption and rent growth. Bellevue with Azure and AWS is the defacto home for the cloud and Bellevue essentially replaced Brooklyn as Amazon’s second H2Q along with Washington D.C.”

As a result, Seattle’s office markets have tightened. Shannon says, “The office market currently has very little space for lease, with vacancy rates sub 4% in the most attractive markets like South Lake Union, the CBD and the Eastside. Double digit rent growth is forecasted to be probable again in 2020 in these markets because of these favorable supply/demand dynamics heavily favoring landlords.”

Those conditions haven’t escaped the eye of investors, either. “Investment capital globally has noticed these positive trends and Seattle is now on nearly every institutional investor’s shopping list. Foreign capital has increasingly recognized the market as one of the best global gateway office markets in the last few years. The new excise sales tax which went into effect in January provided an artificial stimulus that accelerated office sales in 2019 to an all-time record of over $11 billion. This cleared out much of the future sale pipeline heading into 2020. There is, however, even more capital in 2020 that wants to buy in Seattle. The combination of an incredible debt market, strong fundamentals and a global appetite for more product has created an extremely robust capital markets environment for the Puget Sound for 2020.”

For comments, questions or concerns, please contact Dennis Kaiser

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Read more at NKF Capital Markets ReportConnect With NKF’s Shannon

About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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