The Seattle apartment market has for many years hosted an array of different developers and investors – many of which are not based in the Puget Sound region. Over the years we have seen new market entrants come and go, yet the current market cycle has produced an exciting cast of new market entrants redefining Seattle’s apartment and condominium market.
These new market entrants are coming from far and wide, with capital flows and project plans worthy of the investment destination Seattle has become in recent years. The following is a snapshot of a few groups and their plans and a look forward to what we can expect in coming years.
Apartment Buying Frenzy
The current apartment market cycle found its footing as early as 2011 and within a year of that time a bevy of new buyers hit our metaphoric shores. In 2012, TIAA-CREF made a big splash buying three Seattle properties totaling over $300M in a just over two months – capped by the $166M purchase of Aspira Tower. Out-of-town capital continued through 2013 with new entrants Zurich buying apartment assets in West Seattle and Eastlake, Calfox buying apartment assets on First Hill and in Wedgwood and Hartz Mountain making a $62M purchase of Alto Apartments in Belltown.
In 2014, we saw another significant entrant with an individual trade buyer out of San Francisco scooping up a two property apartment portfolio from local developer Continental Properties – Gastby Apartments in Capital Hill and Jax in Lower Queen Anne. In this case, our market directly benefited from near insane pricing in San Francisco producing a well-capitalized trade requirement.
With each of these entrants breaking into the Seattle market we found a new level of competition created – pushing capitalization rates lower and purchase prices higher. As we break into 2015, our apartment market will undoubtedly find continued attention from out-of-town buyers looking to participate in Seattle’s healthy fundamentals.
They Came with Shovels in Tow
Arguably even more exciting than new buyers of Seattle apartment assets, new blood in the development community entering Seattle is nothing short of phenomenal. In the last three years we have seen some of the West Coast’s (and some of the East Coast’s) most exciting developers forge development plans in Seattle.
The list is esteemed and growing. MacFarlane Partners out of San Francisco has planted several significant poles in the ground in South Lake Union, most recently announcing plans to move forward with a 290 unit apartment tower project. Wilshire Capital Partners has also found a home in South Lake Union with 7-story and 26-story apartment projects in the works. Not to be outdone, Miami based Crescent Heights purchased a tower site in the Denny Triangle, joining active developers in the neighborhood including Touchstone, Trammel Crow and Security Properties.
Add to the list Shea Properties out of Southern California, joining other apartment developers along Dexter Ave N, with a well-designed apartment complex planned just north of the Holland Partners Empire.
Foreign Capital on the Rise
This discussion would not be complete without dedicating a separate section to the legion of foreign development investment in the Seattle residential investment market. This category is gaining both momentum and attention as the numbers get more astounding and the players become less familiar.
Foreign, albeit bordering, capital entered our market early with Canadian developer Nat Bosa’s 707-unit condominium behemoth, Insignia Towers. With reservations on the South Tower topping 75% as of February 2015, Bosa is looking more genius than ever. Bosa may have been one of the first Canadians to reach Seattle in the most recent cycle, yet he is not the only player anymore.
Onni Group from Vancouver, B.C. stunned the Seattle commercial real estate community with an announcement of a 1,945 unit project at the southeast edge of South Lake Union. Fellow Canadians bcIMC purchased an entitled high-rise site at Third and Virginia in 2013, followed by the subsequent purchase of a First Hill site in 2014.
Investment and development capital is also coming from the Far East. A Chinese group purchase a 4th & Bell redevelopment site for condo development and another Chinese funded group purchased a tower site in Bellevue in early 2014. Overall, Chinese investment in Seattle is worthy of “Boom” status, according to the PSBJ, with over $2B in recent transactions – a trend which is sure to continue.
What to Expect in 2015 and Beyond
Expect more of the same in years to come, a lot more of the same. Whether it’s out-of-state investors/developers or truly foreign capital, our market will continue to see an increase in market entrants to the Seattle market.
Nearly each week I am talking to a new group wanting to find a foothold in the Seattle/Puget Sound market – just last week I sat down with a group willing to lower return thresholds and adjust buying criteria just for a seat at our table. As someone who reaches investors on a national and international basis, I am fortunate to have early access to these discussions and am both impressed and amazed by Seattle’s allure.
Following investor demand is an important facet of our business and can be extremely accretive to returns for apartment owners in our market. If you are interested in learning how these dynamics can impact your investments, please contact me.