As we left 2020 behind, we collectively hoped that turning the calendar to 2021 would stem the tide of COVID-19 and bring about a V-shaped economic recovery. However, we enter this Spring with many of the same concerns holding-over from a very rocky 2020.
Alas, stability is right around the corner!
If you’ve been within ear-shot of my voice over the last many COVID-ridden months, you’ve likely heard me repeat many axioms. Some provide much needed catharsis that challenging times are only temporary – others I’ve repeated to spread sage advice of others much wiser than me.
One of my most favorite – and most oft repeated as of late – posits that the human condition leads one to believe that “[i]n good times one can never imagine the future could be any different; and as well, in bad times one can never imagine the future could be any different.”
Depending on your geographic location, vocation, and economic status, right now maybe a time when you can’t imagine good times will visit soon again – or soon enough!
A comprehensive and broad recovery may not be immediately recognizable, yet I see signs that economic stability is around the corner for the Seattle commercial real estate market.
First, Big Tech is getting back to work.
Second, apartment rental rates in urban centers are beginning to rebound.
Finally, the apartment investment market is heating up.
Big Tech Getting Back to Work
As big tech evacuated urban centers in March 2020, they took urban-dwelling apartment renters with them. Apartment rents across Seattle—San Francisco—New York City plummeted +30% in the ensuring months.
The recession brought about by COVID-19 wasn’t triggered by an economic event, yet its impact was economic. Office tenants and apartment residents leaving their offices turned-off rental rate growth like a light-switch.
Once these “occupiers” return, that light-switch will once-again flip in the positive-growth position.
It was announced this week that Facebook is reopening its Seattle offices. Just as Big Tech was quick (and smart) to shut-down in-office operations at the outset of COVID-19, they will act similarly quickly and intelligently in reopening their offices.
Expect the trend of reopening to spread throughout Big Tech in a coordinated and swift fashion as they all know they are more innovative and competitive once back in the office.
Why else would they have invested billions in urban campuses?
Collecting talented people in one exciting, dynamic, and energizing place was no accident – and Zoom is no replacement, I am quite comfortable betting that history will prove this prediction accurate.
With office workers’ return comes demand for lunchtime sandwiches, afterwork happy hours, traffic congestion, and the desire to live and play close to work again.
Think I am wrong?
Continue reading as I provide historical data to fortify my position that we will be back to full office employment in no time.
Rental Rates Rebounding
It is no secret that Seattle – as well as other urban, coastal apartment markets – had a rough 2020. Myriad challenges, and not friendly press coverage, painted a pretty bleak picture.
Yet, our team focuses on the data – and the data demonstrates that the tide of apartment rental rate declines started to stem nearly 3 months ago, and rental rates are already rebounding in Seattle.
Over the last year the largest declines were in urban markets – and specifically Seattle. All the while, suburban markets actually achieved rental rate growth.
What came down, will go up again; history proves it time-and-time again!
Investment Market Heating-Up
We are seeing investors come back to the market – and we have good data to prove it. We currently have 24 properties listed and/or under contract. (CURRENT LISTINGS)
Each week we are getting more offers on our listings, our clients are experiencing more contingency periods waived, and more buyers are proceeding to close transactions.
While there was a massive decline in apartment sales Q1 – Q3 2020, sales volume picked-up pace near previous averages by Q4 2020, and that pace continues to gain steam.
Although we don’t expect a return of frenetic apartment sales experienced in 2019, we see sellers and buyers steadily coming back to the market – and for good reason!
Markets Swing Back Quickly, Get in Now
Without question, if you plan to invest in the Seattle/Puget Sound market during the next 10 years – you should place bets now.
Not in 6 months.
Not in 12 months.
Now. (Maybe even yesterday)
Want evidence why?
Since the Great Recession (remember when the sky was falling, Lehman collapsing and people were losing retirement accounts, homes, jobs?), Seattle apartment rental rates grew on average 40%.
This time is different, you say?
No one will live urban, you say?
Tech worker can take Zoom calls while riding a moose and fly fishing in Helena, right?
I call BS.
Since the beginning of modern times, people gathered at the river bend. I call it the Mesopotamia Effect.
For the past 6,000 years, human innovation – written script, literature, sailing – and commerce – souks, bazaars – formed and thrived around a convergence of people and ideas generated thereby.
Want proof that even against the worst of odds people return to the riverbend?
The following graph exhibits Manhattan Class A office rental rates before and after the horrific events of September 11, 2001.
Manhattan Class A Office Rental Rates – 2000 to 2008
Within two years of September 2001 Class A office rental rates declined more than 25%. It was said that people would not return to Manhattan – and certainly no one would work in high-rise offices again.
In the following 5 years Class A office rental rates surged 65% from the lowest trough.
I find it hard to argue with the Oracle of Omaha’s advice of when to enter investment markets. When people are greedy, be fearful. When fearful, its time to act – it’s time to invest.
Get in the market; not too long from now you’ll be glad that you did!
We can help with a Free Valuation of Your Apartment Building or answering questions about what/where to buy.
Working with a capable, experienced, and active team of apartment sales and lending experts is always important–and such sage guidance was never more necessary than it is today.
Give us a call to Turn Our Expertise into Your Profit!