Rebound in Jobs Spurs
Seattle Real Estate

Seattle's real-estate market soared in the late 1990s on the back of the aerospace and technology industries, driven by the city's two biggest employers -- Boeing Co. and Microsoft Corp.

The ties to those industries became burdens during the tech bust and collapse in travel that followed the 9/11 attacks. Area unemployment rose from 4.0% in 1998 to a high of 6.8% in 2003, according to the Bureau of Labor Statistics.

Last year the tide began to turn. The area gained more than 45,000 jobs in 2004 and the real-estate market stabilized. In the first-quarter vacancies in all four sectors inched down from the year earlier and office rents are projected to rise by 2% this year, according to Property & Portfolio Research Inc., a Boston-based real estate analysis firm.

The news of solid job growth fueled plans for new office space and piqued the interest of investors though rental rates are still about 29% below a peak of $32.74 in 2000. "There's new office workers and companies are going to have to put them somewhere," says Jim Costello, senior economist at Torto Wheaton Research, a Boston-based research firm.

Among the projects is Microsoft's 20-year plan to add 2.2 million square feet of offices to its 435-acre suburban Redmond campus to accommodate as many as 12,000 new employees. The first two buildings are slated for completion in 2007, says Jim Stanton of Microsoft. Nearby the Microsoft headquarters in suburban Bellevue, Kemper Development Co. says it is in active discussions with tenants for the office component of its mixed-use Lincoln Square project. The project's hotel, retail and condo elements, including some condos selling for as much as $6 million, are under construction. Several other mixed-use retail projects are planned for Seattle.

Apartment developers have gotten busier too, bringing 20,485 new apartment units into the planning phase in 2004, up 59% from the year earlier, according to PPR. Warehouse construction rebounded from record-low levels in 2003, thanks in part to the proximity of the area's ports to China, Japan and South Korea.

Last year, investors, convinced Seattle was on the rebound, paid $3.96 billion for office, apartment, retail and industrial properties, almost double the previous year's total, according to Real Capital Analytics Inc., a New York research firm. Investcorp, an international investment group, paid a record-high price of $460 a square foot for the Civica Office Commons in Bellevue.

One reason for the interest is that Seattle is cheaper than other nearby markets, such as California, where prices have soared. Bascom Northwest Ventures, a private San Francisco-based group, bought six Seattle-area apartment buildings in the past 18 months. "It was just depressed and cheap," says Brian Wirtz, managing director of Bascom Northwest Ventures, who added that prices are now rising.

By far, the best performing real estate market in Seattle has been residential -- high demand and incomes that are 26% above the national average have driven home and condo prices higher. The median price of single-family homes rose 13.7% in the first quarter to $321,100 from the year-earlier quarter, even outpacing the robust national rate of 9.7%, according to the National Association of Realtors. Homes are selling for a premium in some locations along proposed routes for two ambitious transportation projects: a light-rail link and a monorail line that would offer commuters alternatives to the cars and buses. There are plans for a 36-story condo tower along the proposed monorail at the historic Pike Place Market.

The rising home prices may have a dark side. The cost of living in the Seattle area is 12% above the national average, which could constrain growth, PPR says, though it is still below other West Coast cities.

Read about Seattle's residential real-estate market.

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