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Nat Levy
Real Estate Reporter

February 25, 2016

Real Estate Buzz: This development cycle is in 7th inning, but experts say the game's not over yet

Real Estate Reporter

If the local development boom were a baseball game, we'd be in the seventh inning, according to a panel of experts at a Bisnow event yesterday.

This means the cycle is nearing the final stages and could start to slow down. Several panelists agreed that over the next few years growth will taper off, but no one predicted a drop as brutal as the last recession.

“In terms of how we fall, we think Seattle is going to have a softer landing than others” said Bashar Wali of Provenance Hotels.

Bart Brynestad of Panattoni Development said the real estate industry learned a lesson in the last recession. Lenders and financial partners are more conservative — no more loans equivalent to 90 percent of the project cost — and the market generally is smarter, he said.

Also, the panelists said, Seattle has risen in recent years into the top tier of American cities, right up with New York City, San Francisco and Los Angeles. Pat Callahan of Urban Renaissance Group and Touchstone said Seattle's ascent is the result of several trends and events converging at the right time. Amazon.com's growth; zoning changes that opened South Lake Union and other parts of the city to more development; and the availability of capital — for projects here and around the region — are all factors, Callahan said.

This confluence of events set off a boom in all real estate sectors. Nathan Torgelson, director of the city's new Department of Construction and Inspections, said 7,500 new apartments opened in Seattle in 2014 and another 7,000 opened in 2015. Over the last 15 years, Seattle has added about 50,000 net housing units, Torgelson said. By comparison, during that same period San Francisco had only 18,000 new units open.

On the office side, Callahan said, about 10 million square feet will be built this cycle in Seattle. About 5 million square feet of that is build-to-suit. Of the remaining space, almost half has been leased. That leaves 2.5 million square feet to be leased to avoid higher vacancy rates. Callahan said the remaining space could be leased pretty quickly even if absorption numbers are below historical averages.

With all the action around this region, it's possible we could see some overbuilding, said Security Properties' Ed McGovern, but it shouldn't be much of a long-term concern.

“Supply may overshoot, but I think in the long run there will be continued demand for people to move here, for employers to come here, because now we see the search for talent, especially in a tightening labor market, will draw employers,” McGovern said.

Panelists said the biggest threat to the local economy could be something out of our control, such as a stock market crash or a global recession triggered by geopolitical issues.

Callahan mentioned income disparity and the political instability it may cause as another potential threat. This is a prosperous time for people in a number of industries, but he said a lot of people still feel they haven't benefited from the recovery.

Wali also pointed to the local impacts of income disparity. He said hotel owners are doing great right now, but low-wage employees can't find affordable housing close to where they work.

Diane Sugimura is the interim director of the city's Office of Planning and Community Development, which is in charge of long-term planning. She said the new office will focus on making sure the city plans projects comprehensively, such as making sure that there are safe sidewalks and crosswalks around a new neighborhood park so that people who live near it can walk there. Sugimura said the city is looking at future plans through a racial and equity lens to make sure that Seattle's growth benefits everyone.

“My dream for Seattle is that we are a city where the color of your skin, your country of origin and your zip code are not determinant of how you live, how you learn, how you succeed and how others see you,” she said.

For sale: An actual gold mine

Seattle's technology boom has become a modern-day gold rush, but about 400 miles away in the little town of Halfway, Oregon, a literal gold mine is on the market.

Hilco Real Estate announced it is selling the historic Cornucopia Mine. The site includes 900 acres that used to be a gold rush-era boom town.

A press release from Hilco says gold was first discovered there in 1884, and the mine has yielded more than 300,000 ounces of gold and 1 million ounces of silver. A 1987 drilling study indicates there are significant gold reserves still in the mine that could be tapped thanks to new technology.

What more information about this golden opportunity? It's at www.hilcorealestate.com

Got a tip? Contact DJC real estate editor Brian Miller at brian.miller@djc.com or call him at (206) 219-6517.

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