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Real Estate Buzz


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January 28, 2000

Real Estate Buzz

If there is an Eeyore of the stock markets these days it is, of course, real estate investment trusts. While Wall Street issues are soaring to enviable heights, REITs are pitifully mired in a morass. Around the muck, real estate types ruminate over the efforts of trusts to boost stock prices with aggressive stock repurchase programs.

Realty Times, which recently called the trend "somewhat disturbing," also reports that CarrAmerica, which has a strong presence in the Northwest, has joined the myriad of publicly traded real estate companies initiating a stock repurchase program. The company's board authorized a $100 million buyback.

Last year, according to the National Association of Real Estate Investment Trusts, the composite price of all REITs dropped 14 percent and in 1998 the same index was down nearly 24 percent. That brings to mind one word: ouch.

The declines are puzzling because, as the Realty Times article noted, some REITs are turning in solid earnings performances. In Seattle's sizzling real estate market REIT troubles seem especially difficult to grasp. But an anecdote from the Eastside shows why, compared to high tech, real estate investments can't keep up.

According to an in-the-know source, one of the region's wealthiest men was contacted about investing in a Bellevue building project. There was talk about a 20 percent return on a $20 million investment. Enticing? Hardly. Clearly unimpressed, the source of the capital simply looked at the solicitor and asked why he would want to settle for so little.

Further proof that for all the hype about record low vacancy rates and shiny new towers transforming our urban skylines, for investors real estate seems lackluster.

Most everybody knows about amazon.com's search for another 750,000 square feet of office space, but Mr. Bezos & Co., are only one of the drivers in this market. This week we've run across more major e-tailers that are rumored to be doing their part to ramp up real estate.

Our source says Kirkland-based HomeGrocer.com is looking for an additional 100,000 square feet of office and stamps.com, also is seeking 100,000 square feet.

Officials of HomeGrocer declined to comment because the company is in the mandated quiet period before its initial public offering of stock. Stamps.com officials could not be reached for comment.

Also percolating:

  • The Key Bank at Three Bellevue Center deal may be off. Several months ago there was unsubstantiated talk that the 22-story Three Bellevue Center might soon sport the name of the bank that was to be an anchor tenant, but now the bank is back in the market.
  • Nortel Networks is looking to consolidate its area offices and is said to be interested in a sizeable deal at One Twelfth <@> Twelfth in Bellevue.

These are but a few of some of the alleged space needs. It is it any wonder developers are lining up to unleash on the market more millions of square feet?

There's been plenty of talk about the Puget Sound region's apartment market, what with record per-unit sale prices that are expected to shoot over $200,000 this year. But what about the hot market in Benton and Franklin counties?

WSU's Washington Center for Real Estate Research has extended its survey to include apartment markets as well as single-family homes. The emphasis is on communities with significant numbers of apartments outside the Puget Sound region. (WSU is leaving the market between Bellingham and Olympia to Dupre + Scott Apartment Advisors, the Seattle company that already thoroughly researches this area.)

Dupre + Scott gave the center approval to use the company's basic questionnaire and methodology to research elsewhere in the Evergreen State. With the Dupre + Scott and WSU data, now roughly 95 percent of the state's market rate units are covered.

Glenn E. Crellin, director of the WSU center, says the center intends to conduct surveys each March and September. The September 1999 survey found significant variations across seven markets, ranging from a tight 3.3 percent vacancy rate in the Tri-Cities to 8 percent in Spokane. Rents for two-bedroom apartments ranged from $483 in Spokane to $586 in Clark County.

Thanks to Washington State University, you now have that scintillating scoop



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