The commercial real estate industry surges as never before as the players work to take advantage of the stupendous market

Over and over the pros agree: purveyors of commercial real estate in the Puget Sound region rarely have had it this good.

As Daily Journal of Commerce staff members interviewed developers and brokers about their plans for 2000, each and every one swooned over the extraordinary strength of the bull market.

This must have been what it was like during the Klondike Gold Rush, which fueled Seattle's first big boom the last time one century ticked into another.

Tom Parsons of Opus Northwest LLC compared the preceding year and a half to a bullet train ride. Another developer, Gary Carpenter, compared the strength of the market to a different type of a train, a freighter.

"It's just remarkable," added Jon Runstad, chairman and chief executive officer of Wright Runstad & Co., the Seattle investment builder that has developed more than 10 million square feet since its start in 1972. "And the level just seems to go higher."

Millions of feet of commercial space are under construction in the region yet no one thinks there's much danger of overbuilding.

Look at the record low vacancy rates and all the preleasing activity. During the last boom cycle, new commercial space might sit empty for years. These days it's being snapped up even before the construction cranes are moved on site. The result is a staggering increase in rents. Al Hodge, a broker for the Broderick Group, has predicted rents for new leases will climb by 20 percent and that rates for renewals will blast up 70 percent.

More than just tower cranes and rents are reaching skyward. Look at the accompanying graph, which shows how much commercial real estate traded hands in King County alone last year. The tally hit $1.4 billion, outstripping 1998 by an astounding $500 million.

Tom Abbott, the Cushman & Wakefield senior director who presented these numbers at a recent forecast breakfast, expects the frenzied pace to continue. Investors are interested in the Seattle-area market and want in on the action.

The doubling of the state Convention Center exemplifies the markets commercial real estate boom. Photo by Sam Bennett

As for the sellers, Abbott anticipates those roles will be taken by a couple types of owners. The first are those who do not have enough real estate in Seattle to make the big play; they'll take advantage of surging prices to unload property and move the resulting capital to other markets where they have a more dominant stake. The second class of sellers will be developers who feel they have added what value they can to their properties.

Abbott does not believe the market has peaked. "The word I have been using for while is plateau," he said. Based on continued low vacancy rates and strong job growth, he opines the market will stay on this plateau at least during the coming year. Beyond that, it depends on vacancy rates, he added.

To be sure, there are some troublesome issues on the horizon. Interest rates continue creeping upward. One developer, Joe Blattner of Tarragon, said the Endangered Species Act has hindered progress on some of this company's projects. And no one has unsnarled the region's traffic tangles.

Then there are concerns about the long-term viability of these dot-com companies that are fueling much of the market. Surely the boom will go bust just as the Klondike and all other previous good times did. Perhaps this time, though, developers and financiers will cover their bets well enough to avoid the harsh consequences.

As detailed in this special section, real estate experts are not ignoring the potential trouble. Nor are they letting them get in the way of the good times the likes of which modern-day Seattle has never seen.

Double-Shot Downtown
Imagine a Seattle central business district twice the size within 10 years. A 60-million-square-foot office market, twice its current size of 30 million square feet. Imagine other infrastructure twice its current size. It's happening as we speak.

A tale of two markets
Office space vacancy rates are reaching historic lows on both sides of Lake Washington. In Seattle, everything old is becoming new again. But in Bellevue, new still means new.

Simply regulating development is a fishy way to save salmon
Restoration work for building projects may serve as a model for how new development can co-exist with fish. But what about reducing the impact of existing development?

Tacoma's Transformation
After years of patiently laying the groundwork, Tacoma’s boosters are witnessing their vision for the city blossom.

Dot-coms twist notion of supply and demand
In a commentary about the local commercial real estat market, local broker Leigh Callaghan says that though the good times will continue for some time, local players had better hang on for more theatrics and a wild ride in the coming years.

Lights are burning bright in the Kent Valley
Industrial era gives way to the Information Age.With all this growth, and the land supply diminishing, where do we go from here?

Even in good times, risk still abounds
By almost every standard, this has to be the best of times for commercial real estate and commercial real estate finance in the Puget Sound area. It is a period not without its negative aspects and risks, however.

Renton ratchets up to ride the wave
It used to be that Renton was about the last place that popped to mind when people thought about a hot business address in the greater Seattle area. But times have changed - and how.

Eastside tenants take a whopping 2M square feet in ’99
The make-up of the market has changed drastically from the ``Tech Corridor’s'' early days.

Stand-up retail not going away anytime soon
Against the rising tide of e-commerce, conventional wisdom suggests that traditional bricks-and-mortar retail will soon crumble like a sand castle. The reality, however, is somewhat different.

A return to retailing in the neighborhood
Just when people were getting used to traveling to the suburbs to the climate-contolled retail behemoths we call shopping malls, urban and neighborhood retailing has started making a comeback.

Meeting tech companies’ needs requires creativity
The global high-tech frenzy is sweeping through Seattle, as software, dot-com and tech-related companies are driving our commercial real estate market.

It’s an institutional game - or is it?
There’s no disputing that developing marquee projects is a daunting task. It requires not only expertise but access to boatloads of capital.

Major changes may be in store on lodging front
Despite what seems to be an ever-expanding base of hotels in the region, Seattle can be considered fortunate, if not downright lucky, not to have experienced the same kind of hotel supply increases in 1999 as Portland, San Francisco or Denver.

Plugging into the future
Brokers say online tools will help in the real estate business, but that the notion the Net will make or break a brokerage is spurious.

2000 DJC commercial real estate survey
Two years ago the experts wondered aloud if the market had peaked. The answer at the start of the new millennium is a definite no.

Eastside warehousing the latest on the endangered list
While the Eastside office market continues to grab headlines with new projects and major leases announced regularly, the fate of the Eastside industrial market has become questionable.