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$3.51 billion of transactions occurred in first half of 2013
SEATTLE, Aug 12, 2013 - From Starbucks to Sur La Table and Costco to Expedia, Seattle and the entire Puget Sound region, has long been an incubator for growth, but lately, its’ red hot employment market has captured the attention of domestic and international investors. The unemployment rate in the city has dropped to 5.2 percent, making it as the third fastest improving major metro area in the country. As the region’s premier hub for technology, biotechnology, manufacturing and international trade, the Seattle commercial real estate market has hit its stride with six major properties changing hands in the second quarter of 2013 with a sales volume of nearly $900 million.Investors who nod off may risk losing major opportunities, according to Jones Lang LaSalle’s Capital Markets experts in the region. Since 2010, the City of Seattle has made significant investments in its economy and infrastructure leading to its success. The city has committed $2.9 billion in capital improvements which created or retained 9,531 jobs and has seen the value of construction permits increase almost 63 percent, from $1.6 billion in 2010 to an estimated $2.6 billion in 2013. “Seattle has established itself as a tier one gateway market for institutional investors and saw $3.51 billion in assets trade hands through YTD June 2013,” said Stuart Williams, Managing Director with Jones Lang LaSalle’s Capital Markets. “Driven by its diverse and robust economy, Seattle has become a target market for institutional capital and REITs, and we anticipate continued interest from foreign investors.”OFFICE: The Seattle office market has seen $1.47 billion of investment through year-to-date June 2013. Pricing in the office sector has returned to pre-recession levels with a new price per-square-foot high water mark set at $642.The hotbeds of technology activity in South Lake Union and the Bellevue CBD are seeing significant tenant demand with vacancies dropping and significant pressure on rents. Additionally, cap rates have compressed significantly with the current average sitting at 5.5 percent for institutional office properties. “In 2013 it’s likely we will see the return of speculative office development, especially in the Bellevue CBD as Class A vacancy rates are below seven percent and there is very limited availability of large blocks of space,” according to Williams.INDUSTRIAL: Seattle’s industrial vacancy rates inched down more than 100 bps from last year reaching 5.7 percent in 1Q 2013. Demand for state-of-the-art big box space is driving construction and pre-development activity, with more than 5.7 million square feet under construction. Developers are positioning themselves to capture build-to-suit opportunities as land constraints tighten. “Stable tenant activity from small to mid-sized tenants and rising demand for Class A facilities will keep the market on pace for the coming year. With more than $410 million of industrial transactions, we expect sales volume to be on par with 2012,” said Lori Hill, Managing Director of JLL’s Capital Markets.HOTELS: Seattle’s hotel transaction volumes have strengthened since the recession, and it’s anticipated that the market will reach $150 million in lodging transactions this year. REITs and private equity investors, which historically have had lower exposure in the Pacific Northwest, are increasingly seeking acquisitions the market. The overall Seattle hotel market is expected to record eight to 10 percent RevPAR growth this year, which would likely surpass the national average growth rate for the fourth consecutive year. “The availability of debt construction financing for select, high quality projects in gateway markets motivated by strong demand fundamentals has propelled hotel construction in Seattle, which is evidenced by various new limited and focus service hotel developments underway as well as a proposed convention center hotel,” said John Strauss, Managing Director of JLL’s Hotels & Hospitality Group. MULTIFAMILY: The Seattle multifamily market is ranked sixth in JLL’s U.S. Apartment Performance Index which ranks each area’s pace of rental demand, and its resulting impact on multifamily fundamentals, during the last 12 months. Rent growth during the last year has nearly doubled the U.S. average of 3.4 percent, even while delivering more than 2,000 additional units year-to-date. “The metro continues to see occupancy gains in the multifamily space, and investor demand is up with total sales volume in the first half reaching $1.25 billion,” said David Young, Managing Director of JLL’s Capital Markets.RETAIL: Seattle’s retail demand is driven by a strong, growing consumer base as the market saw a surge in population growth this year. With the population growth, consumer sales are rebounding steadily; however they are still below their pre-recession peak. With no new retail product coming to market, vacancy rates are expected to decline as rental rates inch up creating an opportunity for owners to capture the upside on their rent rolls with future leases. “Nearly $375 million of retail transactions occurred in Seattle through the first half of 2013, with cap rates averaging in the low 7 percent. We expect Seattle’s retail market to continue to do extremely well, with domestic and Canadian capital acquiring assets in the coming year,” concluded Hill.Jones Lang LaSalle Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm’s in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2012 alone, Jones Lang LaSalle Capital Markets completed $63 billion in investment sale and debt and equity transactions globally. The firm’s dealmakers completed $60 billion in global investment sales and buy-side transactions, equating to nearly $240 million of investment trades completed every working day around the globe. The firm’s Capital Markets team comprises more than 1,300 specialists, operating all over the globe.For more news, videos and research resources on Jones Lang LaSalle, please visit the firm’s U.S. media center Web page. Bookmark it here: http://www.us.am.joneslanglasalle.com/UnitedStates/EN-US/Pages/News.aspxAbout Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management. For further information, visit www.jll.com.
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