2018 Real Estate Trends & 2019 Predictions: Capital Markets

Home to a healthy economy and large-scale tech expansions, the Seattle market has risen fast in the ranks of target cities for investors. In this third installment of Kinzer’s blog series, Partner Stuart Williams discusses trends he witnessed in Seattle capital markets in 2018 and his predictions for 2019.

Broker: Stuart Williams

Joined Kinzer Partners: 2018

Capital Markets Team Focus: Sale and joint venture of office, hotel and land permits

Notable trend of 2018

Partner Stuart Williams

We have seen more new capital bid and win bids on major projects. This is big, institutional capital that has never bought into Seattle before.

In 2018, for example, Boston-based Pembroke Real Estate bought 400 Fairview, which is their first asset in Seattle.

Seattle has also become increasingly attractive to international investors. We’ve gone from being a top-20 city to a top-10 to a top-5 – through every iteration, as it ranks higher and higher, we’ve seen more international capital and investors willing to pay higher pricing.

In other major markets, investors are paying $1,500 a foot or $2,000 a foot. Seattle looks like a bargain in comparison at nearly $1,000.

The growth in international investment and reputation can be attributed to strong market dynamics and a change in the types of companies downtown. Our downtown used to be highly focused on professional services, such as banks and insurance companies.

If you look at the credit of the new companies that are taking space, whether it’s Amazon or the big Bay Area firms – Google, Oracle, and others – you’ll see that not only are they occupying a lot of space, but they have great credit. That tends to promote higher prices per foot and more international capital that tends to be more risk-averse.

Predictions for 2019

I started making a prediction every year about what we would achieve in terms of highest price per square foot of commercial space in Seattle.

In 2016 I said, “I think we’ll get over $800 a foot.” And we made it to over $900 per square foot. Now the real question is: will we get over $1,000 a foot in 2019?

Data from CoStar Analytics

We almost got to it in 2018. We had sales at $990 a foot, but we haven’t gotten over the $1,000 a foot barrier. Los Angeles and San Francisco have gotten over that; Portland is miles away.

We’re close, and we’re trending in the right direction. Rents are going up. Land prices are going up. Seattle continues to be a strong market. When you factor all that in, we should be seeing sales for more than $1,000 a foot very soon.