Commercial Lease Rates Hitting New Heights In Seattle

seattle sunsetThe Highway 99 Blues Club, established in 2004 and located in the basement of a hundred-year-old brick building, is possibly one of the best blues clubs in Seattle. As reported by The Seattle Times, in June, the business was notified that their rent would be increasing. Somewhat normal and understandable considering the immense growth Seattle overall is experiencing, especially downtown. However, their rent isn’t going up just $500, or even $1,000. Starting in January 2016, the blues club, if they intended on staying, would be responsible for paying $14, 959 a month. That’s an increase of 225 percent (or $10,359 more a month) and how the business sees it, an eviction notice.

The commercial real estate market in Seattle is reaching new heights, quite literally and figuratively speaking, so much so that downtown tenants, like the Highway 99 Blues club, are being squeezed out due to astronomical rent increases. This gentrification of downtown Seattle is well supported, as companies haven’t a problem finding tenants to fill local office space in exchange for a pretty penny. In fact, not only are rents 7.5 percent higher (an average of $36.76 a square foot) than last year, but in June of this year “the vacancy rate was 11.4 percent, down nearly by half from its high of 21 percent five years ago,” according to the Seattle Times.

This rise in lease rates in Seattle, Bellevue, and surrounding areas has been greater than any other metro area in the US, and that includes tech hotspots like San Francisco, San Jose, Boston, and New York, according to the New York based market research firm Reis. Still, Seattle is cheaper than Manhattan, San Francisco, and London, and currently offers a thriving and exponentially growing technology and health industry. In fact, many San Francisco-based businesses are on the hunt for Seattle offices, including cloud-computing giant, Salesforce.com.

It’s been reported that three-quarters of newly occupied office space in King, Snohomish and Pierce counties is located in downtown Seattle. Last year a top floor office space went for $30 a square foot, this year a lower floor office space in the same building is asking $36 a square foot. That’s a 20 percent rent increase. Demand for land is what is moving these prices, as business owners are paying huge premiums and signing large lease transactions in order secure a spot to set up shop.

Adding to the difficultly in securing an already existing office in downtown Seattle or nearby areas, many companies are signing pre-leases on buildings that are still under construction. Some of these companies being:

-          Amazon just leased 817,000-square-feet of Troy Block, which is part of two-building project in South Lake Union.

-          Holland America Line just leased Martin Selig’s new 185,000 square foot building in Lower Queen Anne, set to open next year.

-          Tableau Software is set to lease a new 2016 210,000-square-foot building north of Gas Works Park.

-          And Juno Therapeutics leased 287,000 square foot building which is under construction at 400 Dexter Ave. N in South Lake Union.

It certainly seems “Seattle is a landlords market,” Stuart Williams, managing director of commercial real-estate brokerage JLL told The Seattle Times. This isn’t a playground for the mom and pop smaller tenant. This game is only available for big time tenants ready to pay up, commit to long term leases and wait patiently for their space in the ever changing Seattle metropolis.

Millennials Are Buying Homes After All

broadview homewwThe National Association of Realtors 2015 report on generational trends showed that millennials make up the largest share of homebuyers, sitting at 32 percent. According to a recent TD Bank Survey of 1,002 adults, millennials who are currently between the ages 25 and 34 will be looking to purchase their first home over the next two years. Alas, putting to rest their reputation as the transient renter generation.

As the older tier of Gen Y rounds into their early 30s, many of whom didn’t experience the housing crisis firsthand, they view home buying with innovative eyes. Millennials see the potential in the “fixer upper” home and aren’t ruling them out as viable housing options. Just as likely to roll up their sleeves as the generations before them, millennials like the idea of tailoring their home to their needs.  Despite being laden with college loans and debt, and maybe because of that, Gen Y-ers are also less romantic about the process – purchasing before marriage, owning for shorter amount of time and flipping with success. There is as much risk as there is reward, and this robust generation isn’t questioning if the rewards exists.

Beyond changing the home owner relationship, this generation is also changing the home buying process. “We’re on our phones all the time, and this generation does not like to pick up the phone,” Player Murray, managing broker at Berkshire Hathaway HomeServices York Simpson Underwood Realty told US News. “They don’t want to bother with a conversation if it can be texted.” And because it’s predicted that millennials will (soon) rise as the generation buying the largest number of homes this year, their preference in how the process works, matter – big time. Nela Richardson, chief economist for the real estate company Redfin, agrees that “because of their size, whatever they decide to do will have an impact on the housing market,” and really, with smart phones and searching apps like Redfin and Zillow, Richardson is on to something.

This tech-savvy generation is spearheading change in many industries and real estate has been no exception. As Gen Y-ers overtake baby boomers in the home buying game, there is a ripple effect. Being that only 3 percent of agents are under 30, and 81 percent of real estate agents are over the age of 45, according to a NAR survey of its members, the tables have turned and the consumer isn’t being served by its own age group.

It’s not that Gen Y-ers aren’t buying homes, they are, just on their terms. They know what they want, which is not a phone call, but rather a text or app that will give them the freedom to research on their time. They do their homework – they aren’t looking for an access point to the information, as that is already at their fingertips, what they are looking for is a person to interpret the information and not leave anything out. Surprises aren’t fun for this generation, but home improvement projects are!

Prices Down In King Co., But Sales Are Strong

1Home prices in the Puget Sound housing market showed signs of cooling in July, but sales volumes were on par with the blazing temperatures we saw for much of the month. While the number of closed sales of single-family homes in King County held relatively steady from June to July, there were 266 more closed sales this July than during the same month in 2014, despite there being 1,311 fewer active listings than a year ago, according to statistics from the Northwest Multiple Listing Service. The median sold price for a home in King County actually fell from $500,000 in June to $485,000 in July, but prices were still up 3.63 percent on a yearly basis. The median sales price for single-family homes in Seattle showed no change from June to July, holding steady at $575,000.

Though that may seem like a modest yearly increase compared to the 10 percent year-over-year price increase in June, median prices in many sub-markets in King County are growing at much higher rates. Prices in west Auburn in southwest King County grew by nearly 25 percent over the year, and Kirkland saw a yearly increase of almost 18 percent. The city of Seattle saw median prices rise by 5.9 percent to $575,000. Even the West Bellevue area made up of communities including Medina, Hunt’s Point, and Clyde Hill, which is home to the county’s highest median price of $1,537, 500, saw prices rise 14.4 percent over last July.

King County’s supply of homes actually increased slightly over the month, from 1.18 months’ worth in June to 1.22 months’ worth in July, but that is still far below the ‘balanced’ range of 4-6 months’ of inventory. Some areas, especially neighborhoods within Seattle, are scraping by with under a month’s worth of homes. The northwest Seattle neighborhoods of Ballard, Green Lake, Fremont, and surrounding areas have just half a month’s supply; and northeast Seattle is doing just slightly better with 0.6 months’ worth of homes available.

Despite the slight drop in home prices over the month, the continued lack of inventory means it is still a great time to sell. If you’re interested in buying or selling a home in the Seattle area, contact your local real estate agent today!

A Hidden Cost That May Be Helping Drive Rent Increases

Parked CarsThe affordable housing crisis in Seattle is garnering attention from the media, homeowners and politicians alike. Rent costs continue to rise and more than 100,000 people are estimated to move to the Seattle area in the next 20 years. Minimal affordable housing options have over half of Seattle renters paying more than one third of their income on rent, an average of $1,501 per month for a one-bedroom apartment.

Common reasons thought to contribute to rising rentals costs are lack of rent control and the fact that almost 65 percent of the city is zoned for single-family housing, leaving limited areas for multifamily development. But an article in The Stranger recently outlined a less visible factor that contributes to monthly rental costs: parking garages in apartment buildings.

Off-street parking requirements and more conservative developers contribute to the, arguably excess, parking built for apartment buildings. It’s estimated that one parking stall in a residential garage can cost between $20,000 and $50,000. Depending on the size of the building this can add several hundred thousand dollars in cost, not to mention taking up space that could be used to construct far more profitable housing units.

The article states that though many still cite parking as an amenity they prefer, more than 30 percent of parking spaces in buildings built after 2008 go unused at night, according to a  2013 report by the Sightline Institute. So who pays for these parking spots? All tenants, even those without cars.

Because the developers rarely see a full return on investment for parking spaces, landlords generally pass on the expense to their tenants. These expenses, usually represented in higher rent, can add up to 15 percent of monthly rent, applying to all tenants regardless of whether or not they own a car.

This issue was recently addressed in the final proposal of Mayor Ed Murray’s Housing Affordability and Livability Agenda. “Off-street parking requirements or quotas have a large impact on the financial viability of new housing for both market and affordable housing development,” the report states. “Parking quotas act as density limits, inflate the average size and price of housing units, and prevent some smaller properties from being developed altogether.”

Price Growth In Seattle Area Slows In May

1S&P/Case-Shiller released its monthly home price index this Tuesday, and the numbers show that home prices in the Seattle metro area have reached a minor lull in the traditionally busy buying season, with the index up just 1.4 percent in May from April. Average prices stayed the same from April to May, whereas prices grew by 0.6 percent from March to April. The weaker than expected gains still reflect a 7.4 percent increase from last year, on par with year-over-year gains in April. The median price in the Seattle area is still 6 percent below the 2007 peak.

David Blitzer, chairman of the index committee, said in a statement that first-time home buyers are partially to blame. “First-time buyers provide the demand and liquidity that supports trading up by current homeowners. Without a boost in first-timers, there is less housing market activity, fewer existing homes being put on the market, and more worry about inventory,” he said.

Though the Case-Shiller index showed an overall gain of 7.4 percent from last year the most notable jump was still in the most affordable homes. There was a 10.7 percent gain in homes sold under $296,017 and only a 6.7 percent gain in houses sold over $471,764.

Data from CoreLogic shows that only 2.18 percent of homes mortgaged in King and Snohomish counties are delinquent by 90 days or more. A sharp decline from last year’s 3.26 percent delinquency rate, and the July 2012 peak of 6.68 percent.  This decline has helped to ground home prices.

Though gains have slowed for the current month, it is anticipated that the stagnation will not continue in the coming months according to Stan Humphries, Zillow Chief Economist.

If you are looking to buy or sell a home in the Seattle area, contact your local real estate agent today!

Nearly Half Of Seattle Homes Selling For Over Asking

Blue RidgeOnly four cities in the U.S. have a higher percentage of homes selling above their listing price than Seattle: San Francisco and San Jose, Calif. are seeing nearly 80 percent of homes selling above asking; Oakland, Calif. is not far behind at more than 70 percent; and Denver, Colo. is narrowly edging out Seattle with slightly more than 50 percent of homes going for more than list price. Seattle clocks in at just under 50 percent, according to Redfin Research. Despite home prices in Seattle being up 15 percent from this time last year, a recent report by the Puget Sound Business Journal showed that homes are not only selling for above asking, but FAR above asking. A home in Ravenna, where the buyers never personally set foot in the house before making an offer, sold for $1,175,000 – $200,000 more than its list price of $975,000. Similarly, a home in Magnolia listed for $699,000 ended up selling for $800,000. Underscoring the great lengths buyers are going to in order to purchase a home, even this home in Bellevue, which backs up to a 50-foot ravine instead of a backyard and was found to have cracks in its foundation, sold for $893,900 – 6 percent over asking.

Not only are homes selling for sky-high prices, but they’re selling in the blink of an eye. Seattle boasts the second lowest number of days on the market of any city in the U.S. at an average of nine days, according to Redfin. Only Denver is seeing its homes sell in a shorter period of time, at an average of just six days. With inventory down 27.5 percent over the year in Seattle and very high demand, it doesn’t look like this mad scramble for homes will let up in the near future.

If you have questions about buying or selling a home in Seattle, one of our agents would be happy to help you navigate this challenging market!

Median Home Price In King Co. Hits $500,000

1215 McGilvra NewThe median price of single-family home sold in King County has reached new heights this year. According to the Northwest Multiple Listing Service, the median price in King County has risen to $500,000, a 10.3 percent increase over the last peak of $481,000 in July 2007. In Seattle, the median is significantly higher than that, having risen 15 percent over the year to $575,000. It’s been rumored that we are in a bubble, but Alan Pope, a real estate appraiser in Redmond, says he believes we aren’t in a bubble, but that “… the balloon is growing, and I can’t tell when it’s going to stop.” In fact, the housing market is just gaining traction from taking a hit during the past recession and isn’t too far above the prices they normally would be had we missed it.

The Seattle area’s healthy job market has caught the eye of the nation and beyond. As more people settle in to Seattle and surrounding cities, the housing market has become quite competitive. With a surge of buyers and very little increase in single-family residential development, there is a shortage of houses on the market. Between March and May of this year, Seattle only had a month’s supply of single-family homes and condominiums on the market, according to a Seattle Times analysis of NWMLS data. Inventory in June of this year was well below the average three months’ supply, and the number of residential listings in King County was 23 percent lower than last year.

Other counties are seeing similar patterns. In Snohomish County, the median price of single-family homes sold was $360,125, that’s 6 percent higher than last year. Pierce County prices are up an impressive 9.5 percent, sitting at $257,000.

In Seattle, homes for sale sit on the market for an average of just eight days, compared to the national average of 28 days. When a home goes on the market, Seattle house hunters are ready to play ball, even if that means paying well above the listing price. The only true fix to relive the pressure on the current housing market is to build new houses. The National Association of Home Builders reports that there were 3,481 permits issued for new single-family homes between January and May, down 4 percent over the year. That might be due to the lack of adequate plats to build on. Allison Butcher of the Master Builders Association of King and Snohomish Counties told the Times that land is becoming increasingly hard to find in Seattle.

As for condominiums, we’re seeing a bit of a trickle-down effect, as the median price in King County was $287,000, up 7 percent over last year, and up 12 percent in Snohomish County, now sitting at $239,950. However, Pierce County is down about 7 percent, at $162,500. Listings for condos aren’t climbing as quickly as single-family homes, but they are taking some of the heat as buyers look for other more available options.

If you are interested in buying or selling a home in the Seattle area, contact your local real estate agent today.

Seattle Area Market: Prices Are Rising, People Are Buying

812 W GalerS&P/Case-Shiller released its Home Price Index for April today, and the numbers paint a familiar picture of the Seattle-area housing market: prices are rising, and people are buying. The average price for a single-family home in the area comprising King, Snohomish, and Pierce counties rose 0.9 percent in April from March, and was up 7.5 percent over the year. Despite the rise in prices, homes are selling in an average of 8 days in Seattle, and the number of completed sales in the three-county region was up a staggering 38 percent from last April. According to Zillow, the median single-family home in the area will now cost you $366,100.

Compared to the blistering pace of price gains at this time last year, when prices were up 11.2 percent on a yearly basis, gains seem to be moderating. In reference to the housing market as a whole, Zillow Chief Economist Stan Humphries said in a statement that “Normal home value growth is usually between 3 percent and 5 percent annually, well below growth rates of just a year ago, so the current pace is far more sustainable.” While the Seattle area’s growth has not fallen into that threshold yet, we’re not seeing the sustained growth of last year, when prices in the area grew by double digits on a yearly basis for 14 consecutive months. San Francisco and Denver are leading the nation in appreciation, with home prices having risen by 10 percent and 10.3 percent respectively.

It is still a great time to sell in the Seattle area, so if you are interested in listing your home, contact your local real estate agent today!

Seattle Homes Selling In Average of 8 Days

3804 E Blaine St.Across the U.S., houses are selling at breakneck speed, with homes only surviving on the market for an average of 28 days before being snatched up by eager buyers. Many homes sold even faster than that in May, with approximately 35 percent going into contract within two weeks of hitting the market. But you think that’s fast? The national market has nothing on Seattle, where last month homes sold after a mere 8 days on the market, and almost half sold above list price, according to Redfin. This no doubt is due to extremely low inventory, especially within the Seattle city limits, where there is less than a month’s supply of homes available, not nearly enough to satisfy the high demand for homes in the city.

Despite this increased buying activity, national home prices actually grew at a slower rate this May – up just 1.6 percent over April – compared to the 3 percent rise in prices we saw last May. On a yearly basis, prices across the country are up 6 percent from a year ago. List prices in the Seattle market increased just slightly from April to May (1.4 percent), and the median was $426,000. Year over year, Seattle prices were up 6.5 percent.

As these statistics illustrate, now is a great time to sell your home! If you’re on the fence, contact your local real estate agent to learn more about the selling process.

Millennials Opt Out of Seattle’s Real Estate Goat Rodeo

Mt Baker

The fact that the housing market in Seattle is hot, is not new news, and finding a home without over paying is becoming quite a task. When a 1,100 square foot home listed at $559k, sells for $717K, it feels it might take miracle to lock something down that is both desirable and reasonable. Moreover, when, and more so, if¸ you find a great buy, the market heavily favors those willing and able to pay cash to win the bid. Well, there is one demographic of Puget Sound residents who aren’t jumping on the real estate bandwagon – millennials.

According to the Puget Sound Business Journal, people between the ages of 25 and 35 who are homeowners is at the lowest since the Gold Rush era. And for good reason. Overall, things are just more expensive now than they were during the previous decades. College tuition has tripled since 1980, causing millennials to take out college loans or needing to take a longer time getting their education due to having to work simultaneously. As such, paying off acquired debt, or simply just getting the basics (job, place to live, overhead costs) nailed down is priority number one. With such a competitive job market, it takes a few years (or ten) of hard work to reach reasonable earning potential.

open-house-illustration

However, Seattle has some of the biggest businesses headquartered here favoring hiring millennials, one of which is Amazon. The online retailer hires thousands of employees yearly, many of which are coming in out of state. Most of those recruits, still fresh to Seattle and a little leery of all the grey, are perfectly content with renting even if they could afford a nice house to match their nice salary. And this doesn’t just happen for Amazon employees, as Seattle has plenty company employees working the same model.

Not surprisingly, this might be a piece of why Seattle currently ranks second on the list of best cities to own a rental property (a jump from seventh place last year). The region’s job growth, paired with the number of people moving into the area, and with the lack of available homes for sale, these are some key factors in why the rental market is going so well. So, for now the millennials are opting out of Seattle’s real estate goat rodeo, but it doesn’t seem like too many people, no matter how ready, are having much success either.