Seattle Commercial Real Estate LLC has always taken a conservative approach on behalf of our clients to investment real estate, be it multi-family real estate, industrial real estate, or commercial or office real estate. We believe strongly that real estate is cyclical. We believe in equity (link to ACR article) as a hedge. In the past few weeks from multiple sources, we have heard words of caution and we feel we need to share these thoughts with you.
A major contractor client has forecast a slowdown in his industry. Their analysis is as a function of the number of new commercial real estate projects they are seeing coming across their desks for bidding. Another major developer sitting on great liquidity has sold some developed properties at what to them appears to be the peak in the office leasing market. That is not to say that they have stopped looking for or acquiring other development opportunities.
An article in the Sunday May 15th Seattle Times by the business editor, John Talton, was entitled “Recession Will Revisit Us, But When?” The article looked at a national cycle, which is typically seven years. The end of the present seventh year of this cycle per the National Bureau of Economic Research was officially this June. This cycle is truly unique in the context that incomes have been stagnant and that the inequality gap has widened. Job growth was “weak” at its very best and the U6 Index, which measures not only unemployment but under-employment and unemployed long term has actually risen.
We are in constant conversations and communications with professionals in Seattle’s multi-family market, office leasing, industrial and commercial real estate. We watch the national and international markets. Our commercial real estate market in Seattle has historically trailed the national markets in terms of downturns and has historically recovered more quickly. Having stated these facts, it is still prudent to be prepared and we will continue to do so.