The Case for CRE in Seattle

Seattle is on fire and presents a fantastic option for institutional investors that typically spend their time in Tier 1s like NYC, SF, and LA. Multifamily development has continued to grow and rents continue to rise. According to RealPage Chief Economist Greg Willett, “Lots of places register very solid expansion of downtown jobs, but Seattle’s urban core growth rate is in a whole different category”.

The housing market in Seattle has been number one in the country for the past 14 months, breaking its own pre-recession record. The only longer held record is by San Francisco during the dot com boom from 1999-2001. An argument can always be made that there needs to be a correction in the market (similar to Miami and Las Vegas over the past decade), however underlying socioeconomic characteristics and market fundamentals seem to make Seattle a great long term investment opportunity.

Although housing costs are on the rise, they are still lower than San Francisco. The average rent, as an example, is nearly half of the equivalent unit in San Francisco ($1,654 per units vs. $2,990 per unit). The city also presents similar options to San Francisco when it comes to cultural attractions: great restaurants and cafes, an indie art and music scene, and outdoor options within driving distance of the city.  

Seattle’s urban core is what truly leads the market. In areas like Downtown, South Lake Union/Queen Anne, and Capitol Hill, 21,707 new apartments have opened since 2010. Despite all of the new supply though, 96.7% are occupied and rents are rising 6.6% per year.

When it comes to the economy, a case can be made that Seattle is on par with San Francisco, arguably an even better option. Unemployment in Seattle is now down to 4% according to the Bureau of Labor Statistics, compared to 3.6% for San Francisco. Moreover, the minimum wage in Seattle will rise to $15 effective in 2018, increasing disposable income. Venture funding has grown and technology giants like Amazon and Microsoft continue to open job recs quicker than they can fill them.

The influence of technology companies has had a strong effect on the office market and Seattle is no different. Lease activity spiked 11% nationally last according to JLL. Nearly 30% of the growth came from six markets where technology or knowledge-intensive businesses dominate: Silicon Valley, Raleigh-Durham, Brooklyn, San Diego and Seattle.

Drilling down into fundamentals, it’s very clear that the Seattle market is strong. For Office, net absorption and new construction is up, total vacancy has trended down over the past five years to 9.2%, and average asking rents have trended up since 2013 to $36/sq. ft. In industrial, there is barely enough space to keep up with demand – vacancy has dropped to a historical low of 2.5% Even in a niche sub-vertical like Life Sciences, vacancy is at 1.3%, with little new construction. Some may argue it’s too late, but it seems like the best is yet to come.

Sources: JLL, NREI,, Seattle Business Times,