Michael Horner, JLL Retail
Seattle has come a long way since the 1971 billboard reading “will the last person leaving Seattle turn the lights off?” The greater Seattle economy and real estate market has continued to be one of the nation’s top- performing locales, even exceeding its prior 2007 peak. Large corporations such as Amazon, Boeing, Microsoft and Starbucks, along with many independent startup companies, have rapidly reduced the unemployment rate, which has dropped to 4.8 percent.
The construction pipeline in Seattle remains robust. With more than 20 cranes working on new developments, the market has the most active projects underway since the Downtown Seattle Associations started tracking development in 2005. Nearly two-thirds of construction in Seattle is residential, with more than 5,000 new apartment units opening since January 2013, and more than 6,000 new units to be completed in the next three years, according to the DSA report.
During the past year, the amount of office space under construction has nearly doubled from 1.7 million square feet to more than 3.2 million square feet. A large contributor to this is Amazon’s revitalization of the South Lake Union area. Amazon’s global workforce has doubled in the past two years, and the company is reportedly hiring more holiday season employees than it did the previous year. Another contributor to the revitalization of the South Lake Union area is Vulcan. If Paul Allen’s Vulcan movesd forward with all of its proposed projects in the South Lake Union area, the company would add about 1,650 new apartments, 1.3 million square feet of office space and 86,000 square feet of retail.
Large amounts of developments, coupled with an unwavering economy and strong investor confidence, has put Seattle in the spotlight on a national level. Investors are capitalizing on opportunities in retail, residential and office for both stabilized assets and upside investment opportunities. Retail tenants recently expanding in the Northwest include CVS, Pancheros Mexican Grill, Bass Pro Shops, Rockin’ Jump and Total Nutrition. Some of the existing tenants in the market that still have an appetite for expansion are Trader Joe’s, Blazing Onion Burgers, Brews and Spirits, Total Wine, Burlington Coat Factory, BJ’s Brewhouse, and Buffalo Wild Wings.
There is a strong demand from retailers to be in the primary Northwest markets. The majority of new construction is residential and office where ground-level retail space is a city requirement. This has resulted in a bulk of the new retail space existing in markets where the retail demand may not necessarily be the greatest. This has in turn left some higher retail vacancy rates in the office/residential buildings, and limited availabilities in the existing centers where the retailers are looking. There are a few new or planned retail projects like Issaquah Highlands, the Trails at Silverdale and Everett Riverwalk that will help satisfy the pent-up demand from retailers for new quality retail projects. Overall, the Seattle retail market appears to be on a solid growth path without an obvious risk of decline.
By Michael Horner, Vice President, and Ryan Jones, Associate, JLL Retail in Seattle. This article originally appeared in the November 2014 issue of Western Real Estate Business magazine.