Are Seattle's Commercial Properties Finally Heading Down the Drain?

At our weekly training workshop last week, our broker taught us how to set up relationships with banks now so that we'll be prepared in the event that we start to see bank repo's and foreclosures rising like they did in the early 1990's. A trend that might have previously been unthinkable in Seattle's HOT-HOT-HOT real estate market of the last 20 years.

Our firm has already begun working on short sales with a few commercial deals that went south as a result of the declining markets in the last year or so. One distressed seller owned a retail center East of the mountains, and we also have two condo conversions where the developer hasn't been able to sell the condo's, so we are listing the properties for sale and the deal will involve buying out the owners of the few units that have sold.

He's anticipating future opportunties with

• Short Sales on properties where the owners are in default
• Bank owned commercial properties (REO's)
  
• Owners struggling to make payments but not yet in foreclosure
• Owners concerned about their tenants not renewing their leases

Although I don't expect a lot of foreclosure activity in Seattle's commercial property marketplace, I do see opportunities lining up for buyers with the fortitude to invest during the tumult. What do they say? It's time to invest when there's blood in the streets? If there ever was such a time, that sounds like now!

According to Marcus & Millichap's research, the retail and office sectors are likely to be the hardest hit by the economic downturn the nation is experiencing. With less capital available, businesses are not expanding, and consumers are spending less, leading to falling business revenues. Combined with all the building that has been going on in the last few years (leading to new inventory available to lease), we are expecting to see:

• Higher Vacancy Rates
• Lower Rent Rates
• Slower Lease-Up periods
• Higher Cap Rates

For those with cash, this represents a great buying opportunity. For those without cash, lenders are still lending money if you have a big enough down payment and clean credit. Loans are still going through and deals are getting done every day. However, cash creates additional negotiating leverage in this time of financial uncertainty.

We Call it an "Opportunistic" Market

This may very well be the buying opportunity that many investors have been waiting for in the white-hot Seattle market that has seen cap rates in the 3- to 4- cap range in recent years. 5- and 6- cap properties are now widely available and buyers are working off of ACTUAL property performance figures, rather than pro-formas, meaning there is less speculation driving up the prices.

We are projecting soft prices in the Seattle commercial market for the next several years. If you have been thinking about buying an apartment building, office or retail space, this may be your perfect opportunity.

Call me to find out what we have available!

Emily Cressey

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As real estate agent and investor, I understand the needs of all parties involved in the transaction. Call me if you need help, buying or selling a commercial property in Queen Anne, Magnolia, Capitol Hill, Beacon Hill, or the greater Seattle/Tacoma area.

If you need help sorting through the current financial market turmoil to determine your next investment move, give me a call - 206-826-5700.