Soaring Growth in Pacific Northwest: Technology, Tourism and Surging Oil Prices Revitalize Region's Real Estate
Little, Darnell, Journal of Property Management
The Pacific Northwest, encompassing Washington state, Oregon, Alaska and Northern California, has experienced quite the economic rollercoaster ride in the past decade. After surviving big losses in the early 2000s, the market in all sectors is flush with green in more ways than one.
Five years after the tech bust, the region has shaken off the dust from troubled times and rebounded effectively. Many of the area's top technology companies are expanding again, hiring new workers and gobbling up office and industrial space throughout the region. Northern California, in particular, is experiencing a new technology renaissance.
The strengthening economy is fueling a population surge that is bolstering area housing prices, even as the nation's housing market struggles. July's Case-Shiller index, which monitors U.S. housing prices, showed housing prices in the Seattle area up nearly 7 percent since the previous year, while prices for the nation as a whole dropped by nearly 4 percent.
High oil prices continue to pump up Alaska's economy. Meanwhile, tourism has remained strong throughout the entire region.
The combination of these factors is making the Pacific Northwest a hotbed for real estate activity. Stephan Cowan, a partner in the San Francisco office of law firm DLA Piper, described the area's real estate investment activity for the first nine months of 2007 as "gangbusters."
"The general economy seemed to have enough positive scores in the underwriting world that the lenders and investors are seeing the area as a growth market, not just within the next few months but in the next five to 10 years," Cowan said.
"As a real estate lawyer doing the deals, I see the strength of it. We're looking at the absorption rates, the demand, the ease with which commercial rents turn over. The law firms are strong; the service industry is strong; the manufacturing is still strong."
After enduring some of the highest unemployment rates in the country after the dot-com bust of 2001, Seattle has swung dramatically to the boom side in less than six years, according to Tom Parsons, senior vice president and general manager of Opus Northwest, a design-build development division of the Opus Group.
"In the Pacific Northwest, our lows are a little lower, our highs are a little higher, and currently we have in the last 18 months had some of the highest job growth, and the healthiest residential markets," Parsons said.
Opus has several projects in the works in the Seattle area, including Fifteen Twenty-One Second Avenue, a 143 unit luxury high-rise condominium in Seattle's Pike Place Market, a dense and lively area of downtown Seattle best known for the fishmongers who toss fish from man to man to the delight of tourists. The project will be the first "tall and slender" residential tower under the city's new downtown zoning, which encourages density and environmentally conscious living.
Vulcan Real Estate, a division of Vulcan Inc., owns 60 acres in South Lake Union--known as the "red hot" area to be right now--with a development capacity of more than 10 million square feet of residential, office, retail and biotech research space. Vulcan's stated goal is to turn South Lake Union into a pedestrian-friendly neighborhood full of office space, residences, restaurants, retail shops and public parks.
Meanwhile, the Portland, Ore. area is also attracting new businesses, increasing its metropolitan population and spurring new real estate development. While Portland still has plenty of old economy companies in timber and shipping, the area has attracted a high-tech corridor employing more than 50,000 technology workers who take in $4 billion in annual wages. …