Seattle Real Estate's Got Long-Term Strength. Here's Why.

Whatever goes up has to come down, but the speakers at our Seattle 2016 Forecast at the Grand Hyatt Seattle weren't overly worried about the market's next downturn, whenever that will be. Seattle has long-term strength it didn't have even during the last cycle.

Martin Selig Real Estate owner and Seattle real estate doyen Martin Selig, who's developed more than 7M SF in his career—literally changing the Seattle skyline—and who has eight properties underway, kicked off the event. Seattle, Martin says, has tremendous momentum as a real estate market, business community and cultural hub. "I don't see anything that's going to stop it." Martin's snapped at the event with his son David.

Seattle's upward trajectory is really just starting, Martin adds. The city isn't just Amazon or Microsoft, it's a hub of innovation that grows as entrepreneurs strike out on their own from larger companies. For Martin Selig Real Estate, that kind of growth means the majority of the properties it's developing are pre-leased. "We announce a building, and soon it's leased," Martin said.

Seattle Department of Construction and Inspections director Nathan Torgelson said during the last 15 years, about 50,000 new residential units were developed in Seattle—a robust number, and about twice that of San Francisco during the same period. He said the city's upcoming permit tracking system will make life easier for developers and architects who want to track projects, and it will be able to track affordable housing requirements in Seattle developments.

Seattle Office of Planning and Community Development interim director Diane Sugimura said her newly reorganized department works with other parts of city government to create total community plans and pay attention to the human side of the equation. In a small but telling example, she said, the city doesn't want to create plans for a new park only to discover that it would be difficult or dangerous for residents to walk there.

Our forecast panel noted Seattle faces a number of challenges going forward. Its infrastructure, especially in the urban core, isn't keeping up with population growth. The squeeze will be on as long as Seattle is an attractive place for people and businesses to relocate, which no one expects to change anytime soon.

Here's panelist Urban Renaissance Group CEO Pat Callahan. Urban's development arm, Touchstone, recently topped off Troy Block.

Land is also constrained, and it's hard to entitle, our speakers said. But there's an upside for developers able to get deals done here—the high barriers to entry keep the competition limited, and all but ensure demand will be high as long as the local economy is expanding.

Here's Provenance Hotels president Bashar Wali. Provenance's portfolio includes the Seattle properties Hotel Max and The Roosevelt, which it's renovating.

This expansion is different for Seattle, because in many ways Seattle has come of age as a global city, our speakers explained. That wasn't the case during previous growth modes, and it puts the market on a different playing field—one that will continue to attract businesses and investors not just from the region or even the West Coast, but worldwide.

Here's Panattoni Development partner Bart Brynestad. Recently Panattoni sold two industrial properties it developed to SoCal investor Bixby Land for more than $12M.

In retail, the panelists said, even the robust Seattle economy hasn't inspired a lot of development, because rents aren't high enough to justify new construction. However, investors are still quite interested in retail here, especially for value-add opportunities.

Here's Harsch Investment Properties SVP retail north Lisa LaManna. The company recently acquired a nine-acre business park in the Seattle area, bringing its regional portfolio to 2.6M SF.

The rough consensus among the panelists: The market is somewhere around the seventh inning. Eventually, there's going to be a slowdown, but Seattle has bright long-term prospects beyond whatever slowdown might occur in a few years. The flow of young workers into the market will keep demand strong for certain kinds of properties, especially multifamily and creative office.

Here's Security Properties managing director capital markets Ed McGovern and Cairncross & Hempelmann attorney Matt Hanna, who moderated.