October 24, 2014

Seattle market ranks 8th in U.S. for real estate

Seattle remains one of the country's top real estate markets — coming in at number eight overall in a new report by Urban Land Institute and PwC.

The report is called Emerging Trends in Real Estate 2015, and it says Seattle is attracting investors because technology companies are growing and Millennials want to live here.

Population has grown 6.9 percent in the urban center over the past three years, and that makes Seattle one of the fastest growing cities in the nation.

The report ranks Seattle third for development and fourth for investment, and says the single-family housing market is 17th out of the 75 top markets.

Seattle was the third highest ranked West Coast city, behind San Francisco and Los Angeles. San Francisco was ranked third nationwide and Los Angeles was sixth.

Tacoma also shows up on the list this year. It is ranked 62nd, and that's ahead of Las Vegas, Tucson, Sacramento and Milwaukee.

ULI and PwC surveyed more than 1,400 investors, lenders, fund managers, developers, property managers, brokers, advisors and consultants for the report.

Texas is the strongest state in the rankings. Houston is ranked first among U.S. cities, with top marks for investment and development, and the second highest score in the single-family housing market.

Right behind Houston is Austin, with the second highest investment score and the top single-family housing market. Dallas/Fort Worth is ranked fifth, and San Antonio is 23rd.

The report attributed the interest in Texas to the lower cost of labor compared to coastal cities like Seattle and San Francisco. It said more than 1.42 million jobs were created over the last two years in places where the “cost of doing business” — which factors in regulations, taxes and labor — is more than 5 percent below the national average. The four Texas cities combined for 493,733 of those new jobs.

Seattle and Houston are now officially considered “gateway cities” by foreign investors, joining the big California markets, Miami and the Boston-Washington corridor. Some people surveyed in the report still consider Seattle a “secondary” market in the U.S., a step down from Los Angeles, Boston, New York and Chicago.

Many surveyed, specifically lenders and equity providers, were very positive about both Seattle and the nation as a whole. According to the report, 40 percent of equity firms surveyed say they plan to ease underwriting standards. More than 42 percent of lenders plan to loosen their standards next year.

“The tide has come back in,” the report says. “An oceanic flow of capital is surging through America's real estate markets, tugged by gravity and pushed by tailwinds.”

For some this is a cause for celebration, and for others a source of concern that maybe investors didn't learn from the recession.

One respondent said Texas markets are traditionally tied to boom/bust cycles. Another worried that the recovery, now going on five years, is getting old and maybe the market is due for a downturn.

But overall, the report concludes people in the real estate industry are more careful than they were in the past, and that's a good thing.

“For 2015, real estate still benefits from ‘once-burned, twice-shy' experience,” the report says. “In most cycles, we would have seen overbuilding and excess leverage gathering steam by now. To the degree that hasn't happened, the industry looks like it has learned some lessons in self-regulation and self-correction.”