Market Reports
Puget Sound Market Report – 1st Quarter 2009
Markets Summary
Residential Market – Overall, the residential market is still struggling. Home prices are still declining, foreclosures are still rising, and new construction has a back log of at least 30 months. With nearly 40,000 properties available for sale in Western Washington, during 1st Quarter 2009, only about 10 percent of these properties were sold. The greatest number of sales occurred in the $250,000 to $350,000 range.
Apartment Market – Only 10 sales have occurred during 1st Quarter 2009; a dramatic decrease since 2007. Rental increases have slowed, but capitalization rates are rising and gross rent multipliers are going down. All of the sales that occurred are for apartments more than 15 years old.
Retail Market – Overall, the general retail market has held well with vacancy rates still below 5 percent in the area. This is despite adding 1.5 million square feet in the area since 2007. However, lease rates are continuing to decline. Capitalization rates have risen to over 7.0 percent.
Industrial Market – The flex market has remained a problem throughout the last few years with high vacancy rates and low lease rates. Vacancy rates have increased in all areas and lease rates have fallen. There are fewer sales this quarter, and capitalization rates show a marked increase over 2008.
Office Market – This market is showing marked increases in vacancy rates due to the amount of new inventory coming into the market. Much of the space is not preleased. Consequently, lease rates are decreasing. Capitalization rates are also increasing.
Recommendations - Stay away from new construction on residential subdivisions at present. Too much inventory, and with the present job market, the buyer pool is depleted; same with office property. Industrial will depend on the area. Some areas like the Kent Valley are still showing signs of demand. Apartment market is guarded. As foreclosures increase, we would expect that people will need to turn to rentals. Thus, demand should increase. The retail market is still showing signs of doing well. This is due to the lack of overbuilding that the other markets had. However, with some of the major retailers closing shop, it would be better to stick to smaller strip malls rather than larger big box or huge shopping centers at present.
