Capital Markets Forecast 2017 [February Breakfast Recap]

On Wednesday, February 15, attendees of the monthly Breakfast meeting were treated to the annual Capital Markets Forecast, sponsored by JLL, Andersen Construction, and Umpqua Bank. We sincerely thank our sponsors for their continued support.

President Kristin Jensen gave the assembly an update on the new members and watched a video regarding the 50th Anniversary of NAIOP. Kristin also announced that the Washington State chapter was named Chapter of the Year! Great job everyone!

Mike Wood moderated the panel:

Mike began with an interesting anecdote – he looked back at the Capital Markets Breakfasts for the last 5 years and noted that for each of those years, the main question was “are we at a bubble?” That was also the theme of this year’s meeting.

James began with a review of 2016 and early 2017 for the banking industry. It has been good times for that sector. James expects rising interest rates with a rate hike in the summer and near December. He also expects Dodd-Frank reform which will be a positive for the Banking sector. His snapshot of the market:

  • Nationally – We are nearing the latter end of this boom cycle
  • Multi-Family – A potential worry is over supply
  • Seattle – US Bank is very bullish on Seattle

Dean followed up with a presentation that drew comparisons between the Los Angeles market and Seattle. In 2016, there was a moderate pullback of the traditional buyers in commercial real estate (CRE). However, new buyers have definitely filled the void. He echoed James with the thoughts that interest rates will be on the rise. He saw the following long-term outcomes from the 2016 election. Positives are:

  • Tax reform
  • Infrastructure spending
  • Deregulation

Negatives revolved around trade and labor.

Dean believes that the CRE market is fundamentally strong. In the industrial sector, demand is outstripping supply and this trend is accelerating. We are at all-time highs in the industrial sector.

Tom echoed the thoughts of Dean regarding the industrial market. He related that the office market had near record sales volume and that the fundamentals are strong. In Seattle, Microsoft and Amazon are dominating the market but Seattle also is the second-largest footprint outside of their headquarters for Apple, Facebook and Google. Tom’s outlook for 2017:

  • Continued strong capital allocation from the institution market
  • Foreign investments will remain strong

David’s discussion focused on multi-family in Seattle. Even though James indicated that nationally there are growing concerns about over-supply, Seattle is an island in this regard. Last year there were 5 new jobs added per new unit of housing. There were 9367 units delivered in 2016 with expectations of 12,000 in 2017 and 18,000 in 2018. David illustrated why Seattle is such an attractive destination for tech workers in the Bay Area: with similarly high salaries in Seattle, expenses are lower for both individuals and companies, creating higher levels of disposable income. Home ownership in Seattle remains more expensive than renting, so the multi-family market will remain strong.

Are we at a bubble? Not yet, in the opinion of our learned panelists. Let’s make some hay – the figurative sun is still shining!

Download PDF presentations from this meeting: NAIOP February Breakfast Slides

Read media coverage of this meeting: The Registry Puget Sound: NAIOP Panel Sees Continued Strength in Puget Sound Market

This article was written by NAIOP Washington State and Programs Committee member Edward Scherer, Account Executive, Avidex Industries, LLC.

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