Commercial real estate in the Seattle metro market has hit a serious slump.
The sale of offices, retail and industrial buildings and land last year totaled $6.3 billion, the lowest since 2011; the market had $5.6 billion in sales during the aftermath of the Great Recession, the Puget Sound Business Journal reported, citing a report from the Commercial Brokers Association.
The CBA report included commercial sales of $250,000 or more in King, Snohomish, Pierce, Spokane, Kitsap and Thurston counties. It also added multifamily sales of more than $250,000 of properties with five or more units in King, Pierce and Snohomish counties.
Last year, the volume of real estate sales fell 64 percent from 2022, according to the report, with the drop-off blamed on higher interest rates. Fourth-quarter sales were down 51 percent year over year.
Interest rates “have likely peaked for this cycle,” the report said, with the market starting to see more institutional sales.
“While this is a positive signal of activity, and the market may see an uptick in 2024, a number of these sales are properties transacting below replacement cost or at reduced values paid compared to just five to six years ago,” CBA researchers said.
“This suggests the likelihood of fundamental vacancy/cash flow issues or loan/financing challenges with the properties.”
Last year, multifamily building sales held the top rank, compared with 2022. Retail buildings moved to second from fourth. Office buildings fell to fifth from second.
Office sales volume fell 76 percent last year from 2022, while industrial/flex sales fell 69 percent, land 60 percent, and retail and multifamily properties by 58 percent, according to the report.
By county, sales volume plunged 71 percent in King, 61 percent in Snohomish, 42 percent in Pierce, 20 percent in Spokane, 19 percent in Kitsap and 29 percent in Thurston.
The decreases impact local and state governments, which depend on real estate excise tax revenues. The City of Seattle is facing a $230 million budget deficit next year.
— Dana Bartholomew
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