Here’s a brief article from the Wall Street Journal that might be of interest: Weathering the Rain, And the Property Storm
The troubles facing most Seattle-area landlords are more like a Puget Sound drizzle than the stormy skies swirling around markets such as Phoenix or Orange County, Calif.
Certainly the economic turmoil buffeting the nation’s property markets has touched Seattle. The area’s median home prices are falling, and average commercial rent gains are slowing. The volume of large office, retail and warehouse sales has dropped dramatically this year, according to Real Capital Analytics. The area’s job growth slipped to 2.3% in July, down from 3% in the year-earlier month, according to the Bureau of Labor Statistics.
Moreover, tighter economic times are hurting some large employers and real-estate consumers in the region, home to about 3.4 million people. As Starbucks Corp. pulls back from an expansion and closes hundreds of stores nationwide, it is considering selling a downtown office building it is developing and an existing one it owns, both in Seattle’s Pioneer Square neighborhood
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But amid these pressures, the Seattle region’s office-, retail- and apartment-leasing markets still have outshined most major U.S. metropolitan areas by some key measures. While retail rents in most markets are falling, average Seattle-area retail rents are expected to rise 3% this year, the highest gain of 54 major markets tracked by Property & Portfolio Research, a real-estate research firm.
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“I wouldn’t say it’s recession-proof, but Seattle’s going to weather the recession a lot better than most markets,” said Stephanie Hession, a real-estate economist with PPR. Still, even with Seattle’s rents largely in positive territory, Ms. Hession says inflation will leave most landlords losing ground.
Sadly, the article is long on rosy talk and short on actual quantifiable facts. Why is Seattle “going to weather the recession a lot better than most markets”? Ms. Hession doesn’t say, and neither does the article. All we read is that Seattle has held up better so far, which is true thanks to our lagging housing market. If Seattle’s economy is based largely on software and airplanes, what specific arguments can be made that those two industries will hold up better than average in a recession?
It seems to me that when money gets tight, individuals and businesses will forego software upgrades, making do with what they’ve got, and cut back on travel. I have read quite a few articles that claim that somehow Seattle’s economy is poised to continue performing well through a recession, but I have yet to see a reasonable argument as to why this will allegedly be the case. If anyone here has a better argument than… well, better than nothing—then let’s hear it.
(Maura Webber Sadovi, Wall Street Journal, 09.10.2008)