Two Recent KUOW Pieces of Note

Thanks to everyone who responded to the call earlier this month from KUOW for help on their story about the soft market.

Here’s the resulting piece: It’s a Tenants Market for Downtown Seattle Office Space

There may be signs of recovery in the region’s housing market, but not so for the region’s office market. A recent survey from Price Waterhouse Coopers says commercial property values in Seattle are expected to decline up to 15 percent this year, that’s more than the national average. The survey predicts the market will remain in recession for two more years.

[Large downtown Seattle landlord UNICO’s Chief Financial Officer John] Lamb says it’s going to be a while before the market begins to stabilize. He says vacancy rates will continue to rise, and don’t be surprised if some commercial office buildings in Seattle end up facing foreclosure.

Also, last Friday’s “weekday” discussed the residential market, with : Short Sales, Foreclosures and First Time Home Buyers

Friday’s program had the same guests that were on the program in early May that we mentioned here: real estate agent / appraiser Richard Hagar, Urban League housing director Linda Taylor, as well as new guest certified financial counselor Andrea Misiano.

They discuss foreclosure / refinancing rescue scams, including some good advice for first-time buyers—take the emotion out of the home-buying process. I haven’t been able to listen to the entire program, but apparently there was also some questionable advice mixed in this time, including the claim that (according to a Seattle Bubble reader) “it’s better to get the low interest rate than the “one-time” lower house price.” In any case it’s overall worth a listen when you can make the time.

Kudos to KUOW for continuing to give the local real estate market some decent, thoughtful coverage that goes beyond the usual “ra-ra” pro-industry pieces that have been all-too-common in most news sources.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1


    My eyes opened up on the 15% drop in commercial real estate values, with a vague assumption by Deborah Wang that this drop occurs after the alleged rebound in the housing market occurs.

    I have to beg to differ with Ms. Wang; commericial real estate and the housing market are hopelessly snarled together like Tweedle Dee and Tweedle Dum. You can’t have a recession as she calls it in commercial RE and a simultaneous rebound in housing. It makes about as much sense as saying the unemployment rate will improve when small businesses lose their profits on bad commercial investments and start hiring again.

    But what the heck, everyone is mitigating the economic mess this year, except VP Biden. I like him, he admits we didn’t know what we were doing on the $787B stimulus bill, as we guessed wrong, unemployment still went up through the roof anyway. Now there’s a honest man…LOL

    I also read recently that several restaurant chains are going broke in this recession/depression this year; especially the ones that have too much RE debt.

  2. 2
    BubbleWatcher says:

    I did not understand Richard Hagar’s claim that interest rates had risen from 4.7% to 6.5%. The latter rate is much higher than current rates (less than 5.5% if you put money down and have good credit). Even for FHA loans, the rates appear to be around 6%. This is of some importance. There are people out there who might be panicked by rising rates and so pushed toward a rash decisions on the basis of incorrect information.
    I was also surprised to hear that another panel member advised taking both a first and second mortgage for a house purchase, the second to cover the down payment. By now, I would think that individuals/families who have not yet put together a down payment should be advised not to buy until they have enough savings.
    DId I misunderstand the panelist? I don’t think so. It seems to me that we have not yet reached the point where either the public or the experts have a proper understanding of risk, despite the recent meltdown. If so, this is not good news.

  3. 3
    george says:

    How do you fill office space with a shrinking economy? In addition to rising vacancies there is another long term problem. Commercial real estate has no secondary market to buy loans like the residentiakl market. In addition most loans have either 5 or 7 year calls. You could have the best building in the world with 0 vacancy and if you are up for a loan “roll over” you really have a problem and have to bring in a ton money to pay down the loan. Again hard to get credit and low appraisals will hammer you. The FDIC is not being very lenient at all no matter how good the building is or how credit worthy the borrower is.

  4. 4
    Kary L. Krismer says:

    RE: BubbleWatcher @ 2 – And again I’d point out that with a first and second, you’re more likely to still owe the amount owing on the second after foreclosure. So your worst likely case scenario becomes much worse.

  5. 5
    Kary L. Krismer says:

    RE: george @ 3 – I believe there was a secondary market for such transactions, but it’s no longer functioning and the government hasn’t done much, if anything, to get it going again.

    That’s when your best refinance option becomes Chapter 11. And in that arena, the lower property value can actually help.

  6. 6
    Kary L. Krismer says:

    Can someone explain to me why Microsoft apparently has office space in at least two downtown Bellevue buildings?

  7. 7
    Ray Pepper says:

    RE: Kary L. Krismer @ 6

    hmmm…. far better commute for Bill Gates in to work from Medina?

  8. 8
    Softwarengineer says:

    RE: Kary L. Krismer @ 6


    Even Boeing leased a lot of Kent valley space, then moved out after the late 90s; to keep its costs down apparently, as its operations shrank.

    It may be teamed with other nearby downtown Bellevue businesses?

    I’m just guessing.

  9. 9
    WebX says:

    RE: Kary L. Krismer @ 6
    Hope this counts as on topic! You brought it up!

    If you compare Microsoft’s employee growth rates in the region, a massive number of new hires, industry hires, and new heads in general have joined Microsoft in the past 5 years as the economy boomed. For some time, the company’s management wasn’t putting together all the good hires plus diminished office space for employees. For a while it was around 10% per year growth – not everyone can make that much difference so fast!

    6/30/00: 39,170 WORLDWIDE (don’t have puget sound number):
    2/10/06: 30,255 Puget Sound, 65,564 worldwide:
    4/21/09: 40,999 Puget Sound, 95,029 worldwide

    When the economy was great and the employees got upset at being double or tripled-up in offices (something previously unthinkable to the company’s past vision and culture), the company bit the bullet and started leasing space all over.

    Lots of Kemper and Schnizter. You’ll actually see
    – Lincoln Square Office Tower
    – City Center Plaza
    – Braven
    – Downtown Seattle leases (small numbers) and South Lake Union

    Plus the company also has spent a ton on adding to its campus with new building developments, taking over Eddie Bauer and Safeco and other Redmond campuses: map,

    The company is keeping most building and land investment on its campus (which continues to grow in Redmond and Bellevue), but is leasing outside that area. Some employees might find this upsetting because it makes a signiicant commute difference to some, and some personalities may prefer life in Seattle for work to the Eastside experience.

    The problem is, an army of engineers and other folks can’t necessarily right a sinking ship in some situations. No need to go off-topic there, but I wanted to provide some numbers and details for Kary.

    My one slight rant-
    It is very clear that the massive hiring by Microsoft has made large changes to the dynamics of some neighborhoods that are very desireable to Microsoft employees. Effectively, a continuous source of high-paid folks bidding up each other for years on condos, for ever-expanding costs per square foot, competing with one another as new bodies move in who all want to live in Belltown, or downtown Bellevue (so much space available now!!), or even in a family-friendly subdivision throughout Microsoftland. Ok, no facts in this paragraph, just opinion. Interesting since the employees as a whole share similar compensation, so at some point it’s almost a ponzi with older/more established co-workers.

  10. 10
    David Losh says:

    RE: george @ 3

    This is the bigger problem in 2011 and 2012 when those loans from the good old days of go go Real Estate start to turn.

    Just a small aside to commercial loans is that it’s all cash. You put together a few million and put it into a mall or apartment building then get a return on your investment. The “owner” can turn a place around and actually amortize a good portion of principle.

    So the problem with these commercial loans is that these will incur actual cash losses. Papaer profit losses are one thing, losing cash is another.

  11. 11
    deejayoh says:

    RE: Kary L. Krismer @ 6 – Microsoft has all of 3 bellevue buildings – bravern 1 & 2, and city center, plus half of lincoln plaza.

    why? my guess is they were cheap, and we needed the room.

    why do you find it odd?

  12. 12
    Scotsman says:

    RE: Kary L. Krismer @ 6

    The soon to be launched “Vista-Fone”

    It’s like an iphone, only more complicated…

    And it features a snazzy random blue screen…

  13. 13
    Jonness says:

    Seattle is surrounded by water. No wonder it ran up so high during the bubble. I expect, since it is so special it ran up at least 2x as high as stinky old Tacoma during the bubble.


    (data from Global Insight; available at

    “take the emotion out of the home-buying process.”


    Prices will correct back to historically affordable levels. All WA cities will correct relative to 2000 values as not much has changed (relatively) about the cities since then. Keep an eye on the historical homeownership rate.

  14. 14
    One Eyed Man says:

    RE: Kary L. Krismer @ 5RE: george @ 3

    I’ve got a breakdown of the rise and fall of the commercial mortgage backed securities market in my files somewhere. It was the subject of a presentation at a meeting of the East King County Bar Association Real Estate section within the last year. I didn’t pull the materials, but I can tell you from memory that that market went from next to nothing (say about 10 billion in 2000) to just under a trillion in 2006 or 2007 and back down to about 10 or 20 billion in 2008.

  15. 15
    Kary L. Krismer says:

    RE: deejayoh @ 10 – I find it odd because I don’t see why a company like Microsoft would need to have employees in a downtown core, and presumably office space would be cheaper elsewhere. I think parking and traffic are getting to be serious issues at their Redmond complex, but other than that I don’t see why they don’t go to more outlying areas.

    Back when I was practicing law I was right across the street from the bankruptcy court when they were developing the ECF system, which allowed you to file and view court pleadings over the Internet. I kept thinking I could be anywhere, but I’m right across the street. Microsoft is a technology company. There employees could be anywhere.

  16. 16
    shawn says:

    RE: Scotsman @ 12 – Would you prefer that Microsoft create a phone just like the Motorola ROKR E1? Apple’s history is full of duds, but we can ignore them, and instead only compare their success’ to others (supposed) failures.

  17. 17
    shawn says:

    RE: Kary L. Krismer @ 15 – Kary, maybe they are not looking for the cheapest, but rather to place their workers in a nice environment that will foster/aid their work.

  18. 18
    Kary L. Krismer says:

    RE: shawn @ 17 – Could be, but that would also get me to question the choice! ;-)

    I used to work in downtown Bellevue back when there were a only a few buildings, and I wouldn’t really have considered it a great place to work. Especially bad was having to watch other people out playing on the water of Lake Washington.

  19. 19

    RE: shawn @ 16


    I haven’t opted for the phones with all the bells and whistles, because the monthly fees are horrifying [IMO]. I can get premium television service for about the same cost and to me, a much better deal and something I’d really use and enjoy.

    I already have Ipod, camera and a laptop internet anyway. Its cost duplication.

    I just use a simple cell phone service with 300 min for $25/mo….LOL

  20. 20
    deejayoh says:

    RE: Kary L. Krismer @ 15 – Well, as I am sitting in one of those towers now, I am all for it! Beats redmond IMO. There isn’t a lot of room there anyway, and few people were happy with the outlying campus buildings that were scattered everywhere. (Sammamish, RTC, Millenium)

    You may recall a couple of years ago MSFT announced plans for a bigger presence in Seattle. I think those have been shelved, maybe this is the replacement space.

  21. 21
    Bob says:

    RE: deejayoh @ 11
    The leases for Bravern and Lincon were very expensive. When signed, MS was expected to keep growing at a similar rate – of course in the last 9 months this changed dramatically.

    The amount of mistakes made by the real estate team at MS are immense. Wish they learned from the great deal that Amazon signed with Vulcan for S. Lake Union

  22. 22
    deejayoh says:

    RE: Bob @ 21 – I doubt the downtown bellevue leases were any worse idea than spending all that money on “The Commons” and then giving it to the division that has lost billions of dollars over the last 5 years. Although I hear they are making it up on the cost of lunches.

  23. 23
    gameboy says:


    Microsoft is making a concerted effort to reduce the traffic footprint. The are locating outlying offices in downtown areas because that is where the best public transportation hubs are.

  24. 24
    Kary L. Krismer says:

    RE: gameboy @ 23 – That’s a good point. And in any case, better transportation doesn’t become their issue, and you don’t get the public to complain about expenditures made toward improving transportation in the area, like can happen near their campus.

  25. 25
    Herman says:

    By Kary L. Krismer @ 15:

    Microsoft is a technology company. There employees could be anywhere.

    You mean, like, India?

    Fully loaded cost of US sw developer: $20,000 / month
    Fully loaded cost of India sw developer: $3-5,000 / month.

  26. 26
    Jonness says:

    It’s time to call a spade a spade and get on with the truth. Seattle is not special–Tacoma is! It’s got a stink mill, you can build easterly forever, and it has double digit unemployment. Who wouldn’t want to pay 2x as much for a house in Tacoma than it was worth 7 years ago? Due to the extremely special qualities of Tacoma, it’s house prices outpaced dingy ol Seattle during the bubble years.


    Read it and weep. 100% of the Seattle is special theory is due to local RE agent bias. If it’s so special, why was it valued less than Tacoma relative to 2000 prices? The data proves, once and for all, Tacoma is the WA city that is the most desirable and will be immune to correcting back to historical levels of affordability.

    Forget about what happened to investors who bought in Pheonix the same number of months as we are now from the peak in WA.

    Pheonix median price:
    Q2_2006: $256,000 (buy now or be priced out forever)
    Q2_2007: $254,000 (now is a great time to buy)
    Q2_2008: $212,000 (now is an even greater time to buy)
    May 2009: $130,000 (please buy, or the nation will go into a depression)

    Pheonix doesn’t count because Tacoma is special, which makes it immune to being way overvalued compared to rents and incomes. As an added bonus, If you’re on a date with a pretty girl in Tacoma, and you cut the cheese, she’ll never know, because it will blend in with the native aroma. Who wouldn’t pay extra for that?

    You guys need to wake up and realize that WA house prices skyrocketing during the bubble had nothing to do with macroeconomic fundamentals, such as cheap and easy to qualify for $0-down loans. Prices went up because WA is special. Nevermind that every chart you’ll ever see of a housing bubble will reveal it takes years to correct, and the asset that bubbled never leads the recovery. WA is special–especially Tacoma! Buy now before interest rates go up and you miss the bottom. Don’t be like all the other stupid consumers who have begun hoarding money in case the green shoots turn out to be weeds. If we all spend 100% of our savings right now, the economy will go wild, and we’ll be millionaires within the year. Did I mention we’re in the midst of a massive bull market in stocks? Houses are on the verge of going back to 2007 levels. Get in while you can.

    Oh, BTW, please give me a 6% commission on every consumer purchase you make due to my advice. That will help increase the velocity of money in the economy, and you’ll become even richer.

  27. 27
    jon says:

    During the period from 2003 to 2007, Seattle moved ahead of the Boston area for the #2 area in high tech according to Milken Institute.

    That is very significant, because it affects who is willing to move out here. The more top quality people that move here, the more jobs that will be created here, and vice versa.

  28. 28
    Scotsman says:

    RE: Jonness @ 26

    ” As an added bonus, If you’re on a date with a pretty girl in Tacoma, and you cut the cheese, she’ll never know, because it will blend in with the native aroma.”

    Military intelligence
    Jumbo shrimp
    Parking in the driveway
    Perfect mis-match
    Driving on the parkway

    …pretty girl in Tacoma…?

  29. 29

    RE: Scotsman @ 28
    I’ve alerted the folks at the “Miss Tacoma” pageant. They’re planning on picketing at Scotsman’s front lawn.

  30. 30
    Scotsman says:

    RE: Ira Sacharoff @ 29

    Ya’ll are welcome to come on over. Bring something to eat or drink. We may get lucky(?)

  31. 31
    Jonness says:

    By Scotsman @ 28:

    <…pretty girl in Tacoma…?

    So what you’re saying is, when she cuts the cheese, you’re going to know?

  32. 32

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