Seattle "Doom Loop" or just another "Boom/Bust" story? (Bellevue: real estate market)

[CrazyDonkey]

But that was a lifetime ago, before the pandemic, when we were still debating if you could have good billionaires. Since that time, Salesforce has laid off 9,000 employees and ditched nearly a million feet of office space. Meta has laid off 21,000 employees and ditched 435,000 feet of office space in San Francisco. Now, late one morning this dark spring, next to the Salesforce Tower, the Salesforce Transit Center — designed by César Pelli’s firm and opened in August 2018 to serve as the city’s main bus hub —was empty, as in truly vacant, save for a security guard in black Dickies and a yellow-and-black jacket walking in circles on the poppy-tiled floor.

https://www.curbed.com/2023/05/san-f...doom-loop.html

The Covid-19 pandemic led to drastic changes in where people work. Physical office occupancy in the major office markets of the U.S. fell from 95% at the end of February 2020 to 10% at the end of March 2020, and has remained depressed ever since, only gradually creeping back to 47% by mid-September 2022. In the intervening period, companies have learned how to effectively work from home. Many firms have announced permanent remote or hybrid work arrangements, and several have begun to shrink their physical footprint. These shifts in projected office demand have led to concerns that commercial office buildings may become a stranded asset in the wake of the disruptions resulting from remote work.Because office assets are often financed with debt which resides on banks’ balance sheets and
in CMBS portfolios, large declines in value would have consequences for institutional investors and for financial stability.1The spatial concentration of office assets in urban central business districts also poses fiscal challenges for local governments, which rely heavily on property taxes levied on commercial offices and the adjacent retail space to provide public goods and services. A decline in office and adjacent retail real estate valuations may activate a fiscal doom loop that lowers the quality of life for residents and worsens the business environment.

https://www.nber.org/system/files/wo...526/w30526.pdf


On the other hand, Seattle has survived many a boom and bust cycle in the past - is the "Amazon" boom (and bust?) any different? I'm not implying that Amazon will go bust (in their quest for world domination), but that they could end up leaving Seattle (or its office, and not just office, real estate market) "high and dry". Would it be all that awful to have 300,000 leave Seattle, half a million leave the county, and a million leave the state? Yes, we might have to make some "adjustments"...

[october2007]

Well I wish it would mean it was like Seattle in the 80s/90s, funky, laid back, not overdeveloped. I’d come back then.

[Guineas]

This article isn't even about Seattle, but SF.

Seattle is already doing much better than SF. With Amazon returning to office, the whole SLU area is much more lively. Furthermore, a lot of new growth in SLU is in labs and biotech, which are harder to WFH. It's also got daily cruise ships dropping tens of thousands of people onto the waterfront and 1st Ave for half the year.

Seattle is also helped by the fact that its suburbs are incredibly bland and cookie cutter (even Kirkland and Bellevue are very ho hum and largely look like Plano TX), whereas the Bay Area is much more varied. Also the flagship state university and only legit university in the state is in Seattle proper.

[CrazyDonkey]

Originally Posted by Guineas

This article isn't even about Seattle, but SF.

Seattle is already doing much better than SF.

The second article I linked, which is referenced by the first and where the "doom loop" term comes from, is more about New York City, but its analysis is applicable to San Francisco and Seattle, as well.

I agree that Seattle, at least on the surface, seems to be doing better than SF or NYC, but we're far from being out of the "woods". Seattle is also the city that had the largest boom in office space square-footage relative to its size and, thus, could be headed for the largest bust. From the second article:

For example, the share of real estate taxes in NYC’s budget was 53% in 2020, 24% of which comes from office and retail property taxes.15Given budget balance requirements, the fiscal hole left by declining CBD office and retail tax revenues would need to be plugged by raising tax rates or cutting government spending. Both would affect the attractiveness of the city as a place of residence and work. These dynamics risk activating a fiscal doom loop. With more people being able to separate the location of work and home, the migration elasticity to local tax rates and amenities may be larger than in the past.

The flip side, however, is that busts also provide new opportunities for renewal.

[jabogitlu]

Some vacancy in both office and residential wouldn’t be the worst. Even if the city needs to trim its budget, we are heading for a difficult time otherwise, as mortgage payments at given rates fall far below pumped property values. Short term pain resets are like forest fires. Sometimes necessary, and a good way to long term improve your local economy. Of course, that’s one theory, and not always true.

[Hemlock140]

Back in the big Seattle bust of 1969-71 Boeing was the only game in town. There is now a lot more diversity in major employers, with Amazon, Starbucks Corporate, Alaska and Delta Airlines, Expeditors International, and 15 biotech companies. There are also nearby corporate campuses for Microsoft and Costco. I expect that many more, if not most employers will be bringing people back to the offices in the next few years, with the possible exception of public agencies such as the City of Seattle and Sound Transit. The office vacancy rate will still be higher than pre-Covid, because of all the construction underway when the pandemic hit. That will mean lower rent for class A office space, and that could bring in new businesses from other cities/states.