A close-up look at residential real estate and commercial construction in the South Sound
South Sound real estate is a hot commodity, both for people looking to buy residential homes and for companies aiming to lease commercial space. Limited (but growing) inventory and low mortgage rates are driving up prices on the residential side, as the construction of new industrial warehousing space is abounding.
The Residential Market
According to the Northwest Multiple Listing Service (NWMLS), both pending sales and new listings in Western Washington rebounded in April after a slow, snowy winter. Brokers added 11,697 new single-family home and condo listings in April — including 4,365 in King County; 1,711 in Pierce County; 588 in Thurston County; and a total of 846 in Mason, Lewis, and Kitsap Counties.
In the same time frame, NWMLS reported 11,188 pending sales, up 927 from the previous month.
Median home prices in the region were up 2.4 percent year-over-year, rising to $424,950. Most counties reported increases, including Pierce County — up 5.05 percent — and rising from a median price of $337,950 a year ago to $355,000 in April. In total, the region saw $4.03 billion in closed sales during the month of April.
At the end of April, housing inventory held steady in Pierce County compared to a year ago, rising only slightly from 1,472 active listings to 1,502. This strong demand means there’s only about 1.17 months’ worth of inventory; four to six months typically is considered a “normal,” balanced market.
Stacie Curlee, a South Sound real estate broker with Maple + Main, confirmed the market is especially strong in the South King and Pierce County areas. “Increased inventory, low interest rates, and a positive economic climate means that buyers are feeling good about purchasing real estate,” she noted.
Still, Curlee was careful to add that despite low inventory, the frenzied market has cooled off slightly, which has allowed buyers to be a bit more selective when choosing a home. “Even though the market is favoring sellers right now, buyer demand is for move-in-ready homes that are priced appropriately,” Curlee said. “Sellers will get the most money for their homes if they prepare ahead of time and work with a knowledgeable agent.”
The current trends among buyers and sellers in the South Sound show younger demographics are the most motivated to buy, while Baby Boomers are more apt to scale down in their golden years, according to Curlee.
“We are seeing a lot of older home owners downsizing, which means that (in most cases) we are working with them as sellers and buyers,” said Curlee, who also noted a healthy economy means she is working with a lot of first-time homebuyers and homebuyers moving to the South Sound from outside the region.
Overall, the South Sound is still far from a balanced market; but after an all-time low inventory in 2018, things are slowly progressing.
“All of this has us feeling positive about healthy and sustainable growth in the South Sound real estate market,” Curlee said.
The Commercial Market
The South Sound’s commercial real estate market has been dominated by the need for more industrial space, particularly in the Kent, Sumner, and Puyallup areas as logistics firms, e-commerce retailers, and large manufacturers continue to drive demand for space in the region.
In the first quarter of 2019, digital commerce firm Pitney Bowes committed to lease more than 60,000 square feet of industrial space in Kent’s North Valley 64, Source Management Limited inked a deal for 19,000 square feet in the Stacy Building in Tacoma’s North End, and seafood company Salmolux leased more than 42,000 square feet in Auburn’s KRS Building.
South Sound vacancy rates are the highest they’ve been in more than four years, with the Kent Valley’s clocking in as having the greatest change over time in the area. Currently, the area has a 5.4 percent vacancy rate, which is up from 4.3 percent, according to a report from Colliers International.
This elevated vacancy rate is likely due to excess industrial space in the region from new construction and large relocations. It is likely that this imbalance between supply and demand will continue into the second quarter of 2019 as larger construction projects are slated to conclude during that time and many have not been preleased.
In fact, more than 65 percent of projects currently under construction in our region are located in Pierce County, and only 11 percent of those have been preleased. These account for close to 5.6 million square feet worth of projects and, of those, nearly 5 million square feet are expected to be completed by the end of the year.
Elsewhere in the commercial sector, much emphasis is being placed on multi-family, mixed-use residential construction; senior living facilities; co-working spaces; and hotels. Here are a few other notable construction projects in varying stages of completion.
Mount Bay Apartments
The seven-story Mount Bay Apartments, located on East 26th Street between C and D Streets, is being designed by Erickson McGovern Architects. The 254,000-square-foot, $45 million building will include 229 residential units with a fitness center, pool, hot tub spa, dog run, garden terrace, sky lounge, barbecue area, and more. Construction is currently in full swing and will likely conclude in 2020.
Franke Tobey Jones
The not-for-profit continuing care retirement community, Franke Tobey Jones, is in the final months of completing a nearly 65,000-square-foot nursing and memory care building on its North Tacoma campus. The building is expected to open this summer.
Downtown Tacoma Marriott
One glance at the Tacoma skyline and progress is evident with the ongoing construction of the 22-story Marriott hotel, which is being build next door to the Greater Tacoma Convention Center. Upon completion, the grandiose hotel will feature 304 rooms, 9,000 square feet of event space, a 10,000-square-foot ballroom and will benefit from being directly connected to the convention center.
Old City Hall
Surge Tacoma’s proposal for Tacoma’s long-shuttered Old City Hall was accepted by the City of Tacoma in September 2018. Upon completion, the mixed-use project would include a basement restaurant and bar, slightly less than 20,000 square feet of retail space, more than 20,000 square feet of office and coworking space, a technology center, 40 micro apartments (10-20 market rate and 20-30 affordable), two rooftop restaurants, and an event space in the clock tower. According to Surge Tacoma’s website, the project is due to begin construction soon with a tentative completion date in 2021.