SEATTLE REAL ESTATE RATED #1

Survey of metropolitan areas reveals best investment value here
By DAN RICHMANP-I REPORTER
Among major metropolitan areas, Seattle's real estate is the best in the nation as a prospective investment, a national report released Tuesday says.
On an eight-point scale reflecting investment value, Seattle was ranked 6.2, according to the 30th annual study of emerging trends in real estate from PricewaterhouseCoopers and the Urban Land Institute.
That ranking reflects averaged ratings by more than 600 surveyed real estate professionals, who assigned a number of 0 to 8 to each the nation's top 10 regions. The better the location for investment purposes, the higher the rating.
"It's saying a dollar invested in Seattle real estate would be more likely to yield more than a dollar invested anywhere else -- but it says nothing about how much the yield would be, or over what time period," said Rick Kalvoda, a PricewaterhouseCoopers director.
Study participants -- including investors, developer and brokers -- supported their high rankings by pointing to the large and diverse types of companies that call Seattle home, singling out Amazon, Boeing and Starbucks.
Survey subjects also said low vacancy rates at Seattle-area shopping centers are buffering those malls against a possible consumer pullback. And they said the Puget Sound region's ports are the most attractive in the country, in part because of their low vacancy rates and low rents.
Despite Seattle's strengths, it should "brace for some buffeting," study participants said in comments they submitted along with their numerical ratings.
About 3.5 million square feet of new office space, plus increasingly tepid job growth, will increase the sub-10 percent downtown office vacancy rate, they predicted.
"Owners are scrambling to find tenants as Washington Mutual teeters and Starbucks downsizes," one respondent wrote. Though Bellevue's office-vacancy rate remains low, it's mostly because of Microsoft's massive presence there -- so that market is vulnerable to any future layoffs by the software company, others noted.
Housing demand in Seattle is slipping, and prices are dropping, while still remaining "well above the national averages." Condo sales are "falling dramatically," but the market is still rated a strong buy for apartments, with rents moving up, vacancies heading down and a limited number of new projects.
Ranked second as a real-estate investment was San Francisco, followed by Washington, D.C. New York City, which has traditionally topped the list, was ranked fourth this year, mainly because the Wall Street implosion cost jobs and created office vacancies there.
Chicago was ranked last among the top 10 markets, with apartments doing well but condos weakening as speculators leave the market.
Nationwide, real estate markets are expected to reach bottom in 2009 and to flounder in much of 2010, with ongoing drops in property value, more foreclosures and delinquencies and a "limping economy that will continue to crimp property cash flows," the study says.
"Commercial real estate was the last to leave the party, will feel the pain in 2009 and may be the last to recover," Tim Conlon, a partner with PricewaterhouseCoopers, said in a news release.
P-I reporter Dan Richman can be reached at 206-448-8032 or danrichman@seattlepi.com.