A Developer’s View on Seattle’s Multifamily Market
- Apr 21, 2020
Driven by positive demographic trends and its tech industry, and despite significant completions during the past few years, Seattle’s steady economic expansion has pressured developers to build, in order to keep up with demand. However, as the coronavirus crisis unfolds, disruption is impossible to avoid. Washington is among the few states in the country that defined residential construction as nonessential during the worldwide health crisis, which has forced developers to cease activity at all construction sites until May 4.
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With roughly two decades of experience in the industry, Vibrant Cities Co-Founder & CEO James Wong considers the coronavirus outbreak to be the recession many anticipated. In an interview with Multi-Housing News, he explained why Seattle’s strong multifamily housing fundamentals will be instrumental in the metro’s recovery, and provided details on his company’s projects.
What has been driving Seattle’s strong economic expansion so far?
Wong: The economic expansion over the last several years has been driven in large part by strong job growth from the tech sector, led by Amazon and Microsoft, which are headquartered here in the Pacific Northwest, followed by others such as Google, Facebook, Apple, Tableau and F5 Networks, which are all growing their teams in our region. A Facebook representative even stated that within the next five years, they will have more employees in the Pacific Northwest than in Silicon Valley.
With such a workforce, can Seattle’s multifamily market get through the coronavirus crisis without significant impact?
Wong: Prior to COVID-19, Seattle was one of the top three job growth cities in our nation. I believe once we get through this, Seattle will still be one of the strongest growth cities again. I think this might be the recession that many of us were anticipating—as we were at the tail end of a protracted cycle—but because the fundamentals are strong and the demand for housing is still high, we’re hoping this will be a V-shaped recession rather than a longer U-shaped one.
With strong multifamily deliveries during the past few years, how has housing demand been performing in the metro until now?
Wong: Even with our strong multifamily deliveries, vacancies have remained low, coming in below 5 percent in 2019. Our industry was responding to the strong demand for new housing, due to people moving into the greater Seattle area because of our robust job growth. The COVID-19 situation will possibly disrupt this in the short term.
Tell us about the multifamily projects you are currently working on. How has the coronavirus outbreak affected your development timelines?
Wong: We currently have four projects under construction representing 400-plus units, with another two projects ready to start construction within 90 days, representing another 300 units. Because the governor’s stay-at-home emergency order was recently extended for a month, our construction timelines are being pushed out.
What sustainability features do you usually integrate into the communities you build?
Wong: We conserve energy in several ways, including the use of smart home features, occupancy sensors and LED lighting, and also through daylighting, where connecting interior to exterior spaces is a design priority. We use highly efficient mechanical and electrical equipment and appliances. We employ water-efficient strategies through highly efficient irrigation and reclaimed water. We also use recycled materials and low-VOC paint, where appropriate.
READ ALSO: COVID-19 Hit on Multifamily Will Be ‘Modest’
What can you tell us about the micro-unit movement in Seattle? Will it be a long-term trend?
Wong: Micro units are here to stay in Seattle. They are a way to help more people live affordably in the city, which is in alignment with the City of Seattle’s desire to provide additional housing supply to help address the current housing crisis. Legislative actions and administrative policy shifts aside, large world-class cities like New York, Boston and Los Angeles all have, and support, micro housing, and it’s just a matter of time before Seattle is on board as well.
How do you expect the Seattle multifamily market to perform in the foreseeable future, considering the current economic situation?
Wong: The COVID-19 situation is an unprecedented cessation of revenue for many individuals and the full effects of it are still uncertain. However, the fundamentals in the Seattle market are still strong. This is not a foundational economic problem in the region. Knowledge workers, who arguably are responsible for a large part of the growth in Seattle, are still going to be in high demand once this crisis passes, and there is still not enough supply of multifamily housing to meet that demand. We anticipate that the recovery will be strong and we have been making prudent decisions to prepare ourselves for that recovery.