Boeing Will Push Local Recovery Into 2003

SEATTLE, WA-Yesterday, at the annual gathering of the Commercial Brokers Association, local pundits predicted the soft economy in Puget Sound could continue for another year–or more. And, most of the real estate market doesn’t look any better.

Addressing the timing of economic recovery, Michael J. Parks, owner and publisher of Marple’s Business Newsletter, remarked, “We’re going to have to wait until 2003 for the Pacific Northwest. The State of Washington and the Puget Sound metropolitan area are about to experience their first recession since 1982.” While nationally there is talk the recession is in retreat, Parks warns, “The aerospace decline will deepen the recession already under way in Washington State.”

The first 5,000 of Boeing’s announced 20,000 layoffs are scheduled for today–the remainder by mid-year 2002. Looking back, more than 118,000 were riding Boeing’s payroll in the second quarter of 1998. The predicted future: just 65,000 by the end of 2003.

And, it’s not just the number of layoffs hitting the economy–those are high-paying jobs going down the drain. Jobs that average about $60,000, compared to the statewide average of $38,000.

And, what does this mean for the real estate market? The multi-family sector, for one, is bracing for turbulence. “No question–we’re in the middle of a recession in the rental market,” says Walt Smith, VP and principal of HSC Real Estate. “This is probably the toughest market we’ve seen in 20 years.”

In part due to approximately 16,000 units planned or under construction, Smith anticipates an oversupply that will push vacancies as high as 8.5% by the end of 2002. Bottom line: too many units, too many job cuts, and a spike in home buying stimulated by low interest rates. Already, Smith says, the market is bearing vacancies in the $1,500-per-month-and-up range of 9%.

As for the office sector, “It could be worse,” says Craig Wrench, president of Lowe Enterprises. While he estimates the central business districts of Seattle and Bellevue now account for 7 million sf of sublease space, he says 27 office projects totaling 6.4 million sf have been cancelled or postponed indefinitely. Nonetheless, Puget Sound is carrying an 11.1% average vacancy at last tally.

All said and done, Parks, who admits to being partial to baseball analogies, sums up the local recession with, “We are closer to the second or third inning in terms of the impacts on business and our lives that to the eighth or ninth.”