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Washington's Hottest Commercial Markets: Where to Invest

Published: 11-07-23 Category: Investing

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

An aerial view of land in Washington State.

The state of Washington is no stranger to commercial investments, thanks to its low tax rates and business-friendly policies. But naturally, as is the case with any commercial market, buying land for sale in Washington State can be more lucrative in some areas than others.

This begs the question: What are Washington's hottest commercial real estate markets? Whether you're investing in farmland or industrial real estate, carefully placing your investments will pay handsomely in the long run.

For that reason, we've put together this quick guide on the best commercial real estate markets to buy land for sale in Washington. We'll discuss the type of activity these markets are seeing, what their local economies are like, and which factors are currently driving their growth.

Let's get started.

Overview of Washington's Commercial Real Estate Market in 2023

Commercial real estate in Washington's largest cities has been undergoing somewhat of a reset period, with the most robust activity occurring in the industrial real estate sector. Office activity in Seattle has slowed, and vacancies have increased, while similar trends are manifesting in Spokane and Vancouver, WA.

Industrial activity continues to illustrate stable performance, with falling vacancy rates in the Puget Sound region. Industrial developers continue to pursue the Seattle region: Nearly 15 million square feet of new industrial space was under construction in Q4 2022.

Washington's retail sector continued to show underrated strength, with extremely low retail vacancies and high construction activity in the Seattle and Tacoma markets.

Top Commercial Real Estate Markets in Washington

Washington's commercial real estate market is poised for strong growth. But where will that growth be the strongest? Based on our research, these are the places you should look when buying commercial property or commercial land for sale in Washington state.

#1 – Seattle

Washington's Hottest Commercial Markets: Where to Invest

Seattle is the single largest city in Washington and the largest economy in the state. The Seattle-Tacoma-Bellevue metro area has an annual GDP of over $413 billion and a diversified economy with major activity in aerospace, agriculture, healthcare, manufacturing, retail, transportation, and healthcare.

Seattle's industrial market is currently its strongest performer, with this most recent Q3 estimate showing 4.8 million square feet of deliveries and steadily growing industrial rents. Data shows Seattle industrial leasing activity slowed slightly, but deliveries will remain on pace.

#2 – Spokane

Spokane is the second-largest city in Washington State, with major industries in aerospace manufacturing, life science, agribusiness, and energy. Data shows cap rates in Spokane's industrial market grew over the last year, and leasing for the city's retail market stayed consistent thanks to medical offices and call center leases.

Despite falling rental gains in its multifamily market, Spokane's multifamily construction remains steady, indicating sustained demand for apartments. Perhaps surprisingly, data shows that Class B and C multifamily properties showed lower vacancy rates than Class A properties at the end of 2022.

#3 – Vancouver

Vancouver is located on the southern border of the state and is part of the larger Portland metropolitan area. Like the other locations on this list, the Vancouver-Portland industrial scene is strong, with a 57% YoY sales increase between Q2 2023 and Q3 2023.

Office vacancies in the metro area remain elevated at over 20% as of mid-2023, while the retail sector is holding steady behind increased leasing volume and tenant demand. Data also shows that multifamily cap rates registered a 14.29% YoY increase.

Factors Driving Growth in These Markets

Much of the growth in industrial real estate across these areas is due to e-commerce demand, a trend that many major metro areas across the country are still seeing. E-commerce demand, as a result, drives demand for warehousing and distribution space as businesses seek to store inventory closer to hotbeds of customer activity.

Similarly, record retail sales of over $210 billion in 2022 reflect growing demand for retail space. About 87% of all retail sales in Washington take place in physical stores, and Washington's sizeable retail industry now employs more than 400,000 people across the state.

The generally mixed activity of office markets across Washington is due to the slow back-to-office push. It's been nearly 3 years since major shifts to remote work began, and similar data across the US shows the same story—offices are still acclimating to the new normal of hybrid work schedules.

Investment Strategies for Each Market

Below is our take on viable commercial investment strategies for buying land for sale in Washington in the aforementioned commercial real estate markets.

Strategies for Seattle

In Seattle, the industrial market is king and provides the highest growth potential for commercial real estate investors. As inflation decreases and consumer spending picks up again, we can expect warehousing demand to grow.

As such, investing in land for sale in Washington for industrial development purposes may lead to long-term profitability amidst the state's dominant e-commerce and remote work trends.

Strategies for Spokane

Spokane's market has recently been especially kind to industrial and multifamily properties. Start your search with those sectors in mind.

Also, Spokane County is the second-largest agricultural producer in the state, with an annual agricultural revenue of over $560 million. If you're having trouble securing a land loan for agricultural land, consider a land contract instead.

Strategies for Vancouver

The Vancouver-Portland area's multifamily rent growth remains well above pre-pandemic levels at over 11%, and the city plans to deliver an additional 8,000 units over 2023.

Moreover, multifamily sales volumes were the highest compared to other asset purchases. The Portland-Vancouver area also has a higher proportion of renters than the national average at 47%, so multifamily investing could be a viable strategy to pursue for Vancouver investors and real estate developers.

Case Studies of Successful Commercial Real Estate Investments

One of the most interesting developments in Washinbgton's commercial real estate market is the rising trend of office-to-housing conversions in major metro Washington metro areas, including both Seattle and Tacoma. Design firms have been experimenting with ways to convert empty office properties into affordable housing.

This new movement could stimulate vacant office properties as owners and developers change gears and try to repurpose properties for different uses. Investing in old office properties for apartment conversions could be the smartest way to rehabilitate vacant office markets.

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