Commercial Real Estate News / General CRE / Emerging Trends in Washington's Commercial Land Market: What Investors Need to Know

Emerging Trends in Washington's Commercial Land Market: What Investors Need to Know

Published: 11-10-23 Category: General CRE

Luke Williams

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.

Real estate markets are dynamic, ever-changing, and unpredictable, and Washington State is no exception. Washington frequently ranks as one of the top states for commercial real estate investment, thanks to its tech-based economy and business-friendly policies.

And yet, national and local trends are still shifting the post-pandemic real estate landscape, materially affecting both current and prospective investment strategies.

To that end, we've put together this guide on emerging trends that investors should familiarize themselves with before buying land for sale in Washington State. Such trends will likely shape the future development of Washington's real estate markets.

Let's get started.

Current Trends in Washington's Commercial Real Estate Market

Emerging Trends in Washington's Commercial Land Market: What Investors Need to Know

Current trends in Washington State's commercial real estate market signal a general softening: Industrial real estate continues to be this year's top performer, with significant growth in Seattle and Tacoma.

However, Washington's retail market is starting to signal a rebound: Retail generated more than $210 billion in 2022, and nearly 90% of all sales took place in physical stores, indicating excellent demand for retail space, even with the rise of e-commerce.

On the political side of the spectrum are plans to address rising rents and homelessness in Washington. Jay Inslee spent a good chunk of the 2023 legislative season signing bills to streamline housing construction and reduce red tape for denser multifamily developments.

Key Factors Shaping the Future

Rising e-commerce demand continues to affect significantly the commercial real estate sectors of Washington State. E-commerce exploded in national popularity during the pandemic, and retail demand shows no signs of letting up on the vital influence it's had on the industrial real estate markets of Washington's cities.

Additionally, we may see substantial changes in the multifamily housing market. Washington State recently banned single-family zoning in many cities across the state, opening up possibilities for new commercial multifamily developments in residential areas.

Emerging Sectors and Technologies

Washington is still one of the nation's top states for technology and is now the national home of cloud computing. The state houses both Amazon and Microsoft, which collectively command over 50% of the global cloud computing market. More generally, technology makes up about 22% of the state's economy.

The state's been attempting to cement itself as an industry leader in clean energy, planning to have a completely carbon-free energy infrastructure by 2045 and aiming to serve as a regional hub for offshore wind turbine manufacturing to meet growing demand for renewable energy.

Washington's agribusiness sector is also making strides, good news for farmland investors. New automation technologies are in place to make Washington State's farms smaller, more efficient, and more sustainable.

Sustainability and Environmental Considerations

Washington State cares greatly about its efforts to promote sustainability and environmental stewardship in its industries. With respect to real estate specifically, Washington passed the Healthy Homes and Clean Buildings Act (HHCBA) in 2021.

The HHCBA is a comprehensive piece of legislation aimed at reducing emissions during building construction and transitioning to a clean energy grid reliant on electricity instead of gas.

More generally, the act gives local jurisdiction the authority to set standards for clean energy usage. Commercial land investors looking at land for sale in Washington need to be aware of environmental standards affecting land development projects.

Preparing for Future Market Shifts

One thing seems clear from the data: Office space investments are still struggling and probably won't recover to pre-pandemic levels any time soon. Revitalizing the current office space market largely depends on getting workers back in the office en masse—a proposition that many are resisting.

Fortunately, the retail, industrial, and multifamily markets in Washington are performing well. Those who own office properties should look into rightsizing portfolios or consider converting office space for another use.

We're also seeing a noticeable flight-to-quality across the country. As a result, it'll likely be easier for investors to focus on buying land for sale in Washington State for existing property improvement to attract high-quality tenants. Rising interest rates may mean considering alternative financing options, like land contracts.

Case Studies of Investors Who Adapted to Market Changes

An interesting case study of investors and developers adapting to a changing market involves Horizon Partners' conversion of a 10-story office building into a 75-unit apartment complex.

The building, which used to belong to healthcare company DaVita, has stood empty since the tenants left and has been something of an eyesore. The DaVita building conversion is just one of several office-to-apartment conversions in Tacoma, a trend that may soon move to Seattle.

Final Verdict

Like many other cities, Washington State's commercial real estate market is going through something of a transitional period. How the state's commercial real estate market responds to changing conditions will set its development course for the foreseeable future.

To sum up our predictions, the following will likely be the linchpins of future commercial real estate growth in the state:

Increasing e-commerce and retail activity will continue to push demand for industrial, logistics, and distribution space.
Clean energy initiatives and a move to electrified grids will transform infrastructure and energy industries in Washington state.
Washington's statewide focus on zoning reform will see increased residential development in urban areas, including increased building conversions.

If you're interested in buying land for sale in Washington, these are the emerging trends you should incorporate into your long-term strategy.

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