The commercial market has experienced declines to the short extent that the residential market has. I had no idea that vacancy rates in Pioneer Square were close to 25%. This article talks about that market and Starbucks selling their building.

Seattle Times
Business / Technology
Originally published August 8, 2011 at 6:16 PM | Page modified August 9, 2011 at 12:05 PM
Starbucks sells Pioneer Square office buildings for $125 million
With a vacancy rate of 21 percent, Pioneer Square has the biggest chunk of empty office space in downtown Seattle.
By Christine Harvey
Seattle Times business reporter
Starbucks closed a $125 million deal Monday with real-estate investment firm Spear Street Capital for two office buildings in Pioneer Square.

The connected buildings, at 505 First Avenue and 83 South King Street, are about 70 percent leased and had been on the market since May, said Stacey Krum, spokeswoman for Starbucks.
Anchor tenants include data-storage company Isilon Systems, brokerage company Sharebuilder and Nuance Communications, a speech and imaging software firm.

Starbucks purchased the King Street building in 2006 for $28.7 million and began building the seven-story First Avenue building in 2007 — when it was opening seven stores a day. A year later when the recession hit, it decided it wouldn’t need the space and began looking for tenants to lease the offices to.

John Grassi, president of San Francisco-based Spear Street Capital, said the company was attracted to the investment because of the neighborhood’s historic charm and its location — between the viaduct and CenturyLink Field. He said he expects tenants to be a mix of technology, media and traditional companies.

With a vacancy rate of 21 percent, Pioneer Square has the biggest chunk of empty office space in downtown Seattle, according to Officespace.com. Rent averages about $24 per square foot — $3 less than downtown’s average and the second-lowest behind Queen Anne and Magnolia.

John Heimbigner, regional director for the online real-estate database, said the space emptied by Amazon.com and the Walt Disney Internet Group make up about 60 percent of Pioneer Square’s office vacancy. Heimbigner said the area is “turning for the better but has a long way to go” before it recovers.

http://seattletimes.nwsource.com/html/businesstechnology/2015856108_starbucks09.html

Christine Harvey: 206-464-3263 or charvey@seattletimes.com

Lets keep an eye to see what moves Starbucks is making next. They have done an exceptional job creating jobs and building one of the best loyalty brands in the US.

Seattle Real Estate Tyler Freed

Homebuyer credit helps keep area housing market afloat
by MAI HOANG
Yakima Herald-Republic

Buy YHR Photos Enlarge photo

ANDY SAWYER/Yakima Herald-Republic
Real estate agent Thomas Parker shows a home to Maria Valdez Wednesday, Nov. 11, 2009.

YAKIMA, Wash. — Since he was a young boy, Ricardo Velasco was told by his parents that he needed to own a home.

For Velasco, a 25-year-old Toppenish resident, it was tough to find an affordable home in the right area.

But when he heard about the federal tax credit for first-time homebuyers, he decided to start looking.

Velasco and his wife, America, and their three daughters, expect to close on their first home later this month and move in just in time for the holidays.

A federal tax credit of up to $8,000 for first-time homebuyers, along with record-low interest rates, has given the local real estate industry extra business.

“It’s given us a talking point to get people interested,” said Rick Fairbrook, broker at John L. Scott Real Estate.

Velasco was one of those interested buyers. He ended up finding a two-bedroom, one bathroom house for $74,000.

Velasco plans to use the money he gained from the tax credit to do some remodeling on the house which include installing a new roof and installing a new heating system.

“The $8,000 did really push us to get the house,” he said. “We’re just thankful this house came along.”

*******

Fairbrook and others in the local and statewide real estate industry believe an influx of first-time homebuyers, lured by the tax credit, has kept the market viable.

Existing home sales in Yakima County during the third quarter had a year-over-year increase of 1.7 percent, according to data from the Washington Center for Real Estate Research released this week. The county also showed a 12.6 percent increase from second-quarter figures.

Statewide, existing home sales increased 2.6 percent, the first year-over-year gain since the fourth quarter of 2005. That figure was up 15.6 percent from the second-quarter data.

The Washington Center for Real Estate Research, which is based at Washington State University, also did a study in late September and early October that shows about half of all home purchases statewide during the third quarter were from first-time homebuyers. About 60 percent of those purchases would not have happened without the tax credit.

“About 30 percent of the (overall) market was attributed to the (first-time buyer credit),” said Glenn Crellin, executive director for the Washington Center for Real Estate Research. “That’s about the same of the overall increase in (sales) activity.”

First-time homebuyers likely made up the majority of buyers in Yakima County. Nearly 72 percent of existing single-family homes purchased in the county during the third quarter cost less than $200,000, according to data from Headwaters-The Source, a Selah-based firm that provides real estate data for the county. About 30 percent of those homes were under $100,000.

There’s no county-level data showing how many of those purchases were a direct result of the tax credit, but local agents believe it was a driving factor.

Mike Kokenge, of Coldwell Banker Associated Realtors, estimates that about 60 percent of the company’s business was from first-time homebuyers.

And it also helped that the tax credit was happening in the summer months.

“People get more motivated to buy,” he said.

*******

While a tax credit may attract first-time homebuyers, other buyers have remained timid, making a dent on the median home price.

The price was likely driven down because first-time homebuyers tend to be in the market for lower-priced homes.

In Yakima County, median prices dropped 1.4 percent from a year ago to $154,200, while statewide numbers dropped 7.8 percent.

According to the Washington Center for Real Estate Research, there are enough homes in the $250,000 to $500,000 price range to supply the local housing market for more than a year if no more homes were placed for sale.

For homes above $500,000, there’s nearly a four-year supply.

And part of the loss in this market is reflective of a tough real estate market outside the area.

For several years, sales activity for Yakima County’s higher-priced homes was partially driven by buyers from areas like Seattle or California. Those buyers could buy higher-end homes in the Yakima area because they sold a modest home for much higher prices at their previous residence.

“That has stopped,” said Chris Nass of Rose & Associates. “Because of the economic climate, (out-of-town buyers) can’t sell those homes for big bucks in the communities where they’re coming from.”

The market has also had an impact on new construction.

Building permits in Yakima County for single-family homes during the third quarter declined 62.5 percent from a year ago, according to the Washington Center for Real Estate Research.

*******

The real estate industry is shifting its attention to an extension to the first-time homebuyer tax credit, which was approved by Congress and signed by President Barack Obama last week.

The tax credit was slated to end in November. Under the extension, homes purchased or under a binding contract by April 30 (and completed by June 30), now qualify for the credit.

That was a relief to Velasco. By the time he closes on his new home, it will be two months since he started the home purchase process.

“We were kind of worried,” he said. “It was one of the first things (our real estate agent) told us — that it was going to take a while.”

With banks taking more time to screen potential borrowers during the loan qualification process, the time it takes to complete the purchase process is longer than in past years, Crellin said.

A few years ago, a home purchase could close as quickly as 30 days, said Tom Trepanier, broker and owner at Windermere Real Estate in Yakima. These days, closing a home could take as long as 45 to 60 days.

A second tax credit is also in place to spur activity from repeat buyers, which may cause increased activity for homes in the $200,000 to $300,000 range.

Under this credit, homebuyers who have owned a home in five of the last eight years may qualify for a tax credit of up to $6,500 for homes that are under a binding contract between now and April 30. Again, home purchases under binding contract must be completed by June 30 to qualify for the credit.

“We’re hopeful that this new tax credit will influence the higher price ranges,” Trepanier said.

But for some existing homeowners, the repeat buyer credit might not be enough to drive them to buy a higher-priced home, especially if they already get tax breaks from paying interest on their current mortgage, said Ron Anderson, an agent with Creekside Realty.

“(The credit) is not going to be enough to make them go further into debt,” he said.

And real estate agents note that other things have to change for the market to have a full recovery, such as increases in employment levels and consumer confidence.

“People have been more cautious in how they spend that money. I’m sure it extends to home buying,” said Fairbrook, of John L. Scott Real Estate. “I think we’re in for a long, slow improvement. We’re not going to see a sudden jump in sales activity in any of the (price) ranges.”

* Mai Hoang can be reached at 509-577-7685 or mhoang@yakimaherald.com.

Seattle Real Estate Tyler Freed

This is a great article from Gurufocus.com. It discusses the latest REI Trust Reports.

Washington Real Estate Investment Trust Reports Operating Results (10-Q)
November-6-2009

Washington Real Estate Investment Trust (WRE) filed Quarterly Report for the period ended 2009-09-30.

WASHINGTON R.E. INV. TRUST is a self-administered qualified equity real estate investment trust. The Trust’s business consists of the ownership of income-producing real estate properties principally in the Greater Washington-Baltimore Region. The Trust has a fundamental strategy of regional focus diversified property type ownership and conservative financial management. Washington Real Estate Investment Trust has a market cap of $1.58 billion; its shares were traded at around $27.13 with a P/E ratio of 11.9 and P/S ratio of 5.6. The dividend yield of Washington Real Estate Investment Trust stocks is 6.4%. Washington Real Estate Investment Trust had an annual average earning growth of 7.2% over the past 10 years. GuruFocus rated Washington Real Estate Investment Trust the business predictability rank of 3.5-star.

Highlight of Business Operations:
We depreciate buildings on a straight-line basis over estimated useful lives ranging from 28 to 50 years. We capitalize all capital improvement expenditures associated with replacements, improvements or major repairs to real property that extend its useful life and depreciate them using the straight-line method over their estimated useful lives ranging from 3 to 30 years. We also capitalize costs incurred in connection with our development projects, including capitalizing interest and other internal costs during periods in which qualifying expenditures have been made and activities necessary to get the development projects ready for their intended use are in progress. In addition, we capitalize tenant leasehold improvements when certain criteria are met, including when we supervise construction and will own the improvements. We depreciate all tenant improvements over the shorter of the useful life of the improvements or the term of the related tenant lease. Real estate depreciation expense from continuing operations was $19.1 million and $56.7 million for the 2009 Quarter and Period, respectively, and $17.2 million and $50.5 million for the 2008 Quarter and Period, respectively. Maintenance and repair costs that do not extend an asset’s life are charged to expense as incurred.

We capitalize interest costs incurred on borrowing obligations while qualifying assets are being readied for their intended use. Total interest expense capitalized to real estate assets related to development and major renovation activities was $0.3 million and $1.0 million for the 2009 Quarter and Period, respectively, and $0.5 million and $2.0 million for the 2008 Quarter and Period, respectively. Interest capitalized is amortized over the useful life of the related underlying assets upon those assets being placed into service.

We believe that we qualify as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code and intend to continue to qualify as such. To maintain our status as a REIT, we are required to distribute 90% of our ordinary taxable income to our shareholders. When selling properties, we have the option of (a) reinvesting the sale price of properties sold, allowing for a deferral of income taxes on the sale, (b) paying out capital gains to the shareholders with no tax to WRIT or (c) treating the capital gains as having been distributed to the shareholders, paying the tax on the gain deemed distributed and allocating the tax paid as a credit to the shareholders. In June 2008, two industrial properties, Sullyfield Center and The Earhart Building, were sold for a gain of $15.3 million. The proceeds from the sale were treated as a distribution to shareholders. In May 2009, a multifamily property, Avondale, was sold for a gain of $6.7 million. In July 2009, an industrial property, Tech 100, and an office property, Brandywine Center, were sold for gains of $4.1 million and $1.0 million, respectively. We currently anticipate that the proceeds from these gains will be treated as a distribution to shareholders. Generally, no provisions for income taxes are necessary except for taxes on undistributed REIT taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRS”). A TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates. There were no income tax provisions or material deferred income tax items for our TRS for the nine month periods ended September 30, 2009 and 2008.

Recoveries from Tenants: Recoveries from tenants increased by $0.1 million in the 2009 Quarter as compared to the 2008 Quarter due primarily to non-core properties ($1.4 million), combined with a $1.3 million decrease in recoveries from tenants from core properties primarily due to lower common area maintenance ($0.6 million) and real estate tax ($0.7 million) reimbursements.

Recoveries from tenants increased by $4.0 million in the 2009 Period as compared to the 2008 Period due primarily to non-core properties ($4.7 million), combined with a $0.7 million decrease in recoveries from tenants from core properties primarily due to lower common area maintenance reimbursements ($1.4 million) offset by higher electricity ($0.5 million) and overtime utilities ($0.2 million) reimbursements.

Provisions for doubtful accounts increased by $1.2 million in the 2009 Period as compared to the 2008 Period, primarily in the office ($1.0 million) and retail ($0.5 million) segments, partially offset by lower provisions in the medical office segment ($0.3 million). The increase in provisions for doubtful accounts for both the 2009 Quarter and Period reflects the impact of the national economic recession.

WRE is in the portfolios of Tom Gayner of Markel Gayner Asset Management Corp, Tom Gayner of Markel Gayner Asset Management Corp.

© 2004-2007 GuruFocus.com, LLC. All Rights Reserved.

Seattle Real Estate Tyler Freed

Washington State Real Estate Outlook

The Washington state real estate market, just like the market in the rest of the country, is starting to rally. But prices on average statewide are still down from last year, even though this time last year the market had already fallen hard. Washington state, bordered with Idaho on the east, Oregon on to the south, Canada on the north and the Pacific Ocean on its west coast can be a good place to make a real estate investment, however, if you’re willing to think of it as a long-term investment.

Right now, Washington state home sales are up almost 16% from last year, which is good news. But the median price has dropped almost 8%. Since June, sales have been boosted by a tax credit that most experts believed believe is responsible for the surge in sales, and that without the credit, at least half of the sales wouldn’t have been possible.

Though residential real estate is down 5% in King County, it is up 12% in the last five years and up 58% from the last ten years. The increase in sales and decrease in price are median numbers in Washington state real estate, however. Some areas have shown an increase in the sale prices of homes, like in Skamania County where home prices are up an average of almost 7% and Columbia County where the average home selling price is up a whopping 25% over this time last year.

Another good indicator of the Washington state real estate market is the number of building permits applied for as compared to this time last year. This will show the trend over the coming months as the new constructions are completed. Columbia county, where home sale prices have gone up 25%, has only half the building permits applied for as last year. And since new construction is slow and few are building, the home prices there could continue to stay above last’s year’s numbers. The number of sales is also up 25% over last year.

Thurston county, the home of the capital city, Olympia, only had about a 3% increase in median home selling prices, but had a whopping difference in the number of building permit applications. Almost 50% more permits have been applied for by the end of the third quarter of 2009 than in 2008. It’s hard to predict the trends when you have a tri-cities area like Kennewick, Richland and Pasco in Benton and Franklin counties, which are usually grouped together in Washington state real estate circles, with each city showing drastically different numbers.

Benton county has had about 25% fewer sales than this time last year, with a small 13% decrease in permits, but the price has stayed fairly steady, with only a 0.3% increase. Neighboring Franklin county, however, shows about the same numbers, except in new permit applications which are up 45% over last year.

If you plan to invest in Washington state real estate, it’s important that you look at the purchase as a longer-term investment and not something that you’ll try to flip quickly while the market’s still erratic. If you want to purchase a residence in Washington, looking at the numbers in the area you’d like to live can help you get in with an investment that will improve over time.

About the Author:

For more information about the current market or how to take advantage of today’s market visit http://www.tylerfreed.com.

Seattle Real Estate Tyler Freed