Silver linings seen amid economic gloom

The economy is in the dumps. Hard times are here. None of the speakers at the annual forecast breakfast Friday of the local chapter of the Institute for Real Estate Management attempted to deny that.

But most also found some silver linings and some grounds for optimism.

Lower mortgage-interest rates and lower gas prices could help the Seattle-area real-estate industry rebound next year, said Lennox Scott, chairman and CEO of John L. Scott Real Estate.

Construction costs are starting to drop, said Tom Parsons, senior vice president of office and multifamily developer Opus Northwest.

And, for all its troubles, Seattle still is much better off than most of the rest of the country, speaker after speaker maintained.

But that's a little like saying Washington State's football team, at 2-11, is better than 0-11 Washington, UW real-estate professor Jim DeLisle joked.

Seattle land-use economist Matthew Gardner predicted a tough year ahead for multifamily housing, both condos and apartments. But the market didn't get overbuilt here as it did in California and Florida, he said: "Everyone wants to be in Seattle right now."

Voter approval in November of new taxes to expand light-rail should spur a boom in transit-oriented development, Gardner said.

The local industrial real-estate market, while slow, also is faring better than the rest of the country, said Bart Brynestad, senior vice president of Panattoni Development. Tenants are hunkering down, he said, but the market isn't overbuilt, and the vacancy rate, at 5 percent, remains low.

"When it does turn, it's going to rebound much quicker," he said.

Kemper Freeman, chairman and CEO of Kemper Development, said business at Bellevue Square and the other retail outlets in his Bellevue Collection is down just 2 percent overall from last year. The region's biggest economic engines — Boeing, Microsoft, Costco — remain strong, he said.

"We're in the bright spot of the country these days," Freeman said.

But Freeman also said that, given the credit crunch, he's glad he's not building a big project right now.

The only nonlocal speaker, Cleveland-based Key Bank director of investments David Legeay, said Seattle's highly educated work force and anticipated population growth will help. But home prices will continue to drop, he said, and apartment rents could slide.

"You're in a region that's faring better than the rest of the country," Legeay said. "But you're going to take your lumps, too."

Eric Pryne: 206-464-2231 or epryne@seattletimes.com