Seattle, it's lonely at the top of the real estate market

For 30 years, the Urban Land Institute (ULI) has been issuing an annual report titled Emerging Trends in Real Estate, which takes the pulse of the real estate and land use industry for the upcoming year. This year's report was under wraps (embargoed was their term) until 1:30 p.m. Eastern time, when market predictions for 2009 were revealed by "webinar" to the waiting media.

I logged onto the webinar while sitting on the couch in the living room of my single-family residence looking at the For Sale sign in my front yard. I could hear background sirens from the report authors' Washington, D.C., offices. The press release sent to Crosscut's editor had asked, "Is Seattle still one of the top real estate markets?" Having put a house on the market at the beginning of the financial freefall, I felt motivated to cover the report for Crosscut.

My first webinar also proved to be a crash course in economics and real estate market terminology. Stephen Blank, senior resident fellow of the non-profit ULI, and Jonathon Miller, report author, spent 40 minutes covering the highlights of the report and then took questions via the Internet.

In the Top Markets section of the 85-page report, Seattle is listed as No. 1, with 6.1 rating points out of a possible 9. Seattle is followed by San Francisco, Washington, D.C., New York City, and Los Angeles. (New York fell from first to fourth). All but two cities had rating declines (that's right, all but Seattle and San Francisco).

What does it mean to be a top market at a time when the Dow is posting record losses?

To be a top market city for 2009 doesn't necessarily mean Seattle had gains, just fewer losses. According to the 2009 report, Seattle still has investment opportunities because, like San Francisco and Los Angeles, we are a global gateway, with airports and ports providing access to Asia and the world. Seattle hasn't had market "upticks" in the last year, but neither has it seen downturns like Las Vegas ("a disaster") or Florida ("ground zero for the housing debacle"). The report offers this Seattle snapshot: Seattle boasts its "corporate giants," but the market braces for rising downtown office vacancies, now at 10 percent. Tepid job growth will flatten rental rates. Housing demand drops, and prices will slip but stay above national averages. Interviewees rate the market a strong "buy" for apartments, and the "number-one buy" among industrials is the Puget Sound ports.

Seattle's commercial and residential real estate market is not considered to be immune from national slow downs. In fact, Washington Mutual's situation, and recent downsizing at Starbucks, indicate that the Puget Sound economy is vulnerable. Yet citizens can rest easier knowing that other cities are in far worse situations, which is actually the scariest thought of all.

While listening to the East Coast voices in the webinar, I became distracted by the real estate-ese. Some of the phrases sang out like song lyrics just waiting for a tune: "Nothing is robust in the Midwest," "pray for retail," "investors don't have lubricants" — complete with the refrain, "Hunker down, hunker down, hunker down."

While listening, I kept my eye on the street: no one approaching the For Sale sign, no lookers, no buyers yet today. Don't they know that Seattle is the 2009 top geographic market for investors in the United States? The report has been available for at least 30 minutes. The home building market is anticipated to be quiet for a while and there's only an 11-month supply of homes. Hasn't everyone else been waiting for this year's Urban Land Institute report?

ULI is a non-profit education and research institute established in 1935. It now claims more than 40,000 members, and its mission is to provide leadership in the responsible use of land and in sustaining and creating thriving communities worldwide. The methodology for creating the report included interviews and surveys with approximately 600 real estate experts across the nation. Wall Street Journal's Marketwatch calls the report, now in its 30th year, "The oldest, most highly regarded annual outlook for the real estate and land use industry." The report is published in conjunction with PricewaterhouseCoopers LLP.

ULI presenters Blank and Miller emphasized that long-term landholders and owners will probably be OK although they cannot expect to see profits in the next few years. Speaking of the commercial sector, Miller said, "If you haven't sold yet, it's probably too late." For those who did sell and are currently in possession of cash, "Cash and low leverage buyers will be kings." As for developers who will need loans to proceed with new construction, "Developers will not be touching new projects unless they're bullet-proof."

The properties that are still considered investment-worthy in top markets are apartment buildings and warehouses, which often vie for No. 1 status. Conversely, the prospects for hotel and retail projects are not good. The international spread of financial problems is already reducing tourism, and consumer confidence is plummeting. "Be content just to have a job," was not one of the presenter's more uplifting statements.