Puget Sound and Portland/Vancouver: 2014-15 Top Economic Market Drivers, Part 1 – The Puget Sound
by Spencer Marona, Managing Director
In this two part series, I will be covering the top economic market drivers in 2014-15 in the Puget Sound and Portland/Vancouver markets: Part 1. The Puget Sound – will Amazon slow down? Part 2. Portland/Vancouver – firing on all cylinders.
Part 1. The Puget Sound – will Amazon slow down?
Amazon is approaching 150,000 employees worldwide and construction is underway to house 71,000 employees on its South Lake Union campus in Seattle, where approximately 20,000 work today. This year alone Amazon added an additional 40,000 employees worldwide. According to CEO, Jeff Bezos, 15 percent of Amazon’s workers live in the same zip code as their office and 20 percent of them walk to work.
This sounds ideal for a multifamily investor; however, it should be noted that this past quarter’s earnings created grumblings with traders on Wall Street. In addition, shareholders are becoming impatient with Amazon’s lack of profits despite mind-boggling growth in revenue and hiring. A concern for the Puget Sound is that a correction in the stock market could bring devastating consequences for the online retailer. Mass layoffs would generate repercussions for the majority of commerce and private residents throughout the northwest.
Speaking first-hand from my time at Amazon, it is my opinion that the company will continue to grow and become more powerful. For every “interesting and cool” idea/product the public knows about, there are about 300 confidential concepts in the works. The impact Amazon has on the Puget Sound market is similar to the growth of Microsoft in the 90s and Intel to the greater Portland/Vancouver market today-both are indicative of longstanding sustainable growth.
If Bill Gate’s original vision for Microsoft was to put a PC in every home, Bezo’s vision is to put the world of consumer goods at users’ fingertips. Satisfaction for Amazonians may come once a customer is able to purchase anything and everything available for sale around the globe on their site; plus the ability to have it arrive at their doorstep within a few hours. With Amazon Web Services (their cloud computing service business, used by the CIA), and hardware business lines (Kindle, Amazon Fire TV and Amazon Fire Phone), among others, indicators are that Amazon is here to stay.
Whether you represent a tech company recruiting in OR/WA, or a multifamily property owner in the northwest, we are fortunate to have this e-commerce giant in our backyard. To learn more about Amazon, their vision, future growth, and watch this recent and rare interview hosted on <re/code>, an independent online tech news site, with Business Insider and Amazon CEO, Jeff Bezos.
With employers like Amazon, Microsoft, Starbucks, among others, foreign investors are starting to see the Puget Sounds as a preferred destination to invest in due to the stability of these companies. According to the National Association of Realtors, China has more than 2 million millionaires and 47 percent plan to move out of the country in the next five years. A survey conducted from April 2013 – March 2014 from the same association also reported that $2 billion was invested into residential real estate in the Puget Sound.
Many Chinese have a different investment strategy than other foreign investors. They seek long-term holds and often purchase residential real estate close to schools for their family even if they have not relocated to Washington yet, according to Terre Foster, a residential agent with Windermere in the Bellevue area. Foster is quoted in a recently published Puget Sound Business Journal article stating, “It’s common for a Chinese investor to buy a multi-million dollar home and have it sit vacant.”
Looking north to Snohomish County, primarily the City of Everett, many were relieved a year ago with the announcement of the Boeing 777X contract. Investors scratching their heads over real estate prices in the Puget Sound should think twice before passing up an opportunity in the north end. Additionally, if your investment strategy is capital preservation, know that labor union negotiations will most likely be back in the headlines and putting residents on the edge of their seats – but not until the contract nears expiration in 2024.
Steve Wilhelm, Staff Writer for the PSBJ covers manufacturing and aerospace. In one of his recently published article’s about Boeing’s impact on the Puget Sound economy, he connects the dots between the giant company and a private owner of a “tiny” newsstand.
Other noteworthy events of the year include:
- Rapid expansion and growth of tech companies
- Gov. Jay Inslee’s controversial approach to tax capital gains
- Seattle and Tacoma ports implementation of their overdue alliance in 2015
- Growth in the aerospace industry
- Local municipalities’ ongoing adjustment to the 2012 passing of Washington’s Marijuana Law
- State Farm’s arrival to Tacoma’s CBD
- Ongoing construction of Sound Transit’s mass transportation network (light rail)
Read more about some of these market drivers and others that will shape the Puget Sound in a recently published post in The Seattle Times.
Later this week, we will publish an overview of the 2014/2015 market drivers for the greater Portland/Vancouver market.