With so much happening in the Bellevue condo and housing market, we caught up with real estate expert, Jason Foss of Real Residential, to learn more. Specializing in the acquisition, management, and representation of distinctive urban properties, Foss has over 17 years of experience.
Foss discusses the current state of the residential real estate market in light of vacant office spaces, particularly from Microsoft’s pullback. He also examines the demand for new condo offerings, highlighting the challenges in the market due to higher interest rates and economic uncertainties. Additionally, insights regarding mortgage rate trends and their potential impact on the market are explored, while also considering upcoming condo projects in downtown Bellevue.
How is the influx of vacant office space, (mostly due to Microsoft vacating 3.9 million square feet) impacting the residential real estate market in Bellevue?
I don’t believe there is a significant impact at the moment other than perhaps psychological. The reason being that the announcements we are seeing now is more or less just the other shoe dropping after a few years of post-pandemic office emptiness.
In other words, I think the downtown Bellevue condo market has largely adjusted to there being fewer downtown workers and it just may be that this period will now extend for a longer time than anticipated (although Microsoft’s pullback has been planned for a while, it just hasn’t been backfilled by Amazon and others in the way it might have been anticipated previously).
Going forward we will just have to see if and when other existing companies expand (like Pokemon did recently) and/or new companies come in (like ByteDance/TikTok) to create more demand for downtown housing.
How is the demand for the new condo offerings that have been coming on to the market? Is it a buyers or sellers market for condos?
I would say demand has been weaker for new construction condos than was expected when these projects were planned. Sales are certainly happening (and, in the case of Avenue, pre-sales which happened over the past few years while the towers were being completed are now closing), but there is no getting around that first COVID and then higher interest rates have taken their toll on sales.
Ideally new construction projects would like to be 75-85% pre-sold prior to completion in order to avoid the carrying costs of a large number of completed, but unsold units, and we are just not seeing sales at that level quite yet for any of the new projects. If the past is any guide, the developers will begin adjusting prices or offering incentives or both in order to get those completed homes sold.
While resale condo inventory in downtown Bellevue is still relatively low, and most of those homes are selling through in a reasonable timeframe, the new construction condo market will be relatively favorable for buyers, especially the higher above $2M and/or $1,250/sf the pricing is.
Of course, as with anything, there will be exceptions. I do still expect to see robust demand for the most desirable condos, i.e. penthouses or other condos very high up in towers with the best views, especially if they are relatively protected.
Mortgage rates have slightly decreased since the start of the year, and analysts anticipate there will be more rate relief by the end of the year. How could that impact the market?
Rates have indeed been coming down and by quite a bit here just in the past week. When we saw rates in the mid 6% range late last year it spurred robust sales activity. I could see something similar happening this fall with a couple of caveats: uncertainty around the upcoming presidential election and probably more importantly adverse stock market performance.
To the degree we see local tech stocks drop due to larger concerns about the economy or specific worries that the AI driven run up in tech company values were overblown, it could impact purchasing activity among that important segment of the buyer pool.
Are there any additional condo projects in the pipeline in downtown Bellevue?
Pinnacle Development seems to be moving forward with development plans for the site next to the QFC which will be a combination of retail, apartments, and condos.
Meanwhile, Bosa has a new project planned for a site adjacent to Downtown Bellevue Park. Given the amount of competing new construction inventory that is likely to be available, it will be interesting to see how quickly they decide to move forward (both with construction and sales the timing of which are somewhat independent).
Timing is everything, of course, but it appears that there will be a pipeline of new construction condos here for a while, although everything will be quite expensive in price per square foot terms relative to the resale market.
