CRE Opportunities in the Pacific Northwest…

CRE Opportunities in the Pacific Northwest…

Chief Economist K.C Conway, CCIM, MAI and CRE from the CCIM Institute recently did a presentation on The Resurgence of Secondary Markets focusing on the Pacific Northwest. The presentation contained some excellent information from which we believe all commercial real estate investors in this region could benefit.  

Here we have highlighted some of the key points but for more information click here for the link to the presentation. 

Population Migration

According to the United Van Line’s National Migration Study, Idaho was the state with the highest percentage of inbound migration (70%) and Oregon was #3 (63%).

40 % of Americans who moved did so for a new job or job transfer, and more than one in four (27%) moved to be closer to family.

Substantiating the accuracy of the Van Line’s study is data from the 202o Census showing strong population migration for the Pacific Northwest:

Economic Outlook & Site Selection

According to ALEC (American Legislative Exchange Council) Idaho made the #11 ranking for its Eco OUTLOOOK. Montana was #35, Washington #37 and Oregon #44. The general idea here is that states that spend less and states that tax less experience higher growth rates than those states that tax and spend more. Company’s doing site selection are looking at this type of data.

Companies and businesses are also looking at states that fund their pension plans. According to Tax Foundation, the Pacific Northwest is doing pretty good in this area, especially Idaho with over 90% of public pensions fully funded.

Site Selection has ranked states in our region as doing well in the following areas:

Montana – Ranked 5^th in both business climate and fiscal health and has a budget surplus in 2021. Important to note is that in May 2021 a bill was signed into law creating Montana’s Broadband Opportunity. They currently are ranked almost last in the country for broadband coverage and this bill should put them in a respectable position for national broadband for the first time. Also, Montana was just ranked by a number of travel & leisure sources as the #1 place people from the Northeast are planning to travel to this summer. Given its position next to Idaho, and considering the migration coming into this region Montana could be a place for huge opportunity concerning commercial real estate.

Idaho – Ranked # 7 in terms of fiscal health but also ranked 50^th for workforce readiness. How is this possible if everyone is moving to Idaho?  The reason is Idaho is importing their workforce and they only get credit for workforce created organically. So, take this ranking with a grain of salt. Another critical development is that Idaho is becoming a manufacturing state. Both Idaho and Utah were ranked in the top 10 for Best States for Manufacturing in 2020 by Site Selection Group. Look for Idaho to compete for Electric Vehicle Manufacturing in the very near future. (The presentation contains interesting information about Hyundai investing $7.4 billion in the U.S. by 2025 and how this company and other EV manufacturing companies  will be creating opportunities in our region – especially in Idaho).

Washington – Ranked very high in higher education research & development, which is critical to the tech workforce and innovation. Also ranked one of the best in terms of electric power cost / generation (which is why Washington State has so much bitcoin manufacturing). This should help keep the tech workforce and industry very strong.

Oregon – Ranked 6^th in worker compensation claims and 15th  in business tax climate. The problem is with the current perception of Oregon / Portland outside the state. Oregon needs to address how it rebuilds a sense of security for new expanding or relocating businesses.

Affordable Zoom-MSAs

A website called RentCafe is tracking the 30 “Hottest Rental Markets”. Four are in WA, ID & OR. (Spokane, Boise, Eugene and Tacoma). 

Other important presentation points:

Vaccination Success – Pacific Northwest has 77% – 88% vaccination success and economies opening up.

TSA Passenger Count – We are back to over 2 MM passengers a day. In January we were only at 30-40% pre covid traffic. There is more leisure than business but business travel is definitely picking up. 

Kastle Office Occupancy Index – The bad news is that, despite vaccinations, there are still under 30% of us returning to the office. 

This presentation also includes information about Industrial & Logistical CRE and Monetary Policy / Inflation that we did not cover in this write up. Please let us know if you have any questions and for more information watch the presentation. 

Thank you!