The Pacific Region of Alaska, Hawaii, Oregon and Washington encompasses three time zones and includes about 14 million people. These states are generally diverse, according to 2020 rankings from personal-finance website WalletHub that involved various socioeconomic, cultural, religious and political metrics. Hawaii ranked as the No. 3 most diverse state, followed by Alaska at No. 15, Washington at No. 18 and Oregon at No. 31.
Washington was expected to gain 65,200 jobs during the three-month period ending in January 2021, but it wound up losing 1,100 positions. It was projected to lose more aerospace-industry jobs this year as Boeing has slowed its production and is moving some operations to South Carolina. Construction permits, however, have exceeded projections as about 112,000 single-family and multifamily housing units were authorized in Washington during the same three-month span.
PwC’s Emerging Trends in Real Estate 2021 report ranked Seattle 34th out of 80 markets for overall prospects, one year after the Emerald City ranked 10th. The report noted that last year’s protests tied to police brutality and racial inequity may have hurt Seattle’s standing, but it also stated that Seattle benefits from being “a midsized city with some big-city attributes, such as sports teams, food and arts, and access to outdoors.”
Oregon’s estimated revenue decline of $2 billion at the start of the COVID-19 pandemic had been completely erased as of February 2021, largely due to federal aid. At that time, Oregon had about 160,000 fewer jobs compared to pre-pandemic days — a 9% decrease — while about 548,000 Oregonians (or about 16% of the state’s adult population) had received at least one vaccination, giving state officials renewed optimism for an accelerated economic recovery.
Colliers International reported that multifamily assets in the Portland metro area are performing reasonably well. Effective rents in the city limits declined by 2.4% year over year in fourth-quarter 2020 but rose by as much as 4.2% in suburban counties. Apartment sales prices remained stable in 2020 but the 139 transactions last year represented a 26% decrease over the prior three-year average.
Alaska’s housing market is stable and key industries there, such as health care and seafood processing, are poised for a modest rebound in 2021. The Trump administration approved an oil-drilling operation near the Arctic coast that could generate several hundred jobs and significant revenues over its expected 30-year life span. Alaskan tourism took a hit, however, when Canada announced a ban on large cruise ships in its waters through February 2022.
State officials predict the number of visitors to the Hawaiian Islands won’t recover to pre-pandemic levels until 2025, although the 5.5 million visitors expected this year is double the 2020 figure. Hawaii’s gross domestic product is forecast to grow by 2.7% in 2021 after shrinking by 7.5% in 2020.
According to Cushman & Wakefield, the vacancy rate for Portland’s metro-area office market jumped by 260 basis points from fourth-quarter 2019 to fourth-quarter 2020, closing last year at 12.7%. Asking rents rose 2.7% during this time frame to reach $30.81 per square foot.
The real estate services company noted that Oregon’s economy was on solid footing prior to the COVID-19 pandemic, which has lessened the severity of the downturn. Portland’s metro-area unemployment rate largely rebounded over the course of 2020 and was at 6.6% at the end of last year, only 10 basis points above the U.S. rate.
Cushman & Wakefield anticipates that job sectors such as e-commerce, life sciences and technology will bring renewed economic opportunity to the Portland region in the coming years. There was 1 million square feet of new office space delivered across the market in 2020, although less than one-third of it had been leased at the start of 2021.
Wines from Washington and Oregon are becoming known worldwide. Measured by sheer numbers of wineries, these states rank No. 2 and No. 3 respectively with more than 1,700 combined, according to 2018 data from the American Association of Wine Economists.
Washington exports varietals such as chardonnay, riesling and syrah to more than 40 countries across the globe. Oregon’s famed Willamette Valley is known for pinot noir, which is grown on the same latitude as the grapes in France’s Burgundy region.
Hawaii imports 85% of its food, and its pineapple and sugar cane plantations have disappeared. Still, the Aloha State generates hundreds of millions of dollars per year in ag commodities, including corn, soybeans, rice, coffee, macadamia nuts and basil.
Although farms account for 0.2% of the land in Alaska, there are several key ag products that originate there. These include beef cattle in the Aleutian Islands; barley, oats, potatoes and milk in the Tanana Valley near Fairbanks; and aquaculture in the southeast portion of the state.
What the locals say
“Usually our investment-sales marketplace dollar volume is dominated by multiple megadeals every year. The megadeals are driven by big institutional investors and those deals just didn’t happen last year. … However, we still saw pretty decent transaction volume in the under $10 million kind of deals, which is a marketplace for local investors. That would include things like apartment buildings, little retail centers, little office buildings. Our industrial market is really hot because of e-commerce. … The one megadeal last year was Amazon bought a 14½-acre piece for $125 million, right adjacent to our [Honolulu] container port.”
Jamie M. Brown
Hawaii Commercial Real Estate
3 Cities to Watch
Alaska’s largest city shrank by 1.3% from 2010 to 2019, but its 288,000 residents account for about 40% of the state’s population. About 12,400 local jobs were lost in 2020 and only one-third of them are forecast to return this year, according to the Anchorage Economic Development Corp. (AEDC). Airport passenger traffic and hotel room-tax revenues were down significantly in 2020 while 14 cruise ships carrying some 19,000 expected passengers were cancelled, AEDC reported.
The Emerald City’s regional economy, with an output of $383 billion, became the 10th largest in the U.S. in 2019. The tech sector propelled this growth as tech employment in Seattle grew by 150% in 2019. Not everything is rosy, however. Seattle ranks among the most expensive U.S. cities for cost of living. About 220 businesses have permanently closed since the onset of the pandemic and the city’s general fund was expected to decline by about $200 million in 2020.
The Lilac City has about 220,000 residents and a metro-area population approaching 600,000. Spokane’s median home-sales price of $309,500 through the first 11 months of 2020 was up 15.3% year over year, the Spokane Journal of Business reported. E-commerce was expected to drive demand for industrial space in 2021 while multifamily and medical-office properties also were forecast to be strong performers, the report noted. Fairchild Air Force Base is Spokane County’s largest employer.
Sources: Alaska Business Magazine; Anchorage Economic Development Corp.; Colliers International; Cushman & Wakefield; GeekWire; Hawaii Department of Agriculture; Honolulu Civil Beat; Oregon Office of Economic Analysis; Pacific Business News; Puget Sound Business Journal; PwC; Spokane Journal of Business; USA Wine Ratings; U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; U.S. Census Bureau; U.S. Department of Agriculture; WalletHub; Washington State Economic and Revenue Forecast Council; Washington State Employment Security Department; WinePair; World Population Review