The Tacoma News Tribune reported today that leases are in place for State Farm to occupy the Russell Building downtown and four floors at Columbia Bank Center. As I sit to write to you this month, the news raises questions about the likely impact on Tacoma real estate.
When Russell left for Seattle, some worried about the impact on high-end home values. There was some impact, but it was hard to isolate with values already declining as a result of the economy. Some of the local Russell employees, whose families were well entrenched here, commuted rather than sold their homes, so there wasn’t the mass exodus that some feared. It is possible that any negative effect Russell might have had on high-end home values will be partially offset by the 2,000 or so jobs State Farm will bring (as many as 300 will be hired this summer!) However, average salaries of these positions have not been reported. This is going to be a claims center. I speculate that this will mean jobs with down-to-earth salaries. I see this having more of an effect on homes priced in the lower to mid price ranges, as well as the condo market downtown, where people could walk to work.
Conditions are ripe for a condo resurgence. Prior to the real estate downturn in 2007, we were seeing a condo boom in downtown Tacoma. There were new buildings going up and old apartment buildings were being converted to condos to keep up with demand. People wanted to live downtown. There was, and continues, a spirit of renewal, with UW Tacoma, new restaurants and fabulous museums. There were rumors that an urban grocery store would open, meaning urbanites would not have to get into a car and drive to Stadium Thriftway or Hilltop Safeway. Tacoma City Grocer IGA opened in the fall of 2011. So the infrastructure has moved in to meet the needs of downtown residents. Prices of condos are down significantly from their highs in 2007. In the first quarter of 2007 there were 53 condo sales downtown (MLS areas 19,20 and 29) averaging $281,446 and $295 per square foot. In the first quarter of 2013 there were 11 (ELEVEN!) condo sales averaging $179,886 and $181 per square
foot. If State Farm employees want to live the urban lifestyle in a downtown condo, they are going to find (for now) low prices, low interest rates and probably good upside potential for values. I see this as the segment of the market most likely to be affected significantly by the State Farm lease, although I believe it is great news across the board and for reasons unrelated to real estate.