Global Recession Looms, But Seattle May Be Spared Its Wrath
It is not a matter of if a global downturn will occur, it is a matter of when. There is no crystal ball predicting the moment that things will turn south — and they may already have done so.
Seattle, however, may be set up to survive this next recession, thanks to a strong technology-based job market.
Shedding some light on the situation, Urban Renaissance Group CEO Pat Callahan shared his economic outlook during his keynote address at Bisnow’s Seattle Forecast event last week at the Seattle Four Seasons.
Nationally, economists are almost unanimously expecting and preparing for the next recession. But here in Seattle, we may do a bit better than the rest of the world thanks to the focus on technology jobs, Callahan said.
“We are in a bubble,” Callahan said. “We are at highs in everything. But that’s not how it is everywhere.”
Seattlites, with their continued booming commercial real estate scene, could be out of touch with the feeling of fear in other parts of the country, he said. Many areas have yet to recover from the last recession.
“Seattle is now a first-tier market,” Callahan said.
Callahan does call for caution. It is possible that tech jobs will become easy to move around the country. If the growth of tech jobs makes living in Seattle too expensive, companies may pick up and move to places like Boise, Idaho, or Las Vegas, which are much cheaper. To that point, it is critical that the community addresses affordable housing and homelessness with respectful dialogue, he said.
One of Callahan's most pressing concerns, this year and in last year's keynote, is the trend toward political populism that aims to demonize political opponents.
“Catering to your political base is not truly governing,” he said. “The role of elected officials at the local, regional and national level is to protect us from the bad things that are happening.”
The populism trend goes both ways, from liberal to conservative, from Seattle City Council to the White House, he said. Though on opposite ends of the political spectrum, government leaders in Seattle and D.C. seem to cater to the extremes, he said.
Political extremism could set the stage for the next geopolitical event. Political events seem to accompany recessions, Callahan said. Under those circumstances, the good times can’t last.
Callahan said there has been a recession about once a decade and we are due. The last four recessions all had similar characteristics that included major economic and political events:
• The Carter-Reagan recession in the late 1970s featured high oil prices along with the Iranian Revolution and the hostage crisis.
• The 1990-1991 recession, which Callahan felt directly because he was laid off, was the result of a restrictive monetary policy and loss of consumer confidence that was the result of high oil prices. Then Iraq invaded Kuwait.
• The 2001 tech crisis was based on “a lot of speculation” on tech companies. There were a lot of overvalued companies, he said. Then Sept. 11 happened.
• The Great Recession was not triggered by an international event, he said. It was due to the fact that the market was out of whack and everyone was speculating.
Panelists at the event also expressed concerns about a coming downturn, though they thought Seattle would fare better than other cities.
“There are jobs,” he said. “Every warm body that can be employed is employed.”
Pembroke Vice President Cory Saunders said his company had been watching Seattle for years before making an investment into the market. He first assessed Seattle in 2011. When he came back in 2017, the city felt like a different place.
“Seattle evolved so quickly,” he said. “We are long-term investors and hold buildings for generations. Everything sets up quite nicely here. We are bullish. We look through recessions for the long-term fundamentals.”
Seattle’s traffic snarl and high land costs aren’t doing the city any favors, the panelists said. Some companies, like Seco Development, see more opportunity in the secondary markets that surround the city, like Renton.
“Companies need to find new ways to permeate away from the urban hubs and be closer to schools and housing,” Seco Development Senior Vice President of Planning and Development Rocale Timmons said. “We see Renton as an emerging market that is primed for growth.”
Gardner wonders when Seattle will reach that inflection point when companies no longer relocate in Seattle because it is too expensive or traffic is too congested.
“We need to figure out how to move people around the city,” he said. “That’s my biggest concern.”
The importance of transportation cannot be overstated from a long-term sustainability point of view, Saunders said.
“This is the only market we do business in that does not have a mass transit system,” he said.
MainStreet Property Group CEO Eric Campbell said his company recognizes the importance of mass transit and looks for opportunities in areas where Sound Transit is headed. To that point, he expects to see strong development on the Eastside.
CORRECTION, JAN. 29, 9:55 A.M. PT: A previous version of this story misspelled the name of Vibrant Cities' Ming Fung. The cutline has been updated.