Eastside industry experts make their predictions for 2017
What a difference a year makes. On the Eastside in 2016, much has happened. The region is blessed with a rich and idiosyncratic wealth of talent across a breadth of industries. Looking ahead to 2017, everyone is wondering where these industry sectors will evolve to next. The answer is anyone’s guess, but to help give some clarity, we solicited the following predictions for 2017 from more than a dozen Eastside experts representing healthcare, tech, startups, hospitality, manufacturing, real estate, and finance.
The Puget Sound area is rich in software talent, progressive medical administration, and startups getting into the healthcare space. Thanks to this historic convergence, I predict we will be seeing new tools and apps that have the potential to dramatically change the way patients interact with “the system.”
For example, I have seen demos of apps that let patients know what hospital or clinic wait times are, when appointments are available, and what one’s cost will be — all in multiple languages to serve our changing communities. As patients become even more savvy and aware of their choices, transparency is even more vital, and smart hospitals will be at the forefront of adopting these types of slick new tools. This is an exciting moment.
The Eastside is and will continue to be one of the most dynamic and exciting places in all of Washington state to provide healthcare. With its mix of businesses, family-friendly communities, great schools, marvelous shopping, and natural beauty, it’s a spectacular place to live and work.
The area’s population will continue to grow and be discerning, educated consumers of health services. This will drive demand for convenient access to a wide array of in-person and online services. Virginia Mason’s medical centers in Bellevue, Issaquah, and Kirkland have evolved in step with their communities and are uniquely positioned to be part of the Eastside’s exciting future.
David Fleischman, vice president of global product, growth at Expedia, Bellevue
Next year, we will continue to see an emergence of technology that will directly impact our lives: the ubiquitous presence of chat bots, mainstream (virtual reality), and acceptance of the notion of self-driving cars. Additionally, as we are starting to see AI integrated in daily activities, AI will be a story of the year. Each of these technologies will help bring our region closer together, specifically, the connection between Seattle and east King County. The lake will start feeling smaller as communication and commuting becomes less onerous.
Local community infrastructure and new companies will continue to spring up, and the Eastside will continue to have the suburban, hometown feel. Our region will host a series of startups exploring new technologies, and established tech companies will make investments to explore these areas. Our area will continue to be a well-known technology hub for talent. Expedia is eager to foster growth of new tech talent through local partnerships with groups like Technology Access Foundation, Coding Dojo, and Girls Who Code, supporting a fresh influx of technologists in the region.
Exciting times are ahead in tech during 2017. I have worked on the Eastside in the technical field for almost 13 years. I have watched it evolve from a region heavily dependent on Microsoft to lead its breakthroughs, to a region widely populated with thriving tech companies pushing the industry’s limits.
The buildup of this energy is going to explode in 2017 with the advancements of virtual, augmented, and mixed realities; machine learning; and artificial intelligence. We are on the brink of embracing the wide adoption of these technologies, and I believe the businesses that have spawned from the brilliance of Microsoft and settled across the 425 will be the global influencers of this revolution.
Seattle and the Eastside are turning into a version of San Francisco, where there are so many startups that retaining talent becomes a challenge. Most strategic talent leaves within two years unless they have good reason to stay. The Eastside will reinvent how business gets done to compete.
We’ll see the blending of the big tech-company vibe with the cool, forward-thinking vibe of the Bay Area. Flexible work hours, yoga, meditation, and dog-friendly workspaces will increase. But hopefully, and most important for retention, companies will invest in the growth of their talent, including manager training, team development, and learning opportunities for all employees.
2017 will be the best year so far for startups on the Eastside. A powerful combination of factors will be coming together:
First, the trend of new co-working spaces like Thinkspace, Orange Studios, Eastside Incubator, ExtraSlice, The White Board, and Impact HUB opening will continue with companies like WeWork adding to the landscape. Second, the Global Innovation Exchange will be training our future leaders in innovation.
Third, the growth of enterprise companies on the Eastside is building up the talent pool, which is going to affect the growth of the startup community.
A unique aspect to our region is that a large number of startups are created by people who worked at enterprise companies before going out on their own. These factors will contribute to attracting talent, building new commercial and residential construction, having a stronger economy, raising rents, and increasing traffic issues. East Link Light Rail will be a boon in many ways once the project is complete. The startup sector in East King County has a very bright future.
The strong local economy has led to increased demand within the hospitality industry as corporate business and conventions look for more meeting space, additional catering, technical services, and parking needs. With a strong performance in 2016, Meydenbauer Center projects the rate of growth to increase approximately 3.5 percent in 2017.
This growth has also impacted the local hotel industry. With the strong performance of the Bellevue market over the last several years, numerous hotel projects have been proposed, and currently three hotels are under construction, scheduled to open in 2017 and 2018. The Bellevue lodging market continues to experience strong corporate travel. The 2016 Forecast of Future Transient Occupancy Tax Revenues Study performed by CBRE Hotels Consulting forecasts the continuation of strong demand in 2017 with increases in room supply and room rate growth in excess of an assumed 3 percent inflation rate. The supply will increase by 7.6 percent, and the average daily room rate will be up 4 percent in 2017, as compared to 2016. However, due to the annualized addition of new supply that enters the market in 2017, a projection of a 2.2 percent decrease in occupancy levels will occur.
Restaurants on the Eastside will flourish in 2017:
In 2016, the Eastside experienced a significant number of new restaurant openings, and that trend will continue into 2017. Specific to Bellevue, the Lincoln Square expansion will bring 10 new restaurant concepts alone to downtown Bellevue in April 2017.
New and interesting Asian concepts will increase proportionately to meet the demands of the growing Asian population locating on the Eastside. The recent overwhelming success of Din Tai Fung has generated huge interest in Asia for restaurant brands to transplant their concepts into the Pacific Northwest and, more specifically, the Eastside.
Millennials will grow in their influence on the industry. They are the largest consumer group in the nation, and operators will create brands that resonate with this group. Owners will continue to create brands that attract millennials and millennial-minded audiences represented in Gen Y, Gen X, and Boomers.
At Out of the Box Manufacturing, we expect to see rapid and continued growth in the emerging Space and Medical Device markets. King County is a nexus of innovation, and OBMFG is gearing up to support the next wave of advanced manufacturing by obtaining machinery, talent, and the appropriate accreditations and certifications.
The only limiting factor we foresee is talent. We must do a better job as a region in supporting advanced manufacturing as a career path for our young people.
Manufacturing on the Eastside is not a monolithic market; rather, it is a number of submarkets that combined are a significant and vibrant part of our overall economy.
Aerospace shipments continue to be relatively strong versus the balance of our manufacturing as aircraft delivery increase. That said, there is constant pressure to innovate and add capabilities while containing or reducing cost.
Industrial demand in our area remains weak as end markets in mining, agriculture, and material equipment reported 8 percent-plus declines in demand (shipments) in the first half of 2016, and incoming orders are weaker than shipments with no discernible improvement likely until the first quarter of 2017. Effects of the industrial slowdown have prolonged inventory liquidation for many of our clients and are likely to continue into first quarter 2017 for all markets. We expect some growth in 2017, continuing into 2018.
With the tremendous job growth we have in the central Puget Sound (Seattle and Bellevue), there’s every reason to believe that 2017 and 2018 will continue to see marked increases in prices. The new construction numbers seem to be improving, with National Association of Home Builder’s data showing building permits for single-family homes up nearly 20 percent. Employers are expecting to add about 70,000 to 100,000 new jobs within the next 30 months, so we can expect perhaps another 35,000 to 50,000 households moving to our area during that period.
2017 is shaping up to be a repeat of 2016. Technology employment will continue to be the driver of the commercial real estate markets across all asset classes. Since 2012, at least 50 percent of the total office market demand in any given quarter has been technology related. This demand profile has in turn spurred multi-family development, retail leasing, and industrial leasing. The increased demand from those sectors has seen increases in available land values as a result.
2017 will see a decrease in vacancy rate for office properties in the Eastside. With the Amazon lease of Centre 425 in the Bellevue CBD, one of the three high-rise office buildings will have been absorbed with the other two seeing significant absorption as well. We expect to see Lincoln Square II and 929 Office Tower stabilize next year, leaving larger employers on the Eastside with fewer choices for space. With job growth expected to be about 2 percent on the Eastside in 2017, we believe there will be a shortage of office space, spurring the pace at which developers seek to line up land to build new office space to answer the increased demand. Land sales should continue to be robust for office product next year.
The post-financial crisis expansion has been underwhelming, but economic growth has been steadily positive and should improve moving forward.
Looking ahead, sustained growth in the economy and a rebound in corporate profits should help guide markets higher, but above-average valuations, lower stimulus from the Fed and global economic uncertainties are likely to spur bouts of volatility.
We expect interest rates to remain low but should move higher over time.
The global economic landscape is mixed. We believe international developed-market equities offer an attractive opportunity as overseas markets benefit from more aggressive stimulus and cheaper valuations.
This article originally appeared in the December 2016 issue of “425 Business.”