Born to an entrepreneurial family in Vancouver, BC, Dean Jones was taught from an early age to recognize a good opportunity when it materialized by his teacher-turned-homebuilder father. Through the family business, Jones had a unique bird’s-eye view of the housing industry and absorbed everything he could.
Over the last two decades, he has been involved with some of the most respected real estate projects in the Pacific Northwest region of the US and has worked as a developer in both Vancouver and Seattle. His firm, T. Jones Inc., was named “Developer of the Year” by Pillars of Industry in 2001, and he was named “Marketing Director of the Year” by the National Association of Home Builders in 2003.
Seizing a new opportunity, Jones partnered with Sotheby's International Realty Affiliates in 2010 to create Realogics Sotheby's International Realty alongside his wife, Stacy Jones. With the simple goal of maximizing the customer's real estate opportunity, Realogics envisions, creates and sells distinctive residential communities. The company now oversees over 200 real estate brokers in five branch offices in the Seattle area.
We chatted with Jones about the Seattle housing market, foreign investors and the tech boom’s impact on real estate.
BuzzBuzzNews: Can you tell us a bit about your background and how you got into real estate?
Dean Jones: I grew up in the family real estate business in Vancouver, BC learning along the way. We were building single-family homes, renovating apartment buildings and managing upgrades with condo conversions.
By the mid-1990’s our US development division, T. Jones, Inc., became more active in the Seattle area, so I relocated to oversee the renovations of small apartment buildings. We later partnered on a 200-unit apartment rehabilitation that I leased up and later marketed as a condo conversion.
The urban renaissance of downtown Seattle was in full swing by the late 1990’s and in 2000 we had presold then developed a 203-unit luxury condominium called The Concord. This project was later awarded Attached Community of the Year by the National Association of Homebuilders, and in 2002 our firm was honored with Development Firm of the Year by the NAHB’s Pillars of Industry Awards.
While our corporate interests had already returned to Vancouver, I remained in Seattle to create and launch Realogics, Inc. – a real estate consultancy and marketing enterprise to assist third-party developers and lenders work through the real estate correction following the events of 9/11.
By 2005 the in-city condo market was improving, and we began the marketing and sales of several new developments while outsourcing the brokerage function. With the Great Recession approaching, we knew the credit crunch would cancel or defer many of the new condo towers in our pipeline, so we augmented Realogics, Inc. by initiating a resale component to the business.
In 2009, we acquired our brokerage partner and by 2010 we debuted as Realogics Sotheby’s International Realty. Today we manage five brokerage offices throughout the central Puget Sound region with 200+ brokers and average more than $1 billion in annual sales. Our core market knowledge and past development experience combine to offer a vertically integrated, full-service new construction platform, providing third-party developers a market research, product development, marketing and sales solution from initial concept to final closing.
BBN: What is the single most exciting trend in Seattle real estate right now?
DJ: Without question, the urbanization of Seattle. Right now, there are 68 tower cranes erected over the skyline – more than any other US market. Our diversified and rapidly growing economy converges with a strong preference for urban campuses, which attracts new jobs and spurs housing demand in the downtown core.
The city center is now home to an estimated 265,000 jobs and about 70,000 residents. Since 2010 more than 50,000 jobs have been added to this rather compact submarket, in addition to about 14,000 housing units. Another 14,000 units are set to deliver by 2020 and it’s easy to see why.
Major employers such as Amazon, Starbucks, Nordstrom, Expeditors International, Alaska Airlines and Russell Investments are all headquartered here and other California-based tech titans like Google, Facebook and Apple are following suit by rapidly expanding in Seattle. These major corporations are drawn to a bounty of young, educated talent and they have learned that recruiting and retaining valuable employees is aided by Seattle’s relatively low cost of living. Washington also has no state income tax.
Population and income growth in the Seattle metro area drove rising median home prices 12.3 percent year-over-year to $722,000 as of March 2017 as the fastest growing housing market in the US for the seventh month in a row, according to the closely watched S&P/Case-Shiller Home Price Index. Seattle has also claimed the most competitive housing market in the country with bidding wars on 90 percent of home sales, according to Redfin.
This is especially common near urban job centers as commuters try to avoid the mounting traffic congestion. The issue being Seattle lacks a subway system and also suffers from a challenging geography with constricted access in and out of the downtown area. Voters did approve Sound Transit 3 – a $53.8 billion regional transit package that will eventually bring 62 additional miles of light rail linking many central Puget Sound municipalities by 2041. However, in the interim the trend is to build up not out, hence the vertical building boom in downtown Seattle.
Recently, the City of Seattle implemented the Housing Affordability and Livability Agenda (HALA), which will grant additional height and density to developers willing to sponsor affordable housing.
BBN: The tech boom has and continues to have such a massive impact on Seattle real estate. Do you have any concerns about the sustainability of that trend?
DJ: Not really, Seattle has become the Silicon Forest – second only, I suppose, to the Bay Area. We are well diversified with multiple corporations fostering a healthy level of competition and innovation. Our roots as a thriving tech region run deep with Microsoft. Countless startups that have followed with a significant and productive venture capital presence that continuously lead the next breakthrough IT company.
Besides, these tech titans are firmly planted in downtown Seattle with long term leases and/or owned buildings so they are unlikely to go anywhere. Amazon alone will have more than 12 million square feet of office space, and Google is now building their own 1 million square foot campus in South Lake Union, following a similar investment by Facebook nearby.
Recently F5 Networks absorbed 100 percent of a new 500,000+ square foot office tower in downtown Seattle. Apple is also looking to expand in lockstep. Bellevue-based Expedia is also moving its headquarters to the Seattle waterfront, which will relocate more than 3,000 jobs.
My real concerns are not about the sustainability of these companies but rather the government policies affecting our economy and the competitiveness of our region. Some of the City of Seattle mayoral candidates are exploring a city income tax, while it appears headwinds are forming to both the popular EB-5 and H1-B visa programs under the new Presidency.
That could slow the trend for foreign workers and investment, which have proven to be a major catalyst within our tech sector. Another challenge is the rising cost of housing. Seattle is starting to look more and more like our West Coast peer markets of San Francisco and Vancouver, BC.
BBN: Seattle is increasingly becoming a hotbed for foreign investment, can you talk a bit about that transformation and its impact on the city?
DJ: Our attraction to foreign buyers, especially to Chinese immigrants and investors, has been building exponentially over the past ten years. We have reported on the trends extensively and contributed to global media stories on this topic. My attention was triggered by a new direct flight route between Beijing and Seattle by China-based Hainan Airlines in 2008 and more recently competing routes by both Delta Airlines and Xiamen Airlines.
Seattle is the closest mainland port to Asia so this was an inevitable scenario and this made our region very relevant to overseas buyers and developers. There were many other contributors. Consider the impact of the 2013 romance comedy called “Beijing Meets Seattle”, which was a box office hit throughout China and painted a storybook lifestyle of Chinese living in the Pacific Northwest.
Then in 2014 the Canadian government reversed nearly 60,000 applications (mostly from Chinese) for their popular resident visa program, which diverted interest in to the US markets amidst a rekindling economy and a growing housing market. That same year the Obama Administration approved increasing the Chinese national multi-entry visa program from one year to ten years and the similar student visa program from one year to five years, greatly encouraging interest in travel to the US.
In 2015, Chinese President Xi Jinping chose Seattle as his first US city to visit, again bringing tremendous global media focus to our city. Then in August 2016, the BC government imposed a sudden 15 percent foreign buyer tax in Vancouver, which was later followed by Toronto, Ontario – two of the most desirable North American markets for international investment in real estate.
This effectively diverted investment trajectory elsewhere, including a preference for Seattle. These investors are very savvy and they understand the impact of an investment pivot, which creates a self-fulfilling prophecy about a rising market.
Ultimately, it’s clear that foreign buyers figured out the Seattle metro area offers a matchless combination of affordable home prices; immediate access to Asia; national-ranked schools; a lack of a state income tax; and extraordinary prospects for economic expansion – all within a moderate climate.
We also exhibit stable local governance, notably resistant to kneejerk policy making that has drawn global capital to seek financial safe harbor in the Pacific Northwest in the first place.
For a good read on this very subject, check out this blog post.
BBN: What do you think the government needs to do to encourage the development community to responsibly address the city’s growing population?
DJ: I think we are on the right track. I like the aforementioned HALA program, which aids affordable housing in the city in exchange for greater density. I also endorse the expanding regional transit system, albeit too little, too late. Ultimately, Seattle has suffered from provincial decision making and a rather small town infrastructure while performing like a global city on the rise with boundless potential.
There’s no doubt that we are on an impressive trajectory for additional growth, so I hope we can maintain our competitive edge in attracting more economic prosperity to the city and build enough housing for the demand while preserving the open spaces and inclusivity.
I do think our representatives need to re-evaluate the Washington State Condominium Act, which has effectively scared off developers willing to build for-sale housing in sufficient volumes. The act provides for only a 5 percent non-refundable earnest money deposit during presale limiting the risk for buyers, while the developer is required to generate 100 percent of the capital stack.
As a result, 94 percent of the all new housing supply built in downtown Seattle since 2010 has been apartments offered for lease rather than condos for purchase. That’s on top of 50 percent rent increases over the same term. The only way to control one’s housing cost is to own it, so I hope for an evolution of this act to balance the risk and rewards for developers and consumers alike, and deliver more for-sale housing in the years ahead.
BBN: What is your favorite neighborhood for investment right now?
DJ: There are so many neighborhoods in development. One for sure is the East Village area in the northeast corner of downtown Seattle. This micro-hood in the making is perfectly centered between the established communities of Capitol Hill, the CBD, Belltown and the Denny Regrade and South Lake Union neighborhoods. Why choose one community when you could be equidistant to all of them? This is the burgeoning metropolis where NEXUS, a high-rise condominium development is being built and acts as an architectural center point to a new vertical village in the making.
Another is the historic neighborhood of the Chinatown – International District, which is in walking distance to hundreds of thousands of jobs yet also moments from the regional transportation hub of King Street Station. We represent another progressive condominium project in this neighborhood called KODA, which is uniquely bridging the past with Seattle’s future.
BBN: Can you talk a bit about the commercial development scene in Seattle?
DJ: Currently, all real estate sectors in downtown Seattle are booming, especially office buildings. Commercial leases have been measured, not by square footage or by floors, but by entire buildings of recent. This boom is led, yet again by the tech industry. In fact, at least one residential developer was noted for considering switching a luxury apartment building to office in light of the changing demands for new construction.
Seattle has grown considerably in the past five years alone, expanding by the equivalent of five Columbia Towers – the tallest commercial office tower at 76-stories, which was sold to Hong Kong-based Gaw Capital in 2015 for a record $711 million.
BBN: How do you think the prospects look for Seattle in the next year? 5 years? 10+?
DJ: The Downtown Seattle Association reports an additional 13 million square feet of office space is in planning and development by 2020, which is about as far forward as one can project in the current development cycle. This added supply is good news for other, more traditional companies feeling the pinch from the overwhelming influence by the tech industry. This supply, should it all be delivered, will help attract more jobs and further support the urban housing demand.