Q2 2015 Seattle Office Market – Tenant Perspective

15/ July 2015

Analyzing the Data

General Conclusion: Seattle’s office market continued to strengthen in Q2 of 2015 with vacancy decreasing to 9.6% down from 10.2% one year prior. Year to date there has been  339,629 square feet of positive absorption.  Demand for Seattle commercial real estate investment product has seen no sign of a slowdown and increasing demand for space should continue to put upward pressure on rental rates across all submarkets and building classes.

Economy:  The northwest has continued to add jobs in the second quarter of 2015.  Some of the more visible job growth is coming from technology companies headquartered outside of Washington who continue to set up operations in the Northwest. Washington’s preliminary seasonally adjusted unemployment rate dropped to 5.4% in May 2015 according to The Washington State Employment Security Department, which represents a .1% decrease from Q1. The Bureau of Labor Statistics is reporting a 4.4% unemployment rate for the Seattle/Tacoma/Bellevue area.

Office Construction: The office construction boom continues in Seattle with the following developments under construction:

  • Amazon II, and Amazon Phases VI, VII & VIII totaling:~ 2,094,000 square feet (100% leased)
  • Troy Block :~817,000 square feet (100% leased)
  • Madison Centre:~750,00 square feet
  • Fifth & Columbia tower:~528,000 square feet
  • Former Pemco HQ:~370,00 square feet
  • 200 Occidental:~370,00 square feet (100% leased)
  • 400 Fairview:~367,898 square feet
  • Midtown 21:~365,00 square feet
  • Dexter Station:~ 345,992 square feet (100% leased)
  • Tilt 49:~300,000*
  • Urban Union:~291,00 square feet
  • Hill 7:~285,000 square feet
  • Allen Institute for Brain Science:~272,408 (100% leased)
  • North edge:~202,620 square feet (100% leased)
  • 1101 Westlake:~ 150,000 square feet
  • The Commons at Ballard:~22,000 square feet*

* = broke ground in Q2 2015

Proposed Development

Given the health of Seattle’s market, office developers are eager to break ground.  The following proposed developments made news in the first quarter of 2015:

  • Project: Stadium East, Size: 1,200,000 square feet, Location: Intersection of I-90 and Airport Way South, Developer: Urban Visions
  • Project: Rainier Square, Size: 750,000 square feet of office, Location: Corner of 4th & union, Developer: Wright Runstad
  • Project: 2&U, Size: 700,000 square feet, Location: Corner of 2nd & union, Developer: Skanska
  • Project: Former King 5 Site, Size: 582,000 square feet, Location: 333 Dexter Ave N, Developer: Kilroy Realty Corp
  • Project: Building Cure, Size:000 square feet, Location:1920 Terry Ave, Developer: Seattle Children’s Research Institute
  • Project: 2301 Seventh Ave, Size: 181,000 square feet, Location: 2301 Seventh Ave, Developer: Clise
  • Project: Third and Virginia, Size: 150,000 square feet, Location: Corner of Third Ave and Virginia, Developer: Martin Selig

Office Sales:  Q2 2015 continued to provide proof of the robust demand for office investment in Seattle.  The following transactions were completed in Q2 2015:

  • Project/Location: Columbia Center at 701 5th Ave, Price $725 Million, Size: 1,500,000 SF Price/SF $483, Buyer: Gaw capital, Seller: Beacon Capital
  • Project/Location: Former Amgen Campus located at 1201 Amgen Ct W, Price $229 Million, Size: 750,000 SF Price/SF $305, Buyer: Expedia, Seller: Amgen
  • Project/Location: Maritime Building located at 911 Western, Price $38 Million, Size: 196,000 SF Price/SF $194, Buyer: Beacon Capital, Seller: Maritime Corporation
  • Project/Location: 111 South Jackson Street, Price $34 Million, Size: 70,000 SF Price/SF $485, Buyer: Deutsche Asset & Wealth Management, Seller: Brickman Real Estate.
  • Project/Location: Former Federal Reserve building at 1015 Second Ave, Price $16 Million, Size: 99,148 SF Price/SF $161, Buyer: Martin Selig, Seller: GSA

Office Leases:  Office leasing activity was on fire again this quarter.  Below are lease transactions that were concluded in Q2 2015:

  • Tenant: Holland America, Size: 185,000, Project/Location: 450 Third Ave West, Landlord: Martin Selig
  • Tenant: Big Fish Games, Size: 137,500, Project/Location:333 Elliott, Landlord: Martin Selig
  • Tenant: Community Health Plan, Size: 91,800, Project/Location: 1111 Third Ave Landlord: Callaghan Partners
  • Tenant: Wireless Advocates, Size: ~56,000, Project/Location: 400 Fairview, Landlord: Skanska
  • Tenant: University of Washington, Size: 53,400, Project/Location:4501 Roosevelt Way NE, Landlord: Blume Company
  • Tenant: Oculus, Size: 51,000, Project/Location: Stadium Innovation Center located at 1531 Utah Ave S, Landlord: American Life
  • Tenant: Sonos, Size: 50,000 Project/Location: Bullitt Center at 1501 E Madison, Landlord: The Bullitt Foundation
  • Tenant: Twitter, Size: 44,000, Project/Location: Century Square at 1501 4th Ave, Landlord: Pike Street Investors
  • Tenant: IMS Health, Size: 32,250, Project/Location: P-I Globe Building at 101 Elliott, Landlord: Legacy Partners
  • Tenant: Ankrom Mosian, Size: 24,000, Project/Location: 1505 Firth Ave, Landlord: Unico
  • Tenant: Sound Community Bank, Size: 17,200, Project/Location: Third and Battery at 2005 Fifth Ave, Landlord: Martin Selig
  • Tenant: Spaceflight Industries, Size: 17,000, Project/Location: West Lake Union Center at 1505 Westlake Ave, Landlord: Deutsche Bank
  • Tenant: Zonar, Size: 16,081, Project/Location: Exchange Building at 821 2nd Ave, Landlord: Beacon Capital
  • Tenant: Dropbox, Size: 13,000, Project/Location: Columbia Center located at 701 5th Ave, Landlord: Gaw Capital
  • Tenant: Sears, Size: 8,500 Project/Location: Columbia Center at 701 Fifth Ave, Landlord: Gaw Capital
  • Tenant: Kineta, Size: 6,000 Project/Location: 401 Terry Ave N, Landlord: Kilroy
  • Tenant: Azuqua, Size: 6,000 Project/Location: 619 Western, Landlord: L&B Property Investments

Below is a table providing information for the major submarkets of Seattle:

2Q2015 Market Data

The total vacancy rate for Seattle is 9.6%.


If your company:

  1. Doesn’t need to move
  2. Has an upcoming space/lease requirement in the next 2 years
  3. Can reasonably forecast headcount needs for years into the future
  4. Has a rental rate in line with or above market

– Start educating yourself on available alternatives and negotiating with your current building to get an understanding of your landlord’s position in the market.  Given the increasing pressure on rents and decreasing concessions, companies are incentivized to be educated on proposed developments that will be delivering in 18-24 months.  It is also helpful to be educated on the market so you can prepare to react quickly to increasingly volatile conditions.

Alternatively, if your company:

  1. Might need to move
  2. Needs size flexibility
  3. Wants to pursue a sublease or plug-n-play opportunity
  4. Prefers not to commit to a lease term beyond the next six months

– Wait until six months prior to your lease expiration and be prepared to act quickly.  The three to six month window prior to lease expiration is when you are most attractive to potential landlords and when they will offer you the best economics.   However, have a lease/sublease signed three months before your lease expires.  You don’t want to be in a holdover situation or without space and you need to give your company time to complete tenant improvements and plan a move.

Written by // Jade Rice