General Conclusion: In Q4 2013 Seattle’s office market vacancy rate remained flat at 10.5% up slightly from the 10.4% vacancy rate in Q3 2014. Positive absorption for the year totaled 1,115,316 square feet. Rents continue to increase despite being historically high across all submarkets and building classes. There has been no sign of a decrease in confidence as office building owners, developers and investors continue to be bullish about the Seattle market and the region as a whole.
Economy: The Washington State Employment Security Department posted a preliminary unemployment rate for November of 6.8% for the state. This is down from 7.6% for the same month in 2012. According to the Bureau of Labor Statistics, the Seattle/Tacoma/Bellevue unemployment rate remained historically low at 5.7% in November of 2013. Several indicators continue to inspire optimism about the state of the commercial real estate market and the future of the economy in the city and region.
Office Construction: 2013 brought a lot of news from developers planning office towers in Seattle, but most will require a significant pre-lease at top of the market rental rates in order to attain adequate financing. However, some developers are planning or building speculative projects. Touchstone Corp landed USAA Real Estate Co as equity partner for their two phase 820,000 square foot project at 307 Fairview Ave N, which is set to break ground in early 2014. Also, 400 Fairview broke ground on the 360,000 square foot project after announcing Tommy Bahama signed a lease to be the anchor tenant. Otherwise, the only other projects recently completed or under construction are: Homeplate Center (~346,000 square feet), Dexter Station (~341,000 square feet), and Hill7 (~300,000 square feet). Build to suits under construction include: Stone34 (129,000 square feet for Brooks Sports), Vulcan South Lake Union (260,000 Allen Institute for Brain Science), as well as plans by Amazon to add to their Vulcan campus.
The following developers have announced plans to build or redevelop significant projects, but have not announced a timeline for breaking ground: University of Washington (Rainier Square), Daniels Real Estate (5th & Columbia), Schnitzer (Madison Center), Amazon (3.3M SF campus at 2701 7th), and Urban Visions (77 stories in the CBD). The soonest any of these developments would be ready for occupancy would be mid 2016.
Office Sales: Seattle remains one of the top few office markets in the country attracting commercial real estate investors. The following transactions were completed in Q4 2013:
Office Leases: Below are significant lease transactions that were concluded in Q4 2013:
Below is a table providing information for the major submarkets of Seattle:
The total vacancy rate for Seattle is 10.5%.
If your company:
– Start educating yourself on available alternatives and negotiating with your current building as soon as possible. Given the foreseeable upward pressure on rents, look for buildings/spaces that your organization can use to leverage renewal discussions today. The educational process is quick/free and should only take a couple of hours.
Alternatively, if your company:
– 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.