Seattle Office Space News – February 2018

7/ March 2018

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of February 2018.

OFFICE DEVELOPMENTS

South Lake Union is getting a new biotech building right in Amazon’s backyard. Called Dexter Yard, the project is located at 700 Dexter Avenue N. and will provide 15 stories (515,000 RSF) of lab and office space along with 25,000 square feet of ground level retail. BioMed Realty, who is developing the project, hopes that Dexter Yard will allow new biotech companies to gain a presence in South Lake Union, where only about 2% of all life sciences space is vacant. The project is set to open at the end of 2020, and will feature a large sports field on the property called The Pitch in addition to its office and wet lab building premises.

Also, this article affirms that Dexter Yard will proceed with construction, planning to begin breaking ground this fall despite not having any tenants lined up. This decision highlights the incredible demand for office/lab space in the area. For early renderings of BioMed’s Dexter Yard project, follow this link.

OFFICE LEASES

Co-working giant WeWork has leased a remarkable amount of space setting up locations all over Seattle, and is all set to expand further. In February it was announced that they have leased multi-floor chunks of space at 925 4th Avenue, 1411 4th Avenue, and 255 King Street in the Downtown area. They are also planning to lease a new office project in Ballard right on 15th and Market, and will be opening their new WeLive tower in Belltown in 2020.

Oracle continues expanding in Seattle with the recent announcement of their sublease of 160,000 square feet in Russell Investments Center, posting more than 600 open job positions listed in Seattle. Oracle announced in August that it plans to hire 5,000 employees across the US. Oracle seeks to compete with Amazon Web Services and Microsoft Azure with its cloud computing technology, making Seattle a growing center for cloud tech companies. Oracle subleased from Nordstrom and shares Russell Investments Center with Zillow, Indeed.com, and Russell Investments.

After a long search, the Mexican Consulate has finally found its new Seattle home in Capitol Hill. The historic building called Harvard Exit is an old movie theater with planned interior refurbishments. The Consulate employs 35 people who are currently working in cramped quarters in a two-story building on Third and Blanchard in Belltown. The new location would offer them a generous 17,000 square foot headquarters and would bring their business to Capitol Hill’s vibrant neighborhood. Neither the Consulate nor Eagle Rock (the owners of Harvard Exit) have given any particulars on the move.

ECONOMY

Business is booming in Downtown Seattle. Since 2010, taxable sales for bars, restaurants, and other retail have increased 50%, and the Downtown area has added 60,000 new jobs. More and more people are moving to Seattle – 22% more in the last 8 years, to be precise. Major public projects and planned or under way, and over 8,700 new housing units will be opened in the next two years. All this construction and development will only further augment the traffic congestion in the Downtown Core.

Today’s average tech worker in the Emerald City is paid $132,000 per year, not including bonuses and other perks. Seattle’s lower cost of living relative to base salary has made it one of the top destinations for relocation amongst tech workers, especially those eager to leave the Silicon Valley (and its insane cost of living) behind.

Office rents in Seattle are rising 2.5 times faster than the national average. Seattle is no longer the “budget option” it once was for startups and established tech companies alike. Seattle is now one of the most expensive places to rent office space, surpassing Chicago and Los Angeles in the last three years. The vacancy rate in Seattle is 5.7%, and Central Seattle has the lowest vacancy rate out of the 10 biggest office markets in the country. Despite (seemingly) endless new construction, rent increases continue to crunch new tenants looking for space.

Winter is traditionally a slower time in the housing market, but Seattle started off 2018 by breaking its own price record. Single-family home prices across King County rose nearly 20% in January compared with January 2017. The increases hit all parts of King County, with prices rising anywhere from 28% to 11% depending on the location. Seattle’s median home price is now $757,000, which is the highest price ever – even higher than last summer.

According to the Northwest Multiple Listing Service (NWMLS), there are only 3,915 houses and condos for sale in King County, which is less than one month’s supply. In a balanced market, the supply would be closer to 4-6 months. While experts forsee a moderate increase in listings and project slower price increases due to rising interest rates, the Seattle area market remains outrageously hot. And King County is not the only county affected: median prices in Snohomish County went up nearly 10%, with Pierce County jumping almost 16%. Kitsap saw a more moderate 3.5% increase in home prices.

Even cities well outside the Seattle area have seen soaring price increases. Washington now has 5 of the 9 hottest housing markets in the US. The median home price on the Eastside is a staggering $938,000, which puts even Seattle’s $757,000 to shame. Even the much “cheaper” areas of Bremerton-Silverdale, Kennewick, Olympia and Spokane have seen home prices rise between 8.2% and 10.5%. However, don’t worry just yet about getting priced out of those markets. Despite increases, the median home price in Bellingham is just $378,000, and $202,000 in Yakima.

There may be a severe housing shortage in Seattle, but construction costs are still rising. Most of the building projects underway are non-residential, and this considerable increase in building is driving up costs. Construction employment flat-lined in 2017, however, which offers a hint of a slowdown regarding rising construction pricing.  Still, the Mortenson Construction Cost Index recommends that owners plan for construction costs to increase by 3.5% to 4% in 2018.

Long-term mortgage rates continue to increase, now making it even more expensive to borrow and purchase a home. The average rate on a 30-year fixed-rate mortgage is 4.43%, and 3.9% on 15-year fixed rates. These increases discourage potential home buyers in addition to encouraging sellers to hold on to their homes. The pace of Americans buying homes fell 4.7% in January, due to increasing home prices, rising mortgage rates, and a severe shortage of housing.

In another twist and potential indicator of a slowdown in Seattle, Amazon has confirmed that about 500 people will be losing their jobs in the Seattle area, though many of those employees will be offered jobs in other departments. These layoffs are due to Amazon’s rapid growth in the last few years, which caused redundancy and budget problems in some departments. Amazon still has over 4,000 job openings in Seattle, but any cutbacks at all are a rarity. Amazon has said that they plan to hire aggressively in some areas while cutting back others, and will likely focus the majority of their new hiring efforts on HQ2 when they finally settle on a second home.

ARENA

David Bonderman and Jerry Bruckheimer, the would-be owners of Seattle’s new NHL team, indicated in February that the NHL would give them favorable expansion rules to build a team here. They have also indicated that they would be willing to become owners of an NBA team, should that become a possibility. The ball has certainly gotten rolling with the new Key Arena renovation going full-steam ahead. Fans are already clamoring to put down deposits on NHL season tickets!

OTHER NEWS

Is WeWork taking over the world? Well, if the founders had their way, they would. WeWork founder, Adam Neumann, envisions a world where people are brought together within the work environment. Revolutionary concepts like open plans with social areas encourage people to congregate. Sharing a drink together at work is considered a virtuous pastime, as opposed to a taboo, and plenty of WeWork offices have well stocked bars and sponsored happy hours. And work is just the beginning. With concepts like WeLive cropping up in Seattle and elsewhere, Neumann intends to completely reframe the way humans live and work. They are even getting into the early education business. The brainchild of Neumann’s wife, Rebekah, WeGrow will offer early education to children age 3 and up, with emphasis on socializing and entrepreneurship. It may seem wild, but Neumann insists that in order to change the world, you have to be a little wild.

Amazon’s list of HQ2 finalists is getting shorter, and rumors are flying about five locations in particular: Austin, Maryland, Northern Virginia, Boston, and Los Angeles. From Super Bowl ad hints to code names like “Project Golden,” the suspicions abound. However, despite rampant guessing, Amazon has yet to give any concrete evidence about where their new headquarters will be. Read up on these rumors and form your own opinion here.

Written by // flinn

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