Seattle and Bellevue's markets for commercial office space saw the number of vacant offices go down in the second quarter of 2012, according to three reports released in July.
Peter Curran, president of tech startup Cirrus10, is looking for a new home for his Pioneer Square company.
Unlike his gigantic tech brother, Amazon.com, Curran isn’t interested in the booming South Lake Union neighborhood. He just needs to upgrade to a better office but wants to stay in his current area with its proximity to public transportation.
“Pioneer Square is a better transit hub,” he said.
But the stock of potential office space is dropping. According to three reports released in July, Seattle and Bellevue’s markets for commercial office space saw the number of vacant offices go down in the second quarter of 2012.
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“We’re leaving a tenant’s market. We’re not going to a landlord’s market; it’s more of an equilibrium,” said Rod Keefe, a senior vice president and partner with Kidder Matthews, the publisher of one of the three reports.
This is in line with Curran’s perspective from the trenches of the startup sector. Although there are still a few deals to be found, he recalls how, in 2010, the market tilted more in his favor. That’s when he found Cirrus10’s current home.
“The market is definitely tighter than it was two years ago,” Curran said.
In addition, Matt Christian — executive director with Cushman Wakefield-Commerce, publisher of another of the reports — says prices in Seattle have gone up.
“We did see rental rates increase 10 percent year over year,” he said. “It’s fairly significant.”
Because of varying methodologies, the three reports don’t agree on the vacancy rate. Colliers International says in Seattle, for example, 13.76 percent of office space went unfilled in the second quarter, compared with 17.33 percent a year earlier. Kidder Mathews put that number at 10.9 percent for central Seattle. Cushman Wakefield-Commerce tabbed the number at 16.9 percent for central Seattle.
In Bellevue the numbers were similarly varied. Colliers put the current Eastside vacancy rate at 12.45 percent. For Kidder Mathews, it was 9.26 percent. Cushman Wakefield said the rate dropped to 12.7 percent for the Greater Eastside.
Fewer vacancies means finding office space — for companies like Cirrus10 — becomes more competitive and, eventually, more expensive.
“It’s almost all technology driven,” said Christian, of Cushman Wakefield.
Much of the improvement in Seattle’s commercial real-estate market is attributable to one source — Amazon.com.
Chris Fox, a research analyst at Colliers, said Amazon has accounted for almost half of the occupancy growth in Seattle offices. Its impact is being felt beyond just its South Lake Union neighborhood.
Jason Richards, president of Seattle startup Project Bionic, was moving his company in May out of its office in Georgetown. The South Lake Union area was his first choice.
“We did want to focus on the South Lake Union area — that extended to Eastlake and Westlake, too,” Richards said.
But in the end, Richards chose Fremont because that neighborhood had the space he needed for the right price, even though it is farther from the freeway. “We had to weigh the pros and the cons,” Richards said.
As the Seattle office-space market becomes more competitive, some landlords across the city are asking for longer leases, in addition to higher rents. Cirrus10’s Curran resists those terms because of the volatility inherent in operating a startup.
“When you’re running a tech startup, you don’t know if you’re going to be around in five years,” he said.
Karl Baker: 206-464-2046 or firstname.lastname@example.org