Downtown Seattle remains an office renter's market, but space has been filling at a rapid clip. In the past six months, office tenants have...
Downtown Seattle remains an office renter’s market, but space has been filling at a rapid clip. In the past six months, office tenants have gobbled up nearly 700,000 square feet of vacant space, enough to fill half the 76-story Bank of America Tower.
Meanwhile, downtown Bellevue’s remarkable turnaround has cooled, but only because premium space in top-tier buildings has become as hard to find as snow in the Cascades.
Yesterday’s quarterly report from real-estate brokerage Cushman & Wakefield underscores that the region’s economy is firing on all cylinders:
• To the south, the boom in port traffic means warehouse and industrial space is getting scarce. Retailers like Target and Home Depot have erected massive distribution centers so fast that the city of Lacey in Thurston County recently called a moratorium on new buildings larger than 200,000 square feet — about four football fields.
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• In the north, Boeing’s successful launch of its 787 jet program means some local aerospace firms are expanding, and some big international suppliers are scouting for space.
• And in Seattle and Bellevue, the sharp 2001 recession that sent vacancy rates skyrocketing is fast becoming a memory.
“Compared to where we were two years ago, when it was, ‘How deep will the hole get?,’ we’ve definitely dug out and we’re headed in the right direction,” said Tom Bohman, who leads Cushman’s Bellevue office.
Downtown Seattle’s office-vacancy rate stands at 13.3 percent, still around double where it was at the height of the tech boom, but down from 16.5 percent two years ago.
With Washington Mutual’s new headquarters, WaMu Center, under construction and scheduled to open next year, landlords are in the midst of a domino effect of finding tenants to fill space that will be vacated by WaMu, then finding tenants to replace those tenants.
Bearing the brunt of the coming WaMu move is Chicago real-estate giant Equity Office, co-owner of the existing Washington Mutual Tower. “They have been backfilling their space very aggressively,” said Cushman & Wakefield’s Wende Sauvage.
Still, with everyone from software developers to insurance companies expanding, she said, “I don’t think [the WaMu move] is going to have the impact that everybody thought it was going to have.”
The speed of the office-space recovery has several developers moving ahead with plans to build office towers. In downtown Bellevue, where the vacancy rate has fallen below 10 percent, developer Kemper Freeman said this week he planned to go ahead with the office portion of the Lincoln Square office/retail/condo development already under construction.
Still, the supply of space hasn’t gotten tight enough to push rents skyward. In the tech boom of the late 1990s, people paid up to $38 a square foot to rent Class A office space; rents today are typically $8 to $10 below that.
For new construction to be profitable, the rule of thumb is developers need to get about $35 a foot.
Maybe the hottest arena of the Puget Sound area’s real-estate market is the warehouse corridor from Tukwila to Lacey that, among other things, helps distribute the unprecedented amount of goods from Asia.
During the past year and a half, the Kent Valley industrial corridor has absorbed a whopping 8 million square feet of industrial space, enough to squeeze in 138 football fields, as giant retailers have built distribution centers to handle goods imported through the ports of Seattle and Tacoma.
Tom Boyer: 206-464-2923 or firstname.lastname@example.org