Seattle’s Booming Office Market Endures a First-Quarter Lull

The slowdown is seen as temporary, however, as market fundamentals remain strong
Updated: Tue, 05/14/2019 - 10:27
 
 
  • The slowdown is seen as temporary, however, as market fundamentals remain strong

Seattle was among the three top 10 U.S. office markets to record negative space absorption, meaning more space was returned to the market than leased, as space absorption slowed across the nation’s major office markets in the first quarter, which is normally a subdued period for the market, a report by real estate services firm Colliers International shows.

The Seattle office market, because of a series of tenant move-outs, recorded negative space absorption of 195,930 square feet. Only one lease transaction exceeding 50,000 square feet was inked in the first quarter, involving tech firm Zipwhip, which leased 72,000 square feet at the Elliott Bay Office Park in Queen Anne, Colliers reports.

On the other end of the spectrum, online retailing giant Amazon announced plans in the first quarter to sublease the 722,000-square feet of space it had previously agreed to prelease in the Rainier Square Tower being developed in downtown Seattle. Still, Amazon is looking to lease some 2 million square feet of additional space going forward to accommodate growth through 2020, the Colliers report notes.

Despite the dour news on the space-absorption front, asking lease rates remained steady in Seattle during the first quarter, at $41.75 per square foot, and though the overall vacancy rate inched up 50 basis points, it remained at a tight 7.6 percent.

“Vacancy moved up but is still the third-lowest of the top 10 markets,” the Colliers report states. “Construction activity remains elevated but more than 70% of the space is pre-committed.”

The two other office markets among the top 10 reporting negative space absorption for the first quarter, according to Colliers, were Manhattan, at 1.6 million square feet of net space returned to the market; and the San Francisco Bay Area, at 176,938 square feet of negative space absorption.

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