Matt Christian, Cushman & Wakefield | Commerce
The Seattle office market has been a shining example of strength and solidity. Compared to the U.S. job rate, which expanded by 2.4 percent over the past year to drop the unemployment rate to just 5.5 percent, the Seattle-Tacoma-Bellevue Metropolitan Statistical Area is looking good. Seattle added jobs at a rate of 3.1 percent in the first quarter of 2015. It also saw employment gains in every category. The unemployment rate remained in line with the U.S. rate at 5.5 percent. Construction led all job sectors with 12.6 percent growth, followed by professional and business services at 4.2 percent.
The Seattle Central Business District office market showed continued improvement as the overall vacancy rate declined by 2.8 percentage points on a year-over-year basis. Asking rents continued to climb in all submarkets with an overall increase of 4 percent, while Class A rents increased by 5.6 percent.
Making tech giants feel at home is nothing new to the Seattle area. The largest lease of the past quarter was Facebook’s 274,000-square-foot deal at Dexter Station. With a planned delivery of May 2015, Dexter Station will be a 10-story, 345,992-square foot office building located in the flourishing Lower Queen Anne/Lake Union submarket. Facebook with occupy floors 3-10, leaving one solitary floor of office space remaining in the building.
Facebook was also inadvertently involved in the quarter’s other major deal, which was the sale of Metropolitan Park West and East, where the social media king is a tenant. The two buildings were purchased by CBRE Global Investors for almost $238 million. The buildings have a combined size of 699,766 square feet. Another notable deal took place less than a mile away—Blanchard Plaza, which was also sold recently for $122.7 million. In January the AFL-CIO Building Investment Trust purchased the 255,818-square foot property, which is fully occupied by Amazon. Amazon also signed a lease for nearly 900,000 square feet at Troy Block in South Lake Union.
Looking ahead, Seattle is going to see an increasingly tight office supply, particularly in large blocks of space and as such, asking rental rates are expected to continue rising. There is a healthy level of new construction throughout the central business district, and nearly 2.6 million square feet of new product is being built on a speculative basis. Expedia recently announced their plans for a 2016 move into the former Amgen building in South Lake Union, which demonstrates the area’s sustained appeal as a hub for innovation. Despite all of the attention the Lower Queen Anne/Lake Union submarket receives, the other Seattle central business district markets are also doing tremendously well, and the supply throughout the downtown area continues to shrink. Tenants with big requirements await the delivery of unclaimed new construction, the majority of which will be built in the Financial District with the completion of Madison Centre and Fifth & Columbia.
By Matt Christian, Executive Director, Seattle Office of Cushman & Wakefield | Commerce. This article originally appeared in the June 2015 issue of Western Real Estate Business magazine.