— By Dan Dahl of Kidder Matthews —
Seattle’s office market has proven more resilient than other cities in past downturns, with smaller declines and quicker recoveries. This cycle is different. Seattle has been hit harder and is recovering more slowly than the rest of the country. San Francisco often signals what’s to come, with the Emerald City trailing by about 12 months. AI-driven leasing activity in San Francisco is gaining momentum — signaling growth for Seattle — but the local market still faces headwinds.
Demand Softens as Tenants Downsize
Demand for office space in Seattle remains weak. Most tenants with upcoming lease expirations are downsizing. Tech companies have historically driven office demand here, but now they are shedding space, laying off employees and working from home. Tenants have the leverage. Concessions like free rent, reduced rates and built-out spaces are abundant, providing the opportunity for tenants to pursue a flight to quality and upgrade to higher-end space.
Investment Market Under Pressure
The investment side is equally challenged. Owners with near-term loan expirations are often in a pinch. Their loan balances exceed current building values due to high vacancies, lower rental rates, elevated cap rates and higher interest rates. As a result, Seattle has seen a record number of buildings returned to lenders. Assets that once traded for $600 per square foot pre-pandemic are now selling closer to $100 per square foot.
Public Safety, Perception and the Shift East
Public safety and politics have played a major role in Seattle’s market dynamics. Enforcement of vagrancy, drug use and petty crime downtown during the pandemic was largely paused. This led many tenants to perceive the area as unsafe. Today, the city prioritizes safety, and downtown is dramatically cleaner. Though perception lags, Seattle’s fundamentals remain strong.
Looking Ahead
Seattle’s office market is in a period of recalibration. This isn’t the first time the city has faced adversity… and it won’t be the last. Every major city experiences highs and lows. This city and its commercial real estate market are built to adapt, evolve and come back stronger.
While its recovery is still unfolding, the path forward is there. It may include new types of tenants, new ways of working and deals that look different from those of the past. But there will be deals. With transformative infrastructure projects like the new Seattle waterfront reshaping the city’s core, Seattle remains a world-class city with much to be proud of. There is real opportunity ahead for those willing to lean in and evolve alongside it.
— Dan Dahl, Executive Vice President, Kidder Mathews. This article was originally published in the August 2025 issue of Western Real Estate Business.