Seattle Office Market Hits 'Turning Point' in Q4
During the last three months of 2024, Seattle's office market has continued to stay in negative territory in terms of demand. Net absorption was -194,000 square feet, according to a report from Colliers.
That said, the rate has continued to go down significantly over the past 12 months. For example, the level was at -449,000 square feet in the third quarter, and more than quadruple at -841,000 in the fourth quarter of 2023.
Overall, the Canadian-based firm described the fourth quarter of 2024 as a "clear turning point" for Seattle's office sector. Key fundamentals for the most part continue to improve. Notably, Seattle's 0.1 percent uptick in the vacancy rate to 30.1 percent marked the smallest increase since 2019. While inventory increased to 65.23 million square feet, from 64.64 million square feet quarter-over-quarter, no general office projects were under construction in the last three months of the year in the region.
"Tenant demand is uneven but increasing. Not all buildings or neighborhoods are being considered, but there are notably more companies searching for office space than a year ago," Colliers wrote.
Additionally, the fourth quarter hosted Seattle's largest new lease deal in five years thanks to Apple securing nearly 193,000 square feet at Arbor Blocks, West. Some other major deals included a $47.6 million sale of 428 Westlake Ave N and a $11 million sale of 2505 Second.
Seattle's office market has been finding success with enticing tenants in with turnkey space, and speculative suites. The latter, in particular, has been a "successful landlord strategy to lure tenants given the exorbitant costs of construction and protracted timelines," according to Colliers.
The post-pandemic work trend has been a fascinating one to follow. While it could vary market-to-market, the question has always been since the pandemic will remote work continue to pick up steam, or will it inch more toward a return to office? While there's a strong case to be made for the latter thanks to healthy demand for Class A and Trophy assets, Colliers noted that "enough" tenants are now making their second leasing decision since 2020. This will "solidify more certainly the direction of the office market than those decisions made in 2020, 2021, or even 2022," Colliers wrote.
Source: GlobeSt/ALM