Seattle’s Commercial Real Estate Market in High Demand as Second Quarter Market Reports Released
SEATTLE, August 17, 2016 – Cushman & Wakefield/Commerce released its second quarter Marketbeat Snapshot report detailing the Seattle and Puget Sound Eastside areas’ office markets. According to the reports, the commercial real estate office market continues to be in high demand. The Seattle-Bellevue-Tacoma unemployment rates increased from 4.8 percent in Q1 of 2016 to 5.2 percent. Despite the continuously increasing unemployment rate, employment actually continued to grow as a result of the high return to the workforce, pushing the labor participation rate higher.
“As the labor participation rate continues to rise, we are also seeing a significant Chinese, Korean and Japanese increase of investments for Seattle’s commercial real estate market,” said Dave Magee, Washington region market leader of Cushman & Wakefield/Commerce. “Amazon, Boeing and other major tech companies have been the driver to the growth in Seattle. This area has reached the level of attraction to international investors, and is now being compared to leading cities like New York, Washington D.C., Chicago, Los Angeles and San Francisco.”
Office Market Reports
Seattle CBD Market
The office market in the Seattle CBD ended the second quarter with a vacancy rate of 6.9 percent and asking rate of 19.1 percent to $38.38 per square foot, both of which increased from Q1 of 2016. With nearly 1.2 million square feet of leasing activity, the CBD saw a 21.1 percent decline from a year ago. Stadium Place – Hawk Tower in the Pioneer Square/International District submarket saw the largest lease transaction of the quarter. Avalara signed for 133,308 square feet and occupancy is schedule for December 2017. The Seattle CBD area continues to be a center of activity, with large blocks of continuous space in high demand and limited supply.
Seattle Eastside Market
The office market in the Eastside saw an overall vacancy rate increase, ending the second quarter at 10.5 percent. As such, the asking rate had an increase of 12.2 percent to $32.81 per square foot on a year-over-year basis. With an 11 percent year-over-year increase, 834,200 square feet of leasing activity was reported for the Eastside. Kirkland Urban, a new mixed-use development which will feature 650,000 square feet of office space, had the two most significant transactions from Tableau, who will occupy 91,907 square feet and Wave, who will occupy 87,145 square feet. Kirkland Urban will begin construction in Q3 of 2016, and is scheduled for completion in Q4 of 2018. The outlook for the Eastside remains optimistic. Bellevue is rezoning parts of downtown to allow for taller buildings, which should generate high-density commercial and residential development.
Seattle Suburban Market
The Seattle Suburban office market improved since Q1 2016, and saw a decrease of 240 basis points to 15.5 percent, with an asking rate increase of 0.2 percent to $24.78 per square foot on a year-over-year basis. Leasing activity in the Suburban area was reported at 47,362 square feet with North Seattle/Northgate, Close-in South Seattle, and Renton showing the most activity. The largest lease transaction of the quarter was by Providence Health & Services, who signed a 45,492 square foot sublease at Time Square – 700 Building in the Renton submarket. The Seattle Suburban area is positioned strongly as it continues to profit from the rising rent and lower vacancy rate in the CBD and Eastside area. Companies should remain looking to the suburban market as an expansion option.
Industrial Market Reports
Seattle Eastside Industrial Market
The Seattle area’s industrial market ended the quarter with an overall vacancy decrease totaling 5.3 percent, while the average asking rent increased $0.81 per square foot to $10.89 per square foot. Leasing activity totaled 1.4 million square feet and the overall absorption remained positive at 1.2 million square feet. The most significant transaction was the lease of 147,040 square feet at Totem Lake Commerce Center in Kirkland. 778,472 square feet of WestPark’s twenty-one buildings was purchased by KBS Realty Advisors for $128 million. The 68,000 square foot built-to-suit for Northwest Storage Properties was also completed. The Eastside industrial market will continue to appeal to tenants demanding improved flex or high tech spaces, higher rates of occupancy, and a greater parking ratio than what Kent Valley can provide. Tech companies will continue to expand to the area due to the culture that supports innovation with more than half the current tenant demand coming from tech firms.
Kent Valley Industrial Market
The overall vacancy increased slightly by 60 basis points on a year-over-year basis and Kent Valley industrial market ended the quarter at 5.4 percent, but decreased 40 basis points from Q1 of 2016. As such, the overall asking rent was $6.04 per square feet, a $0.16 increase from Q2 of 2015. There was a positive overall absorption of 1.9 million square feet, while leasing activity totaled over 4.5 million square feet. Kent Valley’s largest investment transaction was the 306,457 square foot Titan building in Sumner by LBA Realty for $33.6 million. Just over 1 million square feet of industrial product is still set to be delivered in Kent Valley by year-end 2016, 78 percent of which is currently available. Despite the large amounts available, industrial space will remain in high demand with a large volume of big-box tenants in the market.
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Cushman & Wakefield/Commerce operates the Cushman & Wakefield business in Idaho, Nevada, Utah and Washington. The firm partners with its sister company Cushman & Wakefield/NorthMarq to provide innovative commercial real estate solutions to occupier and investor clients, offering transaction services, capital markets services, occupier and investor services, and real estate advisory. Together the firms manage 52 million sq. ft. of retail, industrial, and office assets, have transaction revenues of more than $2 billion, and employ more than 750 professionals. Learn more at www.comre.com.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. The firm’s 43,000 employees in more than 60 countries provide deep local and global insights that create significant value for occupiers and investors around the world. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
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