Then, all of a sudden, high-tech and Internet companies began returning significant amounts of space to the market in the first half of October, and the real estate community acknowledged a slight slow down.
Now, according to the Space Markets Update released last week by researchers at Grubb & Ellis with their Q4 report, the Eastside market appears to be showing a few more signs of degradation, albeit minor. Craig Hill, SIOR and vice president of G&E'S Bellevue office, says while the market is slowing, it has been so hot that is it now just heading toward "normal," which might equate to 5% vacancy rates by mid-year.
At the end of 2000, the average Eastside vacancy rate was a tight 2.3%. Then, "...it began to show its vulnerability to problems in the high tech sector," as evidenced by a fourth quarter jump in sublease space from 63,253 sf to 445,915 sf.
The highest vacancy rate in Eastside office space was the Bothell/Woodinville submarket, at 4.4%, about double the rates of the other cities. The Bellevue CBD was marked at 2.6%, and the lowest vacancy rate was in Kirkland: 0.2%.
Class A asking prices increased an additional 7% during the fourth quarter, bringing the average to $34.32. The highest being the Bellevue CBD at $36.93. The lowest was the Bothell/Woodinville at $24.91.
Thus far, Hill tells GlobeSt.com even large spaces being vacated by dot-coms and high-tech companies are quickly being absorbed. He expects the market to suffer, but only for about six months, and nothing worse than what he describes as "indigestion."
Still, with 3,244,465 sf of office space under construction here at the end of 2000, the G&E report speaks of a potential black cloud over the Eastside "...if the venture capital and stock markets continue to winnow away at the ranks of local high tech firms." In that event, it sees potential for current demand to be met by the 3.1 million sf of space already completed last year.
And yet, another 6.7 million sf of Eastside office projects are in the proposed and planning stages. To this, Hill says much of that 6.7 million sf are in the form of projects that are at present only being "considered" for development if the market conditions are right.
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