A mere year later, downtown vacancies are the highest in close to a decade. Steve Koon with the Seattle office of Colliers International says the latest tabulations mark the downtown vacancy rate at 9.33%--an eye-popping 8.71 percentage points higher than second quarter 2000. When including buildings of all classes in the CBD, south to the stadiums, Westlake, Lake Union and Queen Ann, direct available space pencils out at 1.496 million sf, with sublease space at 1.459 million sf.
The central business district alone, again including all classes, has 1,028,000 sf of direct off space available, with subleases estimated at 600,000 sf. These figures translate to a direct vacancy rate of 5.5%. Combined with subleases the total is 8.73%.
Under the weight of empty offices, asking rents have been pressed downward. Even six months ago, several buildings here were flirting with the $60/sf mark, but no longer. Koon has seen rates drop as much as 15 percent in some buildings; although, the heftier cuts have been predominantly in Class B and C properties. "Many Class A buildings, because they are backed so heavily financially, feel they can wait out what they hope is only a lull in the market," explains Koon.
Looking back, Rob Aigner, Colliers Executive Managing Director here, likens the experience of the first three quarters of 2000 to "a vacation at Disneyland." He says, "Tenants were plentiful, and it seemed we could do no wrong." In contrast, the VP notes that he's written more subleases in the last 90 days than he did previously over his entire career.
In the meantime, the real estate community finds itself in a different world from that of a year ago. Instead of living in the "Magic Kingdom," brokers are taking trips to Hawaii--and lining their pockets with bonuses and other incentives when they deliver solvent tenants to the doorsteps of eager landlords. Says Aigner, "Landlords are much more willing to negotiate with a tenant looking for new space because they don't know when the next one will come down the pipeline." Many tenants looking to enter the market are assessing the odds, trying to figure the best way to bet: Wait and see if rents drop further? Or, jump in now in case the market heats up and space moves quickly.
What can we expect over the remainder of 2001? "That's the $64 million question," says Aigner adding, "The true health (or lack thereof) of this market will not be known until the bulk of the sublease space gets absorbed. For now, it's anyone's guess."
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