Getting the bad news out of the way, Tom Bohman, director of the Bellevue office of Cushman & Wakefield, tells GlobeSt the vacancy rate here climbed 3.98% since the end of the last quarter -- leaving the CBD reeking with an average vacancy of 24.8%.
"That statistic is somewhat anomalous," says Bohman, explaining that the total includes sublease space that has been announced as coming available in the fourth quarter but may not, in fact, be on the market as of today.
The first layer of bad news comes with an underlying bright spot -- the negative flow of sublease space has been limited, thus far, this quarter to small spaces. In fact, Bohman is willing to go so far as to say, "Maybe we have reached the end of sublease give backs."
Bohman lines out some recent deals for fairly substantial chunks of sublease space. While they are outside the CBD, they are still in Eastside areas close to downtown. He cites Washington Mutual's lease of 64,000 sf in the Sunset North building on the Interstate-90 corridor near Eastgate -- as well as locally-based timeshare company, Trendwest's, lease of 52,000 sf at Four Newport in the Bellevue neighborhood of Factoria. Bohman says these are signals that sublease inventory is beginning to "burn off."
Saving the worst for last, Bohman warns that Bellevue's CBD "is going to see continued increase in its vacancy rates." Though absorption in existing office buildings may be picking up, he reminds us that between 700,000 and 900,000 sf of additional space will be delivered to the downtown market over the next five quarters.
Building B of The Summit will bring 280,000 sf of new space upon its 4Q2002 due date. And, the massive, mixed-use project of Lincoln Square on Eight Ave. will deliver another 530,000 sf of offices. Asked to project how bad the vacancies could become, Bohman is willing to go out on a limb for GlobeSt with a guesstimate of a six to eight-percentage point increase by early 2003 -- bringing the net vacancy total in the vicinity of 30%.
"The wildcard here," Bohman says -- putting words to the hopes of those in the industry here, "is what would happen with another round of expansion and growth, which could eat up a lot of space with a local resurgence."
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