Austin

Dallas/Fort Worth

Denver

Houston

Nashville

Raleigh-Durham, NC

San Francisco

San Jose, CA

Seattle

ATLANTA

Especially hard hit in the Great Recession, Atlanta is not just making a comeback, but it's posting strong growth on almost every front. Atlanta may be a cyclical market, but its recent run is turning investors' heads.

Consider just a few of the metrics: Atlanta is among the 10 most promising markets, thanks in part to a homebuilding comeback, according to Pricewaterhouse Coopers' Emerging Trends in Real Estate 2015. A diverse economy, low cost of doing business and affordable housing are among the drivers.

“The Atlanta market is attractive to institutional and local investors and developers,” PwC's report reveals. “Local market participants assess the availability of capital and strong local development community as two of the best attributes of the Atlanta market.”

Mike Sivewright, JLL's Atlanta market director, says multifamily assets continue to lead the way from a volume standpoint, and he's seeing record pricing for class A office properties. The assets that are trading either have experienced strong rent growth or have strong repositioning potential, he says, but where do we go from here?

“As the economy matures, investor interest will broaden in terms of assets and geography,” says Sivewright. “As for the year ahead, we could see increased buyer demand in Atlanta for class B industrial properties as well as hotels.”

April Hawkinson, associate vice president at Cassidy Turley in Atlanta, says the city has historically been known to be a key transportation hub for the East Coast, which adds to the appeal. However, she notes, in the past three to five years Atlanta has become a huge market for IT and tech start-up growth companies based on the city's access to talent with top universities, and qualitative lifestyle.

“With the rise in market activity, we will continue to see vacancy rates decrease, rental rates increase, new spec development break ground and a shift from a tenant's market to a landlord's market in the very near future,” Hawkinson says. “As the market turns, tenants will need to begin evaluating their real estate goals sooner in order to find opportunities amongst the competition.”

Most Atlanta commercial real estate industry watchers agree that the city is poised for more growth in 2015. Since the market recovery began, Atlanta has trended well above the US as a whole in year-over-year payroll growth, and the metro area now exceeds its pre-recession peak by 27,400 jobs.

Steve Martin, managing principal at SDM Partners in Atlanta, says if you are just now eyeing Atlanta for industrial development, you are probably late to the game. That's because sites and land are hard to come by and, in almost all cases, are controlled by those plugged into Atlanta and likely already building here.

“If you want to be out in front of what's next in our market, office will be, on a limited basis, the place to play…but be careful. Office development is not for the faint of heart due to the high costs and correspondingly high rents required,” Martin says.

“The issue in the future will not necessarily be overbuilding of office, but lack of demand and/or economic strength. On the other hand, industrial could have supply issues given the amount of construction already underway.”—Jennifer LeClaire

dedicated edition.

AUSTIN

Development is heating up for 2015 in the Austin market, spurred on by the capital city's uniquely, well, “weird” infrastructure. The area's population continues to climb, cranes dot the landscape in the CBD, and multifamily and office submarkets prevail as hot commodities.

“It's multifamily and office right now,” says Karen Judson, vice president for research at Transwestern Development Co. “Retail is tight and rates are high.”

Which is all the more reason why the city is gravitating toward live-work-play models such as the Domain and Mueller Austin in the north/northwest quadrants of the city, she says.

The Domain continues to grow in scope—Seattle-based Nordstrom is set to open the city's second store this fall there, and it will anchor the third phase of the Domain's expansion, according to the Austin American-Statesman. When the project is completed, the 304-acre development will include approximately 1.8 million square feet of retail, 5,000 multifamily units, 3.5 million square feet of office and nearly 1,000 hotel rooms.

Other mixed-use projects in the works include Transwestern's recently announced 1645 E. 6th St./the Arnold in the east Austin corridor. “We are very pleased to get started on this exciting development,” says Transwestern Development Co. associate vice president Josh Delk, who is leading the development team. “This location is in the center of one of Austin's most culturally rich and defining neighborhoods, and we are thrilled to be bringing a project of this caliber to the area.”

Other projects of note include Waller Creek, an approximately 1.4-million-square-foot office, residential, hotel and retail space that will comprise three buildings, the tallest of which is expected to exceed 50 floors.

And Ryan Cos.' Waterfront, a 625,000-square-foot campus that fronts Town Lake, is set to feature wide floor bays that will offer floor plates not typically found in or near the CBD.

“It's a challenge, the size of the floor plates in the CBD,” says Mark Emerick, senior vice president with CBRE Austin. “It's been a criticism; companies don't want to split up over four or five floors.”

That's all the more reason, Emerick says, why the Domain has risen in stature in the office/flex market. “The Domain is a similar ecosystem” to the CBD, he says.

Another big catalyst for the overall market will be the new UT Dell Medical School, set to open next year adjacent to the Frank Erwin Center north of the CBD. The medical school “is going to pull a lot of biotech companies to that area,” says Judson.—Anna Caplan

For the latest news and analysis of the Austin commercial real estate market, visit GlobeSt.com's dedicated edition.

DALLAS/FORT WORTH

Corporate relocations and large industrial complexes will continue to spur the Dallas/Fort Worth area in 2015, say a swath of industry experts.

Far North Dallas, specifically Richardson, continues to steal the limelight in the massive market. The Toyota and State Farm campuses are the headliners, but plans have since been announced for a $500-million CityLine adjacent mixed-use center.

In the industrial sector, interest abounds for infill locations near D/FW International Airport, even if they prove ever elusive. “One million square feet isn't even a big deal anymore,” Jeff D. Thornton, regional senior vice president-Texas at Duke Realty Corp., said in a panel discussion at RealShare Dallas in November.

Like many cities in growth mode, D/FW has a propensity for overbuilding. Brett Owens, principal/managing director for brokerage services at Transwestern summed up the situation best at the event: “Dallas has a reputation for overbuilding but right now, we're in a healthy place.”

Other notable developments include Trademark Property Co.'s redevelopment of Victory Park, near downtown, and the firm's Waterside eco-friendly project in southwest Fort Worth. The latter development will bring to the city its first Whole Foods Market.

Elsewhere in Fort Worth, which has been named in the Top 10 of fastest-growing cities in the country, more than 28,000 jobs were added in 2014, according to a recently released report from CBRE. Wholesale trade led all other sectors in job growth rate, at 11.9%, while the professional and business-services industry contributed the highest number of jobs, with 8,800 jobs added.

As such, Fort Worth home sales continued to rise in December 2014, outpacing the prior year by 15%, coupled with a 12.5% increase in the median sales price. Months of inventory, at 2.2 months, is now at the lowest point in recorded history based on data from the Real Estate Center at Texas A&M University.

According to a report just released from Dallas-based Axiometrics, Fort Worth ranked 12th in rent growth from January 2014 through last month.—Anna Caplan

For the latest news and analysis of the Dallas/ Ft. Worth commercial real estate market, visit GlobeSt.com's dedicated edition.

DENVER

The Denver economy is among the most robust in the country due to strong employment gains across multiple sectors.

The manufacturing sector drove demand for industrial space, increasing payrolls by 5.7% over the last 12 months with the addition of nearly 4,000 employees, according to a recent report from Cushman & Wakefield. Construction, another important sector impacting demand for industrial space in the metro, grew by 3.1% over the last year, the firm notes. Non-farm employment expanded by 3.1% or 40,800 jobs across the metro over the same time.

On the office front, the professional and business services sector drove demand for office space, increasing payrolls by 3.2% over the last 12 months with the addition of nearly 7,500 employees. Natural resources, another important sector impacting demand for office space in the metro, grew by 8% over the last year. Non-farm employment expanded by 3.1% or 40,800 jobs across the metro over the same time, says the firm.

According to C&W research analyst Brian Larson, “the underlying fundamentals of the Denver metro remain strong and will continue to improve as employment and productivity increase.”

For industrial, he notes that with nearly 5.2 million square feet of construction completing in the next 12 months, scarcity of large blocks of space will ease in 2015. Construction of 605,500 square feet at the newly announced Trammel Crow Crossroads Commerce Park will begin in mid-2015 and deliver in early 2016. As preleasing and sales activity takes place in the new development, Trammel Crow will bring an additional 350,000 square feet to the market.

On the office side, Larson says that with nearly 1.1 million square feet being completed in the next 12 months, scarcity of top-tier space will ease in 2015. “As construction nears completion, owners can expect to sign their first new leases, which will generate additional activity as demand is realized.”

As a result, he says, new buildings will come online with significant leases in place. “Forward commitments of tenants in existing buildings will be key to sustaining strong rent growth and keeping vacancies stable. Preleasing and renewals for new and soon to be vacated spaces will be a leading indicator of the strength of the overall market over the next several quarters.”

And according to a recent study from the Milken Institute, consumer spending, supported by high per-capita incomes and wage increases in the region is contributing to broad growth in employment across a range of industries. In addition to the professional services sector, restaurants and bars, outpatient care, and corporate headquarters based in the metro each added more than 2,000 jobs in 2013. This diversity, the study says, will help the metro withstand economic shocks that affect one industry.

But one cause for concern is present, according to Savills Studley, and that is the drop in oil and gas prices. The energy sector was a critical element early on in Denver's recovery, particularly in the CBD, says the firm. Energy companies are not necessarily hurting yet, but they are certainly pausing. “Oil and gas is off right now, but it's too early to tell if this is just a blip that will correct itself or if we are on the cusp of a downturn like 2008,” says the firm's Rob Link, executive vice president.

Any pullback by the energy sector, as long as it is moderate, should be offset by the growing number of tech companies tapping into the region's talent, as well as growth among professional/business services, healthcare and engineering firms, adds the firm's EVP, Jim McGrath. The 36 Corridor, Boulder, Southeast, the CBD and LoDo are all hot and landlord optimism in general is strong across the region.—Natalie Dolce

HOUSTON

No one knows exactly what the price of oil will do in the next year, but one thing is for sure: The Houston commercial real estate market will take a direct hit if the price of crude keeps falling.

While more than 80 buildings and some 18 million square feet of office space under construction in the city last year—according to a recent Wall Street Journal report—all of that could change in 2015 if some energy companies make cutbacks as the current optimism in the market recedes.

“Landlords are watching the price of oil and hoping for a rebound sooner than later,” says Mark O'Donnell, EVP and co-branch manager of Savills Studley Houston. “If oil stays down for 18 months or more, landlords will struggle. Many tenants are looking to reduce overhead and opportunities to reduce real estate expense are increasing. Concessions and opportunities for tenants will growth over time if oil stays down.”

A recent Colliers International report says Houston's office market posted 2.2 million square feet of positive net absorption in Q4 2014, bringing the year-end total to 6.8 million square feet. In addition, more than 2.1 million square feet of new inventory was delivered during the same quarter, bringing 2014 delivered inventory to more than 6.6 million square feet. ExxonMobil began moving into a portion of its new north campus (and is slated to complete its move by the spring) and Southwestern Energy moved into its new corporate headquarters, just south of the ExxonMobil campus.

While the citywide average rental rate decreased slightly between quarters—1.6% from $27.08 to $26.78 per square foot—it is still 3.2% higher than it was a year ago. Both CBD and suburban class A average rental rates decreased over the quarter; however, both class B average rental rates rose.

Finally, Houston's office investment sales market is benefiting from the foreign capital that is pouring into the US. According to a recent survey by the Association of Foreign Investors in Real Estate, Houston ranked #3 in the top five US cities for foreign investors.

The Houston metropolitan area created 120,600 jobs between October 2013 and October 2014, an annual increase of 4.3% over the prior year's job growth. Sectors creating most of the jobs contributing to the annual increase include: mining and logging, construction, transportation, warehousing and utilities, and health care and social assistance. As per Colliers, Houston's unemployment rate fell to 4.7% from 5.9% a year ago.

“Houston's office market reported record-high asking rental rates in Q1 2014. Average quoted rental rates began peaking mid-year and we saw those rates begin to level off in Q4 2014. During 2014, Houston's office market experienced lower than average vacancy rates and a huge surge in new construction and deliveries in 2014,” says Lisa Bridges, director of market research for Colliers International.

Says Savills Studley Houston research manager Tim Wingfield about leasing: “For 2015, the combination of sinking oil prices, Houston's large development pipeline and the emergence of second-generation and sublet space should lead to rising availability and softening rents.”

O'Donnell notes that “many tenants are focusing on various workplace strategies to not only reduce costs but to operate more effectively. Better space utilization, reduced vacancy within a special footprint and alternatives to traditional space utilization are a bigger focus than ever before.”—Anna Caplan

For the latest news and analysis of the Houston commercial real estate market, visit GlobeSt.com's dedicated edition.

NASHVILLE

The big story for Nashville's growth has been multifamily. Employment gains and new entertainment attractions are luring Millennials to the southern city, which is driving multifamily demand.

For the past five years, Marcus & Millichap reports in its Nashville, 2015 Outlook, the metro has generated an average of 25,000 jobs annually. That has expanded employment more than 3%, far surpassing the national average. The firm predicts the creation of high-quality jobs will continue to draw top talent and young professionals to the metro.

“Substantial supply additions will persist this year, which will put slight upward pressure on vacancy in the near term,” MMI reports. “Despite the uptick, the vacancy rate will remain below 5% as net absorption exceeds 3,000 units for a third consecutive year. While conditions remain tight, operators will achieve another year of respectable rent growth.”

G. Ronald Witten, president of Witten Advisors LLC, pointed out Nashville as an early leader in the Southeast's multifamily landscape at NMHC's Apartment Strategies Outlook, and predicted that the early start would lead to a lag behind other Southeast markets this year: “2015 is another good year for the Southeast, with 3% to 4% rent growth expected, except in Nashville.”

MMI and Witten aren't the only ones seeing these trends. Development in Nashville's urban center is bringing employers and employees together in a vibrant environment, according to PricewaterhouseCoopers' Emerging Trends in Real Estate 2015 report. The firm says Nashville is attractive to the Millennials due to its postsecondary education system and entertainment district. At the same time, a low cost of doing business is driving industrial diversity.

Historically, PwC reports, local owners and developers have dominated Nashville—but that looks to be changing as institutional investors have discovered the improving economy and opportunities offered by growth in the urban center and the increase in the city's industrial base.

“Local perceptions of the market are that the strength in the local economy will continue to drive investor demand in 2015,” PwC predicts. “The increasing interest in the market by national institutional investors will be supported by the strong local development community.”

Jonathan D. Miller, partner in Miller Ryan LLC and author of the TrendCzar blog for Forum sister organization GlobeSt.com, predicts Nashville will “enjoy population growth and investor interest” in 2015. He referred to Nashville as a “top tier, secondary market.”

On the office front, Google marked Nashville as one of its seven tech hubs, which MMI says will serve as a network to the region's startups to diversity and attract new tenants to the metro and lift office space demand. Banking services company UBS is investing over $36 million in a new downtown facility, leasing 90,000 square feet and creating 1,000 high-paying jobs, the firm reports.

“Nashville is an emerging technology hub in the US,” says Grant Clarke, vice president of selling services at ServiceSource, a cloud-based recurring revenue management solutions company. “Nashville's vibrant culture and entrepreneurial spirit are key ingredients to building a dynamic workforce.”—Jennifer LeClaire

RALEIGH-DURHAM, NC

Raleigh-Durham is hitting on almost all cylinders, with industry watchers ranking the region high for office, industrial and multifamily. PricewaterhouseCoopers' Emerging Trends in Real Estate 2015 report points to the Millennial generation's fondness for this southern market, especially considering that several projects underway are urbanizing Raleigh/Durham.

According to PwC, this activity is creating an environment that is setting the stage for Raleigh-Durham to attract and retain a high-quality workforce. What's more, the market offers companies a “very competitive” cost of doing business.

“Local market participants feel that the strength of the local economy will drive activity in 2015,” PwC reports. “The continued strength of the economy could provide investment opportunities for a growing institutional investor base as well as support the strong local development community.”

Looking ahead, though, Raleigh-Durham could soon experience growth pains. For starters, Kevin Finkel, executive vice president of Resource Real Estate, points to a growing abundance of new multifamily supply in high-growth cities such as Raleigh.

“This new supply will put downward pressure on rents and occupancy for class A apartments,” he says. “Fortunately, the majority of new supply is concentrated in the urban core so certain suburban submarkets will be quite insulated from this negative impact, especially for class B and C apartments in strong suburban markets.”

What about the capital markets front? Clearly, the gateway markets are the hottest but Kevin Welsh, senior vice president of CBRE's institutional properties team, is starting to see more interest in what he calls the “edge cities” such as Charlotte, Raleigh and Charleston.

“These cities are not quite 24/7 communities, but rather can be called 18/7 communities, as they still have a nightlife and the live-play-work environment,” he says. “These markets are interesting because there's a lot of capital that wants to be in them. In terms of product class, the apartment space will continue to be strong in these markets because of the high demand from Millennials.”

Turning to the retail market, Avison Young's most recent Raleigh-Durham Retail Market Report predicts vacancy is likely to remain tight for the foreseeable future, placing upward pressure on rental rates. Construction activity is steady, the firm reports, but moderate by historical standards, with developers being very selective with regard to location and timing.

Finally, turning to offices, Avison predicts a lack of class A options will force more Triangle tenants to consider class B space in 2015. While several construction deliveries are scheduled in the next 12 months, the firm reports preleasing activity has been strong, and the additional space will not be enough to meet increasing demand. More projects are likely to break ground in 2015, Avison concludes, but landlords will find themselves in the driver's seat in the near term.—Jennifer LeClaire

SAN FRANCISCO

San Francisco's growth is largely attributable to the high-tech industry and that has changed real estate development patterns and demographics in the city toward a younger population that desires the urban lifestyle. That is according to CBRE's Colin Yasukochi, head of research and analysis in the Northern California market.

He says real estate demand has surged with more than seven million square feet of office space and 14,000 residential units either recently completed or under construction. “There have also been numerous new restaurants and retail store openings catering to the rise in the millennial population. Most of this new development has been concentrated within the greater downtown and South of Market street area.”

And many developments are pushing forward across multiple property sectors. For example, in early February, HCP broke ground on the first phase of the Cove at Oyster Point, a new life science development located in South San Francisco.

“The time is right for new development in South San Francisco,” according to CBRE life sciences expert Chris Jacobs, who, along with the firm's Rick Friday, was engaged by HCP to exclusively handle leasing of that project. “Vacancy for research space in the area is less than 1%, while demand is strong.”

According to Jacobs, “Market fundamentals and industry dynamics have built a compelling case for new development. I've been tracking life sciences for 25 years and never seen vacancy this low. The strong demand we're seeing from life sciences tenants simply can't be met with the limited, existing inventory.”

Adds Friday, “There are several life science companies with large requirements in the market right now. These tenants are looking for the type of amenity-rich and collaborative environment that the Cove will offer; as such we anticipate leasing at the project to be quite competitive.”

And it isn't only the local or even US firms that are keen on San Francisco. Chinese real estate investors and developers can't get enough Bay Area real estate, particularly large development projects in prime locations.

Paul Hastings real estate partner David Hamsher relates that recent investments have principally been made in dense commercial and mixed-use areas, and have been dominated by high-rise development sites—the same types of projects that have been built in China over the past decade.

“The recently announced blockbuster deal to sell a prominent development site in the heart of Downtown San Francisco to Oceanwide Holdings—a large publicly traded Chinese developer—is a clear example of this trend,” he says. Oceanwide Holdings, Tohigh Property Investment LLC purchased the First & Mission project for $296 million. Located in the south of San Francisco's financial area, the project covers a land area of about 5,069 square meters, with total building area of about 218,300 square meters.

Hamsher expects to see more big deals like this in the coming year. “China and the Bay Area have longstanding cultural and economic ties that are only growing stronger,” he says. “Growth has slowed in China—particularly in real estate—and demand in the Bay Area is extremely strong across a wide range of sectors.”

He continues, “Chinese developers and investors have lots of money and experience that they are eager to put to work around the world. So, short of a dramatic change in jobs in the Bay Area, a hiccup in international relations or new political or economic winds in China, Chinese interest in Bay Area real estate will remain strong in 2015.”—Natalie Dolce

For the latest news and analysis of the San Francisco commercial real estate market, visit GlobeSt.com's dedicated edition.

SAN JOSE, CA

Nestled just south of the booming San Francisco market sits San Jose, the largest city in a market with serious tech cred, including nearby headquarters offices of Apple and Google. The market is one of the top commercial real estate growth sectors in the country, with major job growth from technology companies fueling office development, residential development and the local economy.

We have a white-hot economy in San Jose, Stanford Jones, EVP of investments at Marcus & Millichap, relates. “It is a very dynamic tech market with explosive job growth and office development, office absorption, and that is what is driving growth in the San Jose market. It is very vibrant.” CBRE director of research and analysis Colin Yasukochi echoes Jones' comments on the tech industry's role, saying, “Almost all of the growth is being driven by the tech industry. This has resulted in a lot of office construction and a lot of residential construction as well.”

The market is made up of San Jose proper and San Jose MSA, which encompasses everything north, including Sunnyvale, Mountain View, the home of Google, and Cupertino, the home of Apple. Yasukochi refers to this as the “greater Palo Alto area,” and says that you can see the wave of growth moving out from there, starting in Palo Alto, Mountain View, Sunnyvale, Cupertino, and moving south through Santa Clara and north San Jose. “It really works in that order in terms of the wave of growth, says Yasukochi. “These markets are near Stanford University and venture capital, and traditionally they have been home to some of the largest and fast growing tech firms, and that is why these geographies are growing quite rapidly.” At the end of 2014, the Palo Alto office market had a vacancy rate of 4.8% and an incredible rental rate of $6.16 per square foot.

Although the presence of Apple and Google is nothing new, it's the sustained growth of these companies that's fueling this demand and attracting other tech companies to settle nearby. “While Apple and Google have been here for a long time, they have continued to expand at a very rapid pace,” Jones explains. “It is an overlay to the market, and it is common for them to announce every quarter that they are absorbing another 1.5 million square feet of office space. Apple is also in the process of building the Apple 2 Campus, which is an extremely monumental event for the South Bay.”

The growth of high-paying jobs from this industry is also driving multifamily development. According to Jones, there are 70,000 apartment units poised to come on line in the Bay Area over the next four years, and 30,000 of those units are in San Jose MSA. “That is very significant from a historical perspective,” he says, noting that there is also a lot of rehab-to-core work and value-add construction. The average rate for a two-bedroom apartment in the area currently ranges from $3,500 to $4,500, and the prices haven't slowed absorption. “Rents are up between 45% and 50% from the downturn in 2008 and 2009,” says Jones, adding that there are also exceptionally high barriers to entry for investors looking to break into this market. “There are still relatively few opportunities in the core markets, and they are commanding very low yields—in the low fours. In the new construction stuff, those yields drop down into the low threes. But, it is a multi-buyer bidding process.”

Jones expects the multifamily market to continue to thrive at this pace for the next two years. “Right now the job formation has been outpacing the housing formation, and we expect that to continue through 2015 and into 2016,” he says. “It will likely become more of an equilibrium through 2017.” For the office sector, Yasukochi agrees that this upward momentum will continue through the year, but may begin to slow. “We don't have a specific forecast, but we certainly expect this to be another year of strong growth, but it may not be as robust as 2014,” says Yasukochi. “Just like any expansion cycle, the growth rates start to moderate. The growth really started in 2010 and accelerated in 2011, and has been fairly strong since that time.”—Kelsi Borland

SEATTLE

Washington many times has been called the “most innovative state in the nation,” based on its large technology workforce, high productivity rates and vast array of public technology companies. According to JLL managing director Steve Schwartz, Seattle's workforce, collaborative startup environment and quality real estate has made the city one of the most desired locations in the country for high-tech companies of all sizes.

Several major tech tenants have recently entered the market. Chinese e-commerce company, Alibaba Group, for example, opened up a recruiting office in Seattle in October. Other tech tenants that recently entered the market include Apple, Galvanize, Oracle, HP and Dropbox. Additionally, companies such as Tableau, which already has a local presence, have been expanding their footprint. Zillow too recently expanded its national headquarters in downtown Seattle, signing a lease to occupy five additional floors of the Russell Investments Center at 1301 Second Ave. in early 2017, adding 113,470 square feet of office space. With the expansion, Zillow will occupy floors 29-40 by 2017, totaling 268,514 square feet, and will be the largest tenant in the 42-story building.

Schwartz says that “Seattle's economy has hit a new all-time non-farm employment peak and boasts one of the lowest unemployment rates of any major metro area, with the local unemployment rate 110 basis points below the national average. The most recent employment forecast from the Puget Sound Economic Forecaster calls for impressive job growth of 2.6% in 2015. Current figures show that unemployment in November 2014 stood at 6.2% statewide and 4.7% in the Seattle-Bellevue-Everett area. Over the past 12 months, a total of 82,700 jobs have been added in Washington, mostly in the professional and business services (this sector includes many jobs related to high-tech) industries, construction, retail trade, government, and education and health services.

According to a recent Colliers International report, Silicon Valley companies are expected to grow local head count and expand Seattle operations. In addition, the firm says another outlook, at least for the local office market, is that “commodity” assets that are recapitalized will undergo renovations and will be repositioned.

The firm points out that demand from technology and creative sectors account for 50% of tenants in the market. And those tenants are seeking new or updated buildings in urban locations with great on-site and area amenities and they will pay a premium for the right space.

As for new construction, as of the end of Q4, according to Kidder Mathews, there were 17 office buildings under construction in the region with a total of 6.9 million square feet. Twelve of those are in the Seattle CBD, including four for Amazon accounting for 2.8 million square feet of that total; Phases VII and VIII by Vulcan and two of their own 1.1-million-square-foot towers.

In addition, Touchstone's 214,000-square-foot NorthEdge project in the Fremont neighborhood near the north end of Lake Union was also added to the list. Touchstone and Vulcan have both released preliminary designs for a total of four additional office buildings in the South Lake Union neighborhood of the Seattle CBD.

Outside of Seattle, Kidder Mathews says that work continues on the 180,000-square-foot second phase of Google's Kirkland campus. In the Bellevue CBD, Trammell Crow's 929 Tower project has gone vertical and Kemper Development has completed excavation for Lincoln Square II. Schnitzer West is getting closer to starting its Bellevue projects, the firm notes and Schnitzer's smaller tower will likely be next as Kemper's Lincoln Square II will have to wait until the massive parking garage for the mixed-use project is completed. No pre-leasing has been announced in any of the Bellevue projects.—Natalie Dolce