Tech Carries the Ball as Seattle Office Leasing Slows

SEATTLE—Leasing dropped for the second consecutive quarter to 1.9 million square feet in fourth quarter 2019, according to research from Savills. This is down 4.8% from the previous quarter and 7.7% year-over-year.

This translates to leasing activity falling below the five-year average. Specifically, leasing activity was down 18.5% below the five-year average of 2.3 million square feet per quarter. Quarterly leasing previously peaked at 4.1 million square feet in the fourth quarter of 2016 and bottomed at 1.3 million square feet in the second quarter of 2017. Nearly 200 office leases were signed in the region in fourth quarter 2019, averaging almost 9,545 square foot per lease. And, a majority or 52.2% of large transactions occurred in the Downtown submarket.

But, despite the general slowdown, tech giants remain active, says Savills. Six of the 10 largest leases in the quarter came from the tech sector, which executed 69.2% of the quarter’s major transactions.

Notable tech giants were particularly active in the fourth quarter. Facebook expanded by 324,999 square feet at 124th Avenue NE in Bellevue/Eastside and into a new location at 9805 Willows Road NE (80,980 square feet), while Amazon expanded by 160,000 square feet at 300 Pine St. in downtown. Also notable, Bank of America subleased 115,000 square feet at Rainier Square Tower.

Moreover, class-A asking rents held flat as availability stabilizes. Seattle’s overall average office asking rent was $39.91 per square foot in fourth quarter, reflecting a 4% increase from the previous quarter, but a more muted 1% increase during the last year, according to the report.

Rents ranged from a low of $25.65 per square foot in Tacoma to a high of $46.54 per square foot in downtown Seattle. Class-A rents held flat year-over-year, even with a 2.9% uptick in the quarter, now standing at $48.99 per square foot. In 2019, rents in the Central Business District increased by a mere 0.9% to $44.98 per square foot, while suburban rents increased 4.8% to $29.81 per square foot.

All submarkets are at or near market balance except Southend. Core and suburban fundamentals illustrate a striking disparity, with fourth-quarter availability rates of 10% in the Central Business District and 18.7% in the suburbs, both reflecting modest quarterly tightening. Submarket availability rates range from 8% in Bellevue/Eastside and 11% in downtown Seattle to a high of 28.2% in Southend, according to the report.

“Large tech users on the Eastside continue to take down any available space,” Chris Kagi, assistant director with Savills, tells GlobeSt.com. “In the fourth quarter, Facebook leased more than 400,000 square feet in two separate locations in Bellevue/Eastside. As a result of the unrelenting activity, this submarket has become one of the most competitive in the entire country.”

More than 2.7 million square feet of office space is currently under construction, accounting for 2.4% of total office inventory.