While Amazon continues to be the market mover in Seattle with the two most notable leases in Q1 2017, another tech-based company has taken up nearly 50,000 square feet in downtown Seattle. Snap Inc., the group behind the popular app Snapchat has leased 47,338 square feet in the Market Place Tower, the third most significant lease signed this quarter, according to new Q1 2017 office market overview reports from the Broderick Group. The reports show that technology is still at the center of the vast majority of new development and leasing activity in the Seattle and Eastside markets.
Amazon recently announced its 100 percent pre-lease of Tilt49 in the Denny Regrade, which is set to deliver in Q3 this year, as well as 147,432 square feet at Westlake Terry in Lake Union. Outside of these leases, Capital One and Zillow were among the most significant leases this quarter. Capital One took up 39,489 square feet at 501 Eastlake, and Zillow is expanding to the Russell Investments Center with 38,723 square feet.
Heading into the second half of 2017, the Seattle market can expect increased vacancy rates due to deliveries of developments with vacant space. At the same time, strong leasing activity and rent growth is expected to continue through the end of 2017.
The news that Expedia will maintain a long term Bellevue presence is certainly a positive sign there may be more coming
Looking at the Eastside, the technology sector is dominating leasing activity, much as it does in Seattle, as well. Of the tenants that signed leases, the tech sector accounted for 88 percent of activity in Q1 2017. The next notable sector was gaming, with 5.5 percent of the activity. Additionally, the majority of leasing activity was in renewal rather than new leases at 86 percent and 14 percent, respectively.
One of the more anticipated leases on the Eastside is that of travel company Expedia. After Expedia announced it would be moving its headquarters to Seattle by 2019, the company renewed a lease of 112,354 square feet at the Skyline Tower in Bellevue, of which 56,000 will be long term, according to the report. “The news that Expedia will maintain a long term Bellevue presence is certainly a positive sign there may be more coming,” the report stated.
The Expedia lease had the third largest lease activity on the Eastside, behind Microsoft’s 255,171 square feet at Bravern I and the company’s other 211,362 square feet at Lincoln Square North Tower.
But due to the completion of some new developments in the Bellevue central business district (CBD) including Centre 425 (100 percent leased), Lincoln Square South Tower (87 percent leased or pending), and 929 Office Tower (84 percent leased or pending), vacancy rates rose to 18 percent at the close of Q1 2017. But the Broderick Group noted that taking into account leases that have been signed or are pending at new developments, the true vacancy in the CBD is closer to 11.8 percent, while the Eastside overall is seeing a vacancy rate of 9.8 percent. The Broderick Group projects that Bellevue CBD vacancies will quickly lower to below 10 percent in the second half of 2017.
While there has been activity in this cycle (2016-2018), the Eastside’s speculative development totals 2.2 million square feet with over half of that, 1.5 million square feet, in the Bellevue CBD, of which is 92 percent is leased or pending. But even with the 2.2 million square feet in development, the report notes that this pales in comparison to the 2007 to 2009 cycle, where 4.5 million square feet of speculative space was added. “Given the numbers, downtown Bellevue will likely demand more new construction,” stated the report.
However, there are still a few undetermined factors for the CBD including Expedia’s space at Tower 333, where it currently has 374,000 square feet, and at Civica, with 44,000 square feet. The leases for both of those buildings expire in December 2019.