The good news in the sizzling Puget Sound office market is that new big blocks of space are on the way. The bad news is that they can’t seem to get here fast enough and there are not more of them.
“There are new construction projects coming on line in the next couple of years,” said Greg Inglin, Seattle-based senior vice president for commercial real estate services firm Colliers International. “By mid-2016, the bulk of spaces 100,000 square feet or more will be primarily new construction though some will be renewals or expansions.”
But the demand for large blocks of contiguous space is projected to just continue to outpace available supply in Puget Sound. Big Class A offices are expected to be quickly snatched up by technology tenants mostly but also traditional companies looking for the open floor plan preferred in today’s workplace.
“There’s not going to be much left,” Inglin said.
According to Colliers in its third quarter office report for the region, 17 buildings totaling 6.3 million square feet are under construction.
Among the largest blocks of space being built currently in Seattle are Daniels Real Estate’s The Mark high-rise at 811 Fifth Ave. with 528,000 square feet of offices and Schnitzer West’s Madison Centre tower at 505 Madison St. with about 750,000 square feet of commercial space. Another Schnitzer West project is the Urban Union mid-rise at 501 Fairview Ave. North, which will deliver 291,000 square feet of space.
In Bellevue, the 462,000-square-foot 929 Office Tower by Trammell Crow will be the first new Class A commercial building to rise out of downtown since 2010. Just recently, cloud-computing leader Salesforce announced plans to double its workforce in Puget Sound by leasing about 85,000 square feet at the 929 tower with an option to expand to more than 100,000 square feet.
“The Seattle area is home to some of the most talented enterprise software engineers in the world,” Salesforce co-founder Parker Harris said in a news release. “That’s why we are doubling down on our investment in the Seattle area, which will be a key innovation hub for the company.”
According to commercial real estate services firm JLL in its Seattle-Bellevue Office Insight third quarter report, several major office projects have been delivered so far this year, bringing 1.6 million square feet to the region’s Class A inventory.
“With 35.9 percent of the space currently preleased, tenants will have ample opportunity to acquire premier space and continue migrating to and growing in Puget Sound,” JLL said in its report. “Average asking rents for new construction space being marketed stand at $49.60 per square foot (on an annual full-service basis), representing a 47.2 percent premium over the regional average.”
In another report, JLL pointed out that Bellevue’s central business district is projected to see 1.5 million square feet of new space in the coming year. “This will provide additional opportunities for larger technology tenants to find sufficient space for their growing industry,” JLL said.
But all the new space coming to Puget Sound is not expected to stay available for long periods of time.
“Looking forward, we expect significant positive absorption in Q4 as previously signed leases commence and robust demand from technology and life-science companies continues,” Colliers said in its report, adding that other notable tenants in the hunt for new space include Docusign, Redfin, REI and Valve.
Image courtesy of JLL.