By Kate Snyder
Amid rising availability and rapidly rising debt costs plus Microsoft’s exit from the area, developers in the Eastside have more than enough reason to slam the brakes on planned developments. According to a recently released report from Broderick Group, “Q4 2023 Eastside Office Market Overview,” the Eastside has few projects currently under construction – the bulk of which are in Bellevue – with none planning to break ground in the near future throughout the region.
“If not for 1.4 million square feet of new construction delivering fully-leased to Amazon and Meta during the fourth quarter, net absorption would have been a jaw-dropping negative 1.1 million square feet,” the report states. “Blame can squarely be placed on the long-planned Microsoft exodus.”
There are only two projects, both in downtown Bellevue, that are currently under construction on a speculative basis with no pre-leasing to date, according to the report. The first is The Eight, by Skanska, which is a 552,000 square foot tower on NE 8th that is scheduled to be delivered in early 2024. The building is expected to be multi-tenanted and is closest to announcing signed leases in the next quarter. The other project, Houston-based Patrinely Group’s 480,000 square foot Four106, is located on NE 4th and will be delivered in Q2 2025. Tour activity at these two new developments has picked up significantly, though demand from full building users is not existent.
Bellevue’s Spring District saw construction wrapped up on Meta-leased Block 5, which spans 327,000 square feet. That and the 215,000 square foot Block 13 will increase Meta’s Spring District footprint to 1.8 million square feet, according to the report.
In the Kirkland submarket, which currently sits at just 4.4 percent vacant, Kirkland Ascent was delivered in the fourth quarter with a completed lobby and three full floors in shell condition, adding a 56,171 square foot block of available space that could be leased in full floor increments or as a single-user building.
According to the report, no additional office development projects are under construction or will break ground in the near future across the Eastside. Of the approximately 16.3 million square feet of projects in the development pipeline that are expected in 2026 and after, just one percent – or about 180,000 square feet – is pre-leased.
As the Eastside office market continues working to find its footing, there is some positive momentum the region is experiencing. Amazon provided a “kick in the pants,” according to the report, with its return to office mandate, and the more recent moves by Meta and Google to issue similar requirements to their employees help set a trend that will be mirrored by other mid cap technology companies. Additionally, the gap between supply and vacancy narrowed at the end of 2023 as the area saw a reemergence of tenant demand late in the year.
However, the recovery is likely to take years, with Class A offices leasing first, according to the report. Rents will then increase as inventory decreases, and price-conscious tenants will migrate to lower cost options.
“Tenants are seeking projects surrounded by walkable amenities and easy access to transit,” the report states. “In addition, users are seeking projects that offer redeeming qualities such as views, high ceilings, open air deck space and plentiful natural light. Poorly located aging buildings with antiquated infrastructure and little or no amenities are in for a difficult stretch.”
