By Kate Snyder
Despite a slight increase in vacancies, the question surrounding how remote work might change workplaces as well as a possible recession on the horizon, the Seattle office market is still in a good position to eventually recover much of its pre-pandemic demand in the next year or two, according to Broderick Group’s Seattle Q3 2022 Market Report.
David Greenwood, vice president for Broderick Group, shared his optimism for the future of Seattle’s office market while emphasizing the current uncertainty that’s gripping not just the Seattle area but markets across the country as employers grapple with return-to-office policies.
“Overwhelmingly, the broader consensus is there’s uncertainty in the market right now,” he said.
One of the biggest factors that remains in question is how major employers will utilize office space in the future. According to the report, employees have become accustomed to working from home, and “for employers and landlords alike to encourage a successful [return to office], it is imperative that they help make the office more like home and encourage social structures that result from RTO.” The report posits that some form of hybrid work – a combination of remote and in-office – will become commonplace, but the details of how that might happen would vary among different companies.
“Our research has shown that a form of hybrid work is here to stay and will be widely adopted across most companies throughout the region,” the report states. “The specifics of what hybrid work will look like will be unique to each company as employees will need a compelling reason to come to the office beyond an arbitrary mandate imposed by employers to come to the office ‘just because.’”
During the third quarter, direct vacancy rate was 14.21 percent, an increase over 2021’s 11.6 percent, according to the report. Out of 64 million square feet of office space, approximately 9.1 million is vacant. However, the increase is not a surprise, Greenwood said – experts knew what was planned and that it was coming, and despite the increase, he noted that the vacancy rate in general is maintaining a certain amount of stability. However, both he and the report shared details about where vacancies are more pronounced and which buildings are taking more of a hit in leasing.
“Well-located office buildings offering a host of amenities and collaborative workplace designs have led the pack in leasing activity while still preserving pre-pandemic level leasing rates,” the report states. “That said, dated office buildings with minimal amenity offerings and hard-to-get-to locations have been drastically impacted by the new leasing environment.”
Leasing activity in trophy assets and Class A buildings is doing well, Greenwood said, and where the most successful activity is taking place is where owners and developers are offering amenities like remodeled lobby space or gym space for office workers. Class B and C buildings, he said, are struggling with leasing and part of that may stem from the fact that the infrastructure in those buildings might not be able to support the amenities that others are offering. To fill vacancies, owners and developers of Class B and C buildings may have to offer additional concessions, Greenwood said, or get creative about what kind of amenities those types of buildings can support.
Despite the variables the market is facing, the Seattle area is still a robust region for commercial growth, Greenwood said, noting that the city has the best technology talent outside of Silicon Valley and “a dominant regional force in terms of labor supply.” The area is also trending toward becoming more of a cohesive region than in the past, Greenwood said, with companies having employees across not just Seattle and Bellevue but also places like Kirkland. How it will continue to change in the future remains to be determined.