By Kate Snyder
Decreased tenant demands stemming from remote work could mean that several Eastside commercial developments initially planned to break ground in the next several months hit the pause button instead of moving forward, according to Broderick Group’s Q3 Eastside Office Market report for the Puget Sound region. During the third quarter, major companies like Microsoft and Amazon have announced delays to tenant improvements, intents to vacate leases with 2023 expirations and cancel planned expansions for projects in downtown Bellevue, showing that “the brakes have been slammed on the five-year party of relentless Big Tech expansion on the Eastside.”
Despite the forecast of potential slowed construction and sales activity, however, a number of projects are still moving forward at a steady pace. Jeff Livingston, vice president of Broderick Group, said the Eastside area is still an attractive place to live and work, citing the school districts and transit services. He also made note that the trends the region is seeing is not unique to the state.
“Economically, Washington is still a great place to live,” Livingston said. “I think it’s a macro trend that’s playing out in our area.”
Outside of the Bellevue CBD, a handful of new development sites are in the early stages of entitlement, according to the report. Wright Runstad and Shorenstein are in the process of receiving entitlements for Block 15, which is an 11-story office building scheduled to deliver 327,000 square feet of office and retail space at the end of 2024 in The Spring District, a block from the nearby future light rail station. Westbrook’s Woodlands at Bellevue – on the former Boeing/Eastgate Campus on I-90 – is an approximately 670,000 square foot complex with a July 2023 delivery date and “a rare suburban alternative to the large amount of new CBD planned projects.”
Other projects have a less certain future, according to the report, stemming from a number of factors, including the rise of remote work, the increased costs of construction and Microsoft’s uncertain future commitment to the Bellevue CBD. But those that are in the works include Skanska’s The Eight, which is a 552,000 square foot tower on NE 8th in downtown Bellevue that is slated to deliver in early 2024 as well as the 480,000 square foot Four106 by Houston-based Patrinely Group that has a 2025 completion date. Kirkland Ascent, a 57,000 square foot three-story building developed by Talon, is also scheduled to be completed in late 2023.
According to the report, the previously announced 224,000 square foot Plaza 305 site owned by Capstone and Prudential is evaluating the possibility of repositioning the project as a residential development. Among projects that could break ground in 2023 are Clarion and KG Investments’ 19-story, 450,000 square foot tower on the corner of NE 4th and 108th; the first phase of Tishman Speyer’s 112th & Main, which is two 13-story towers totaling 550,000 square feet; and Columbia Pacific’s 16-story, 382,000 square foot building on the edge of downtown at NE 2nd and 112th adjacent to I-405. However, the report emphasizes the high likelihood that all of these projects could abstain from breaking ground until tenant demand returns.
“If Skanska (which has the advantage of lower construction and land costs) is successful at leasing a large portion of The Eight by 2024, and Microsoft reconsiders its commitment to downtown Bellevue, then the door will open for additional projects to break ground,” the report states. “Until then, all new developments will pause to assess the unfolding market conditions.”
Livingston said with regards to office development, there were a large number of groups that purchased or land-leased parcels downtown, and at a certain point, it’s too late for companies to stop moving forward on projects. In 2020 and 2021, he said, there was a mad dash to tie up development sites and now demand has slowed down. While the short-term is so hard to predict with the shifting positions on employees returning to the office, however, Livingston noted that there is still plenty to be excited about in future Eastside development.
“Long-term, I’m very optimistic for the future of the Eastside,” he said.
