By Meghan Hall
Over the past market cycle, established organizations have dominated the commercial real estate industry, and that trend has continued to hold true through the first quarter of 2022. Over the past several months, Amazon and the University of Washington signed up for more than 100,000 square feet each, expanding their presence into other markets. Both leases were highlighted in a first quarter report released by brokerage firm Newmark.
Amazon’s 178,957 square foot lease at Redmond Hilltop was the largest of the quarter. The e-commerce giant already occupied real estate in the area, and has office space at the Redmond Town Center and additional R&D space in East Redmond. Newmark estimates that the latest lease will bring 800 more jobs to Redmond.
In a second significant direct lease, the University of Washington took 119,499 square feet at 1601 Lind. A former FAA building, the property is located in the Renton/Tukwila submarket. The property had been vacant for several years prior to UW’s lease. The university intends to use the space for its Department of Laboratory Medicine and Pathology.
The first quarter marked something that office users have long been waiting for: the end of COVID-19 restrictions. According to Newmark, office users are now beginning to fill space they have leased over the past couple of years, even though hybrid work models are expected to remain. Sublease availability continues to “rapidly” decline, with more than 250,000 square feet removed from the market. Year-over-year, available space is down 1.4 million square feet.
“The Puget Sound office market steadily improved at the start of the new year, with solid fundamentals and indications that the overall outlook for 2022 is bright,” Newmark states in its report. “Mask mandates in King County were rolled back in mid-March, an encouraging step that stimulated a return-to-office wave for some of the region’s largest employers.”
By the end of Q1, overall vacancy in the Puget Sound was 10.4 percent; direct vacancy sat at 9.5 percent. The region also saw its third consecutive quarter of positive net absorption, which totaled more than 1.027 million square feet. Rental rates rose to $45.10 per square foot, up from $42.01 per square foot a year ago.
According to Newmark, vacancy will continue to decline, and the market will continue to improve. Newmark notes that, “the flattening of the coronavirus curve has made employers cautiously optimistic that the end of the pandemic is in sight.”