The third quarter of 2023 has brought some notable changes to Seattle’s office leasing market. Leasing activity experienced a significant uptick, yet deal volumes remained below pre-pandemic levels, according to a third-quarter Seattle/Puget Sound market analysis by Savills. Meanwhile, availability rates fluctuated, with a surprising stabilization in the Seattle CBD submarket.
Leasing activity in the third quarter of this year reached 1.4 million square feet, marking a notable increase from the previous quarter’s 1 million figure. However, these numbers remain well below the 1.9 million square feet in activity reported a year ago. The boost in activity this quarter can be attributed to two substantial transactions, each close to 150,000 square feet: Amazon and Basis School. Notably, major corporate occupiers, including Amazon, have been renewing and expanding their office spaces, aligning with policies for in-person working days. This trend could potentially influence other companies in the area to recommit to returning to the office.
One of the significant shifts observed in the third quarter is the stabilization of availability rates in the Seattle CBD submarket. For the first time since 2019, Seattle CBD recorded a slight drop in availability, signaling a potential turning point. This submarket’s performance contrasts the overall availability rate in the Seattle/Puget Sound region, which climbed to 25.9 percent, a significant increase from 20.3 percent in Q3 2022. Additionally, the market has 3.4 million square feet of office space under construction, which, while offering attractive amenities for occupiers, may contribute to the overall availability challenges, the report stated.
Despite the fluctuations in availability and leasing activity, gross asking rents experienced a 9.8 percent year-over-year increase. This surge in rents can be attributed to rising operating costs and the introduction of premium office spaces to the market. Bellevue CBD stands out as the most expensive submarket, with an average asking rent of $59.91 per square foot. However, the growth in overall Class A rents has been more subdued, with a 3.1 percent increase compared to the broader market. Demand remains robust in Seattle’s trophy properties, but older Class A properties have seen softened conditions, tempering overall rent growth in this category.
In response to evolving workplace dynamics, many businesses are rethinking their office needs, Savills concluded. Some occupiers are opting for smaller, high-quality office spaces to better align with the changing workforce landscape. Buildings carrying substantial debt are facing unique challenges, emphasizing the critical importance of thorough due diligence when evaluating potential landlords to minimize risk when selecting office space, the report stated. As demand for office space remains subdued, landlords have been, and are likely to continue, offering increasingly generous concessions to attract and retain tenants, reaching historically high levels.