Office construction is in full swing across the country, with 101 million square feet in the pipeline. However, 65 percent of the new development is in just 10 markets, with New York leading the way followed by Dallas, D.C. and Seattle-Bellevue, according to Jones Lang LaSalle’s (JLL) 2016 Second Quarter Office Report. The amount of office space scheduled to deliver in Seattle and Bellevue, over the next 18 months, is 6.5 million square feet.
“South Lake Union is clearly on fire right now, there’s very little vacancy,” said JJ Shephard, a managing director for JLL in Seattle. “Overall, I would say that the Seattle market, in general, is going through some significant expansions, in terms of employment growth. So we’re seeing across all different spectrums of the employment base, led by tech, close to about a 70 percent absorption. We’re going to continue to see a lot of absorption the next couple of quarters right in those three new buildings right in the Denny Triangle area. There’s also some tenants circling that could be taking a significant portion of that vacancy. We’re starting to run out of space in that large part of the city.”
At the beginning of the year, there was a little bit of a slowdown that lasted about two months, and now we’re off to the races again
According to Shephard, the Eastside will see most of the new product in downtown Bellevue. There’s also going to be some development in the Spring District, such as REI’s new headquarters, University of Washington’s Global Innovation Exchange and Tsinghua University of Beijing’s graduate institute.
On the Seattle side, South Lake Union and the Denny Triangle area will soon see upcoming deliveries by three large projects that are under construction, says Shephard. Tilt 49 is a 307,296 square-foot multi-use project by joint venture M. A. Mortenson Company, AMLI Residential and Touchstone Corporation. Hill 7 is a 286,000-square-foot project by Touchstone and Midtown 21 is a 332,400-square-foot project by Trammell Crow Company. There are also two big high-rises, Madison Centre by Schnitzer West LLC and The Mark by Daniels Real Estate LLC, that will be delivered mid to late 2017, added Shephard.
According to Downtown Seattle Association’s (DSA) 2016 Mid Year Development Guide, Amazon is leading the way with two upcoming projects. A $275 million project, located at 2100 7th Avenue, is scheduled to deliver 1,131,000 square feet in 2019. A second $250 million project, located at 2101 7th Avenue, is under construction and on pace to deliver 1,152,000 square feet this year.
Three other large projects are also underway, says the same DSA report. Daniels Real Estate’s $400 million hotel and office project called The Mark, located at 811 5th Avenue is under construction and scheduled to deliver 528,000 square feet in 2017, says the same report. Touchstone broke ground on a $285 million 796,000 square-foot project at 300 Boren Avenue North, and is anticipated to be complete in 2017. Kilroy Realty Corporation’s $375 million project located at 333 Dexter Avenue North is scheduled to deliver 582,000 square feet in 2018. Forty-four percent of the space scheduled to be delivered by 2017 has been leased, according to JLL’s July 18, 2016 Chart of the Week for Seattle and Bellevue.
“We are not seeing a slowdown,” said Shephard. “At the beginning of the year, there was a little bit of a slowdown that lasted about two months, and now we’re off to the races again. There are a lot of new tenants in the market right now, on both sides of the lake. What we’re finding is that most of the companies that moved here over the last five years, many coming up from the Bay Area, have come to open an engineering office. Most are growing because they’re finding it easier to attract really good engineering talent here in Seattle. So I expect this year to be a very strong year for Seattle, with regards to the commercial real estate market.”