Vacancy rate hits 11-year high in Seattle area as office space market enters recovery mode

The Seattle skyline and Mount Rainier. (GeekWire Photo / Kurt Schlosser)

New report: A market analysis for the first quarter of 2021 from the commercial real estate company Broderick Group expresses optimism that after a year of pandemic-induced working from home, organizations and employees will become more confident to return to the office in the Seattle area. The group is foreseeing a rise in demand and space inquiries as COVID-19 vaccination levels continue to rise, even as some companies adopt distributed work models and hybrid workplace protocols.

Key findings: Even as the report references the Puget Sound office market as being among the most resilient in the country, the rebound to pre-pandemic activity will take some time, and 2021 will be a recovery year for the market.

  • Seattles direct vacancy rate of 8.11% and sublease vacancy rate of 6.4% makes for a combined overall vacancy of 14.5%, the highest that number has been since 2010.
(Broderick Group Graphic)
  • The first quarter of 2020 brought 14 significant leases totaling approximately 456,000 square feet, while Q1 of 2021 saw just four significant leases totaling approximately 65,000 square feet.

Eastside growth: East of Seattle, especially in downtown Bellevue, Wash., 2020 was exceptionally difficult, the report says. And the first quarter of 2021 was unquestionably brutal as the vacancy rate rose to 9.5% driven by a glut of sublease space. But growth from tech giants Amazon, Microsoft, Facebook and Google, a reemergence of tenant activity and the rise of new towers in downtown Bellevue is fueling optimism for the rest of 2021 and beyond.

SpaceX is also growing on the Eastside, leasing a 124,907-square-foot building complex thats under construction in Redmond Ridge Business Park.

Top market for tech offices: A previous report from CBRE, on the strength of early-2020 activity, found the Seattle region to be the No. 1 market in the U.S. for tech office space, eclipsing the San Francisco Bay Area for the first time since 2013.

Tech companies coming back: As large tech employers start to bring workers back to offices across the region, real estate watchers are keeping an eye on the domino effect across other businesses.

Broderick Group singled out Amazon, the largest employer in Washington state, saying that their plans and employee happiness and success will drive their competitors and other companies to occupy their offices sooner than they may have previously planned.

  • Amazon told employeesin a memo last month that it expects most U.S. corporate office workers back in the office by early fall. It was the most recent update on remote work since Amazon said employees could continue to do their jobs from home through June 30.
  • Microsoft startedbringing employees backrecently to its Redmond, Wash., headquarters campus while also releasing new details about its plans for a hybrid workplace model.
  • Google announced this week that it will start opening some Seattle-area office buildings to employees for optional in-person work on April 20.

Seattle-based real estate company Zillow Group says that it will remain committed to its downtown office location for people who want to collaborate in person, but its going forward with a distributed workforce model. Plans to hire more than 2,000 employees this year wont be focused on a centralized headquarters.

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