1Q’11 PUGET SOUND MARKET REPORT
Eastside and Northend Office Market TECH BOOM The Eastside and Northend Office Markets experienced a significant rise in activity in the first quarter of 2011. The CBD, along with many of the suburban Eastside markets, has seen significant growth in the high tech and bio tech sectors as vacancy in these markets has remained relatively flat over the
EASTSIDE AND NORTHEND OFFICE SUBMARKETS LEGEND Northend Office Submarkets Eastside Office Submarkets 5
last year.
EVERETT CBD
The year got off to a healthy start, with many new leases
S SNOHOMISH COUNTY
being signed and a large number of tenants touring prospective
S EVERETT/ HARBOR POINTE
spaces in the CBD, Issaquah, Redmond and Bothell. The I-90 Corridor was the most active submarket in the first quarter, with its excellent access, large blocks of vacant available space and building efficiencies. This market should continue to gain strength and grow as the 520 Bridge toll will force companies to
EDMONDS/ LYNNWOOD
MILL CREEK/ WOODINVILLE
BOTHELL
choose a location that will be economical for their employees. Rental rates, vacancy, absorption and concessions were mostly unchanged during the first quarter, which can be an early indicator of market stability. One gauge of local market strength
405 NORTHGATE/ N SEATTLE KIRKLAND
continues to be illustrated by the growing number of pending transactions. We anticipate increased signs of stabilization and
520 CORRIDOR
520
positive rental growth as we head into the second quarter. The benefits of the year’s earlier activity should start to fully be realized as we head into the third quarter, with recently signed
REDMOND
5
SEATTLE
tenants beginning to occupy their new spaces. In addition, we
BELLEVUE
SUBURBAN BELLEVUE BELLEVUE CBD I-90 CORRIDOR
MERCER ISLAND
anticipate continued market momentum as companies with
ISSAQUAH
90
2012 or 2013 lease expirations start to look for space. One of the major issues that will impact the Eastside office market will be the diminishing supply of large blocks of contiguous space. Major tenants – those requiring 75,000 SF or
The true vacancy in the Eastside and Northend Markets can
more - will find it increasingly difficult to identify spaces that
be best illustrated by the number of small spaces spread
adequately meet their size requirements. As the high tech and
throughout the various submarkets. As market demand returns
biomedical industries continue to grow, the demand for larger
and space requirements rise, development of downtown office
spaces will continue to increase. Their movement in the market
product and suburban business parks should start to return to
will have a trickle -down effect on other industry segments
support the expansion.
requiring larger, contiguous work spaces. Current capacity is not
The Eastside Office Market will anxiously await the outcome of
able to support this type of growth and with very few, if any, new
the possible AT&T/T-Mobile merger, which could greatly affect
projects in the pipeline the more desirable large blocks of space
the market if a space consolidation is needed, or if a massive
will continue to diminish.
expansion occurs.
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S EAT T L E | BEL L EVU E | TA COM A | PORTLA N D
1Q’11 PUGET SOUND MARKET REPORT
Eastside Office Market The Eastside Office Market consists of nine submarkets, with 666
HISTORICAL VACANCY RATES & RENTAL RATES
buildings and a total of 34,700,529 SF. The overall vacancy rate is nearly
18.0%
$35.00
even with where it ended in 2010, while average asking rental rates have
15.0%
$30.00
gone up in nearly all submarkets. Overall, year to date net absorption
12.0%
is on pace with 2010, with the largest gains in the first quarter in the Kirkland and Bothell submarkets.
$25.00 $20.00
9.0%
$15.00
6.0%
$10.00
3.0% 0.0%
$5.00
2005
2006
Eastside Office Overview Market Area
2008
Rental Rates (FS)
INVENTORY Buildings
Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE OFFICE
2007
51 72 76 58 39 112 20 68 170 666
SF
Direct Vacancy
Sublet Vacancy
Total Vacancy
8,404,237 3,865,553 3,112,139 4,798,470 1,790,277 4,034,108 438,616 3,814,326 4,442,803 34,700,529
13.2% 18.4% 10.8% 15.2% 10.4% 16.7% 14.7% 19.0% 13.5% 14.8%
1.6% 1.9% 0.1% 0.8% 2.6% 1.4% 0.2% 1.4% 0.8% 1.3%
14.8% 20.3% 10.9% 16.0% 13.0% 18.1% 14.9% 20.4% 14.3% 16.1%
ABSORPTION 1Q YTD
7,642 56,301 20,630 1,590 17,533 50,221 3,664 20,288 (104,585) 73,284
7,642 56,301 20,630 1,590 17,533 50,221 3,664 20,288 (104,585) 73,284
2009
2010
$0.00
2011
Vacancy Rates AVG CLASS A RENT & EXPENSES (FS) Rent NNN
$34.52 $27.00 $27.37 $31.05 $27.82 $30.31 $32.00 $28.53 $35.00 $30.40
$9.75 $8.00 $7.00 $8.50 $7.50 $8.00 $9.00 $7.00 $8.50 $8.14
Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE OFFICE
2004
2005
2006
2007
2008
2009
1Q 2010
2Q 2010
3Q 2010
4Q 2010
1Q 2011
16.3% 20.0% 12.7% 14.1% 3.3% 14.0% 3.6% 23.2% 11.1% 14.9%
9.6% 15.1% 12.3% 9.0% 2.0% 7.4% 1.2% 13.2% 7.7% 9.7%
5.5% 16.1% 8.9% 5.8% 3.0% 10.6% 1.8% 9.7% 10.1% 8.7%
6.9% 26.2% 3.5% 6.7% 5.9% 6.8% 4.9% 7.8% 8.3% 9.0%
10.5% 27.8% 6.5% 15.0% 2.3% 12.6% 10.1% 12.0% 9.7% 12.6%
13.4% 22.9% 12.0% 16.9% 6.5% 19.0% 14.8% 21.8% 11.6% 15.8%
15.7% 22.0% 12.6% 15.8% 7.9% 18.2% 15.6% 25.1% 11.4% 16.5%
16.3% 22.9% 12.7% 14.9% 4.9% 17.0% 20.4% 23.6% 11.1% 16.4%
15.3% 21.1% 13.0% 16.5% 13.9% 17.4% 19.3% 19.7% 12.5% 16.2%
14.9% 21.7% 11.5% 16.1% 14.1% 19.3% 15.7% 19.9% 12.1% 16.2%
14.8% 20.3% 10.9% 16.0% 13.0% 18.1% 14.9% 20.4% 14.3% 16.1%
Historical Rents (FS) Market Area
Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE OFFICE
Historical Total Absorption
2007
2008
2009
2010
$37.87 $25.81 $28.04 $34.61 $31.42 $31.22 $29.42 $28.74 $29.20 $30.70
$39.06 $26.14 $28.59 $35.50 $31.65 $32.96 $30.40 $28.91 $29.88 $31.45
$35.02 $23.54 $26.15 $31.04 $29.95 $27.57 $26.65 $25.11 $26.02 $27.89
$32.67 $23.58 $24.51 $30.37 $29.04 $27.18 $26.63 $24.45 $24.65 $27.01
Market Area
1Q 2010
2Q 2010
3Q 2010
4Q 2010
2010
1Q 2011
Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE OFFICE
(191,343) 37,381 (18,227) 126,193 (25,336) 31,084 (3,589) (123,411) 12,483 (154,765)
(50,899) (35,567) (2,390) 11,797 (16,431) 49,563 (21,177) 54,638 9,977 (489)
81,147 70,787 (8,388) 231,887 (48,569) (16,464) 4,882 144,764 (22,694) 437,352
37,295 (25,991) 44,697 (85,126) (2,883) (78,489) 15,633 61,787 19,394 (13,683)
(123,800) 46,610 15,692 284,751 (93,219) (14,306) (4,251) 137,778 19,160 268,415
7,642 56,301 20,630 1,590 17,533 50,221 3,664 20,288 (104,585) 73,284
Asking Lease Rates by Class (FS) Class A
Bellevue CBD Bothell 520 Corridor I-90 Corridor Issaquah Kirkland Mercer Island Redmond Suburban Bellevue EASTSIDE OFFICE
$34.52 $27.00 $27.37 $31.05 $27.82 $30.31 $32.00 $28.53 $35.00 $30.40
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LEASE RATES (FULL SERVICE) Class B Class C
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$26.96 $23.65 $24.03 $27.63 $29.50 $24.96 $23.92 $22.71 $25.05 $25.38
$20.51 $19.17 $14.10 $20.00 $22.72 $23.98 $18.94 $18.35 $17.77 $19.50
Class A
$10.75 $9.00 $8.00 $9.50 $8.50 $9.00 $10.00 $8.00 $9.50 $9.14
OPERATING EXPENSES* (PSF) Class B Class C
$9.75 $8.00 $7.00 $8.50 $7.50 $8.00 $9.00 $7.00 $8.50 $8.14
$8.75 $7.00 $6.00 $7.50 $6.50 $7.00 $8.00 $6.00 $7.50 $7.14
*Expenses are approximate
Market Area
S EAT T L E | BEL L EVU E | TA COM A | PORTLA N D
Prior years as of 4Q
Historical Total Vacancy Market Area
1Q’11 PUGET SOUND MARKET REPORT
Northend Office Market The Northend Office Market consists of seven submarkets, with 295
HISTORICAL VACANCY RATES & RENTAL RATES
buildings and a total of 8,645,620 SF. The overall vacancy rate is even
16.0%
$27.50
with where it ended in 2010, while average asking rental rates have
14.0%
$26.00
edged down slightly. Year to date net absorption is heading into positive
12.0%
$24.50
territory, with the largest gains in the first quarter in the Woodinville/
10.0%
$23.00
8.0%
$21.50
Mill Creek submarket.
6.0%
2005
2006
2007
2008
Rental Rates (FS)
2009
2010
2011
$20.00
Vacancy Rates
Northend Office Overview INVENTORY Buildings
Market Area
ABSORPTION SF
Direct Vacancy
Sublet Vacancy
Total Vacancy
1Q
YTD
AVERAGE RENT & EXPENSES (FS) Rent NNN
Everett CBD
57
1,708,912
7.4%
0.0%
7.4%
3,935
3,935
$22.14
$4.50
Lynnwood/Edmonds
92
2,791,113
23.6%
0.1%
23.7%
7,947
7,947
$22.72
$5.50
Woodinville/Mill Creek
27
671,368
20.6%
0.0%
20.6%
42,238
42,238
$20.57
$4.50
N Snohomish County
19
361,271
6.7%
0.0%
6.7%
(1,950)
(1,950)
$20.50
$4.50
S Snohomish County
7
227,227
9.3%
0.0%
9.3%
-
-
$20.50
$4.50
S Everett/Harbor Point
43
1,237,737
9.4%
1.7%
11.1%
5,343
5,343
$19.80
$4.50
North Seattle/Northgate
50
1,647,992
10.9%
0.6%
11.5%
18,134
18,134
$22.01
$5.00
NORTHEND OFFICE
295
8,645,620
14.6%
0.4%
15.0%
75,647
75,647
$22.10
$5.19
Historical Total Vacancy 2004
2005
2006
2007
2008
2009
Q1 2010
Q2 2010
Q3 2010
4 2010
Everett CBD
5.0%
6.7%
6.5%
8.9%
5.6%
4.1%
4.9%
5.1%
6.2%
7.7%
7.4%
Lynnwood/Edmonds
17.0%
17.0%
17.7%
18.9%
16.3%
23.0%
24.7%
24.3%
24.5%
24.0%
23.7%
Woodinville/Mill Creek
5.2%
7.9%
10.2%
12.8%
29.3%
30.8%
30.7%
30.5%
28.0%
26.9%
20.6%
N Snohomish County
5.1%
2.8%
3.4%
3.1%
4.4%
5.1%
5.4%
6.5%
5.7%
6.1%
6.7%
S Snohomish County
1.0%
11.0%
13.3%
12.6%
12.0%
8.7%
7.1%
7.1%
11.5%
9.3%
9.3%
S Everett/Harbor Point
13.8%
16.3%
10.7%
9.4%
9.5%
12.0%
12.6%
10.8%
11.7%
11.5%
11.1%
North Seattle/Northgate
9.3%
11.2%
11.5%
9.5%
11.2%
12.8%
12.7%
12.8%
11.8%
12.7%
11.5%
NORTHEND OFFICE
11.1%
12.3%
11.9%
12.4%
12.6%
15.2%
16.0%
15.7%
15.8%
15.9%
15.0%
Historical Rents (FS)
Q1 2011
Historical Total Absorption
Market Area
2007
2008
2009
2010
Market Area
Q1 2010
Q2 2010
Q3 2010
Q4 2010
2010
Q1 2011
Everett CBD
$24.54
$23.32
$23.43
$23.29
Everett CBD
(14,091)
(3,679)
(17,901)
(25,161)
(60,832)
3,935
Lynnwood/Edmonds
$24.23
$24.15
$22.70
$22.33
Lynnwood/Edmonds
(47,880)
12,372
(5,431)
13,135
(27,804)
7,947
Woodinville/Mill Creek
$26.80
$25.89
$23.26
$22.72
Woodinville/Mill Creek
7,584
1,465
16,830
7,190
33,069
42,238
N Snohomish County
$25.83
$24.87
$21.58
$21.42
N Snohomish County
(1,034)
(4,070)
3,144
(1,685)
(3,645)
(1,950)
S Snohomish County
$26.87
$27.60
$20.41
$28.09
S Snohomish County
3,811
-
(10,168)
5,099
(1,258)
-
S Everett/Harbor Point
$22.46
$22.62
$22.26
$21.92
S Everett/Harbor Point
(7,773)
22,849
(12,110)
2,549
5,515
5,343
North Seattle/Northgate
$26.80
$25.61
$23.12
$22.49
North Seattle/Northgate
1,865
(1,712)
16,847
(14,326)
2,674
18,134
NORTHEND OFFICE
$25.36
$24.87
$22.39
$23.18
NORTHEND OFFICE
(57,518)
27,225
(8,789)
(13,199)
(52,281)
75,647
Asking Lease Rates by Class (FS) Class A
LEASE RATES (FULL SERVICE) Class B Class C
Class A
OPERATING EXPENSES* (PSF) Class B Class C
-
$26.47
$17.80
-
$5.00
$4.00
$25.34
-
$20.09
$6.50
-
$4.50
Woodinville/Mill Creek
-
$23.02
$18.11
-
$5.00
$4.00
N Snohomish County
-
$22.00
$19.00
-
$5.00
$4.00
S Snohomish County
-
$22.00
$19.00
-
$5.00
$4.00
S Everett/Harbor Point
-
$23.29
$16.31
-
$5.00
$4.00
North Seattle/Northgate
$23.62
$22.48
$19.94
$6.00
$5.00
$4.00
NORTHEND OFFICE
$24.48
$23.21
$18.61
$6.50
$5.00
$4.07
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Everett CBD Lynnwood/Edmonds
*Expenses are approximate
Market Area
S EAT T L E | BEL L EVU E | TA COM A | PORTLA N D
Prior years as of 4Q
Market Area