1Q’11 PUGET SOUND MARKET REPORT
Seattle Office Market SEATTLE R E V IVA L The Seattle Office Market saw a significant jump in activity in
SEATTLE OFFICE SUBMARKETS MAP
the first quarter of this year, illustrated by a sizeable increase in the number of tenants touring the market for additional space,
BALLARD/ U DISTRICT
fewer available large blocks of space and nearly 345,000 SF of net absorption. Market velocity is beginning to tick upward in Seattle. Although the first quarter ended with 16.2% vacancy, there
QUEEN ANNE/ MAGNOLIA
were a total of nearly 180 signed leases and investment activity
LAKE UNION
has started to return to healthier levels, as occupancy in high
DENNY REGRADE SEATTLE CBD
functioning assets continues to rise.
520 CAPITOL HILL/ CENTRAL DISTRICT
SEATTLE
PIONEER SQ/ WATERFRONT
South Lake Union continues to outpace the rest of the Seattle market in terms of new development and will continue to be the
Elliott Bay
Lake Washington
90 5
primary area of growth in the Puget Sound region. One new South Lake Union tenant that will have a significant impact the vacancy rate in the second quarter is Amazon.com.
S SEATTLE/SODO WEST SEATTLE
With the continued progression of Amazon.com’s 1.7 million SF headquarters, the tech giant will take occupancy (544,000 SF) of Phase IV of their project in 2Q 2011. In addition to their own campus they recently signed a lease for 460,000 SF at one of the CBD’s newer buildings, 1918 Eighth. Another well known name taking up residence in the South Lake Union neighborhood is the Bill & Melinda Gates
Biotech, technology and medical companies have led
Foundation.
This 590,000 SF two-building campus sits just
the charge in the Puget Sound’s recovery and are leasing or
west of the Amazon.com headquarters and is also slated for
purchasing most of the large blocks of space in the area from
completion in the second quarter.
This exciting new facility
the CBD to Fremont. Aside from the large users, smaller groups
will be a draw for many national and international philanthropic
have been expanding as well. In Fremont alone, three tech
groups.
tenants are increasing their space needs by more than 8,000 SF
The availability of large blocks of space in the Seattle CBD
each. Overall, the South Lake Union and Fremont areas have
market has been steadily declining, making it increasingly
been the stalwarts in the Seattle office market, with continued
difficult for large companies to find suitable space. While the
growth and a high level of tenant activity.
Seattle CBD office market does have a 14.5% vacancy, there
There is much anticipation for the rest of 2011 in the Seattle
are only 4 buildings that are able to offer 100,000 SF or more
office market as we continue to see many tenants entering the
of contiguous space. Columbia Center offers the largest space
market and nearly 1,000,000 SF of absorption already slated
at 186,000 SF. Nearly 41% of the available 2,000,000 SF of
for the second quarter of this year. Overall, with 16.2% vacancy
availability in the CBD is comprised of spaces that are 50,000 SF
and rental rates stabilizing, the Seattle office market looks to be
or smaller.
enjoying a quicker recovery than what was initially anticipated.
(4 2 5 ) 9 7 4- 4000
w w w. pa c i fi c -re.c om
S EAT T L E | BEL L EVU E | TA COM A | PORTLA N D
1Q’11 PUGET SOUND MARKET REPORT
Seattle Office Market The Seattle Office Market consists of eight submarkets, with 697
HISTORICAL VACANCY RATES & RENTAL RATES
buildings and a total of 59,233,118 SF. The overall vacancy rate has
18.0%
edged slightly upward since the end of 2010, while average asking
15.0%
rental rates have declined. Overall, year to date net absorption is on
12.0%
pace with last year, with the largest gains in the Lake Union and Pioneer Square/Waterfront submarkets.
$32.00 $30.00
9.0%
$28.00
6.0% $26.00
3.0% 0.0%
2005
2006
INVENTORY Buildings
Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle SEATTLE OFFICE
2008
Rental Rates (FS)
Seattle Office Overview Market Area
2007
103 84 83 84 102 97 73 71 697
ABSORPTION SF
Direct Vacancy
Sublet Vacancy
Total Vacancy
1Q
YTD
25,161,152 3,166,922 5,566,588 4,643,628 7,931,918 6,050,336 3,875,806 2,836,768 59,233,118
13.3% 6.3% 12.6% 7.3% 24.3% 19.3% 18.1% 18.6% 15.0%
1.2% 4.4% 1.0% 0.1% 1.4% 1.4% 0.1% 0.0% 1.2%
14.5% 10.7% 13.6% 7.4% 25.7% 20.7% 18.2% 18.6% 16.2%
(79,448) 62,624 (20,748) 4,152 287,826 97,705 41,310 (49,750) 343,671
(79,448) 62,624 (20,748) 4,152 287,826 97,705 41,310 (49,750) 343,671
2009
2010
2011
$24.00
Vacancy Rates AVERAGE RENT & EXPENSES (FS) Rent NNN
$28.90 $25.42 $24.50 $27.00 $34.45 $23.84 $26.67 $22.98 $26.72
$9.45 $8.00 $8.25 $8.00 $9.45 $8.50 $8.50 $8.00 $8.52
Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle SEATTLE OFFICE
2004
2005
2006
2007
2008
2009
1Q 2010
2Q 2010
3Q 2010
4Q 2010
1Q 2011
13.4% 5.4% 14.1% 11.2% 18.3% 13.9% 17.7% 9.9% 13.3%
12.5% 4.7% 12.0% 10.6% 16.1% 11.9% 15.9% 9.7% 11.9%
10.4% 3.4% 9.7% 7.3% 11.6% 8.7% 8.5% 12.7% 9.2%
10.4% 2.7% 9.2% 4.1% 5.7% 7.2% 7.6% 9.6% 8.6%
11.0% 12.6% 8.1% 4.3% 6.4% 12.4% 5.8% 10.0% 10.1%
15.9% 11.9% 16.4% 13.5% 8.2% 15.6% 15.6% 10.9% 16.4%
15.6% 14.0% 15.7% 9.1% 25.5% 14.2% 16.1% 17.3% 16.2%
16.2% 14.5% 12.4% 8.6% 22.4% 18.4% 16.6% 18.6% 16.4%
15.3% 14.6% 13.1% 7.5% 22.3% 22.2% 16.4% 16.7% 16.3%
14.0% 14.4% 13.2% 7.2% 20.9% 22.4% 16.5% 15.9% 15.6%
14.5% 10.7% 13.6% 7.4% 25.7% 20.7% 18.2% 18.6% 16.2%
Historical Rents (FS) Market Area
Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle SEATTLE OFFICE
Historical Total Absorption
2007
2008
2009
2010
$35.37 $35.59 $29.25 $35.08 $32.52 $25.92 $25.81 $22.74 $30.29
$33.37 $31.10 $30.56 $31.05 $38.31 $28.97 $35.80 $22.95 $31.51
$29.49 $28.83 $26.16 $30.00 $31.29 $26.34 $21.55 $23.61 $27.16
$29.16 $28.06 $24.80 $29.53 $32.20 $25.69 $27.66 $23.25 $27.54
Market Area
1Q 2010
2Q 2010
3Q 2010
4Q 2010
2010
1Q 2011
Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle SEATTLE OFFICE
65,210 (63,698) 41,206 191,401 117,562 80,232 (16,586) (24,369) 390,958
(140,078) (16,787) 182,460 24,976 509,498 (3,664) (18,245) (2,512) 535,648
229,388 (2,393) (40,792) 30,320 144,692 (232,194) 4,559 53,491 187,071
320,815 78,031 (7,401) 22,719 98,069 (14,602) (1,035) 22,632 519,228
475,335 (4,847) 175,473 269,416 869,821 (170,228) (31,307) 49,242 1,632,905
(79,448) 62,624 (20,748) 4,152 287,826 97,705 41,310 (49,750) 343,671
Asking Lease Rates by Class (FS) Class A
Seattle CBD Ballard/U District Belltown/Denny Regrade Capitol Hill/Central District Lake Union Pioneer Square/Waterfront Queen Anne/Magnolia South Seattle SEATTLE OFFICE
$28.90 $25.42 $24.50 $27.00 $34.45 $23.84 $26.67 $22.98 $26.72
(4 2 5 ) 9 7 4- 4000
LEASE RATES (FULL SERVICE) Class B Class C
w w w. pa c i fi c -re.c om
$23.51 $22.23 $22.70 $24.47 $25.23 $22.44 $21.49 $21.36 $22.93
$17.18 $20.27 $21.20 $18.50 $18.50 $19.23 $22.00 $13.00 $18.74
Class A
$9.45 $8.00 $8.25 $8.00 $9.45 $8.50 $8.50 $8.00 $8.52
OPERATING EXPENSES* (PSF) Class B Class C
$8.45 $7.00 $7.25 $7.00 $8.45 $7.50 $7.50 $7.00 $7.52
$7.45 $6.00 $6.25 $6.00 $7.45 $6.50 $6.50 $6.00 $6.52
*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