Compliments of Jason Smith of Kidder Mathews, attached is a Seattle-area office real estate market review for Q2 2014. As the report notes, so far in 2014, the only major surprise in the office market was Boeing expanding into over 600,000 s.f. of space in Bothell and the I-90 Corridor, single-handedly dropping the vacancy rates in those submarkets by 300-400 basis points (bps) each. The rest of the market trends are holding steady; leasing activity is improving across the region and the lack of large contiguous spaces in the Seattle and Bellevue central business districts (CBDs) have emboldened developers. Rental rates for Class A space in the CBD hotspots have moved up significantly, and with the economy continuing to improve, the forecast is for rental rates to continue their upwards trend over the next year.
The second quarter saw positive absorption in all five markets (Seattle, East King County, South King County, Snohomish County and Pierce County) for the first time in over six years. As a result of this activity, the region’s vacancy rate dropped to 9.5%, a full 50 bps lower than the first quarter. The forecast is for the vacancy rate to continue to decrease, perhaps at an even quicker pace, as tenants see their options narrowing and rental rates still not fully back to pre-recession levels.
The full Q2 2014 market review can be found here.