Office vacancies up; rents dive in Seattle and on Eastside
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Office vacancies up; rents dive in Seattle and on Eastside
By Bill Kossen
Seattle Times business reporter
The rising vacancy rates in office space are finally paying off - for tenants.
The average rent for Class A space in downtown Seattle plummeted nearly 10 percent during the past three months, according to a report released yesterday by CB Richard Ellis, a commercial-real-estate company.
That came as the vacancy rate in the city's top buildings rose almost four percentage pointsto 9.6 percent.
The second-quarter drop in lease rates was the first big decline since the office vacancy rate started rising a year ago from below 2 percent.
Lease rates fell less on the Eastside, but that may be due to a lag in reporting, said Jane Blair, a CB Richard Ellis vice president.
"There is a ton of space on the Eastside," she said.
"There will be some incredible deals."
Much of the available square footage is due to faltering dot-com and high-tech companies subleasing space to help pay their bills, she said.
"It's a great time for tenants who are flexible and will move into sublease space," Blair said.
Those deals, however, likely won't be found in the more desirable locations and buildings on the Eastside or in downtown Seattle, she said. Rents there will remain fairly stable, and space will be hard to find - be it subleased or leased directly from the landlord, Blair said.
According to the report:
• The vacancy rate in downtown Seattle increased from 6 percent at the end of March to 9.6 percent now, while the average lease rate dropped from $37.37 to $33.72 a square foot a year.
• The Class A vacancy rate on all the Eastside rose from 5.1 percent to 9.3 percent. The average lease rate dropped from $30.82 to $29.80.
The lease-rate figures in the report are based on the asking price for office space during the quarter, not what existing tenants were paying. The rates can vary widely by locale.
"It's not good news, but we were at some pretty lofty rent levels to begin with," said Gary Carpenter, an executive vice president for Bentall, a Vancouver, B.C.-based development company with office buildings in the Seattle area. Carpenter is in charge of the company's U.S. operations.
While the downtown Seattle, Eastside and Snohomish County office markets are seeing dramatic rises in vacancy rates, things remained stable to the south.
The vacancy rates actually dropped a bit in what is considered the South End - South Seattle and the close-in suburbs - and the Federal Way-Tacoma area.
That's because that area serves more traditional office users, not the volatile high-tech sector, said Pete Hollomon, a CB Richard Ellis broker.
But several Boeing office leases coming up in the next few years could dramatically affect the South End market, he said. That has happened in Snohomish County, where Boeing's materials-buying unit left Lynnwood's Quadrant Center, putting 295,000 square feet of office space on the market, representing nearly 10 percent of Snohomish County office space.
Because of the glut of office space on the market and the uncertainty of the local economy, many developers are taking a wait-and-see attitude.
"We've been so used to seeing vacancy rates below 5 percent, that is a bit of a shock," Hollomon said.
Real-estate experts say that it could take 12 to 18 months to fill up the available office space.
Bill Kossen can be reached at 206-464-2331 or bkossen@seattletimes.com. |
