Overall office leasing activity in the region is dominated by downtown Seattle, as might be expected, with the city’s central business district accounting for nearly 54 percent of total leased square footage in the first quarter of the year. But, in a sign of shifting real estate trends, nearly three-quarters of the square footage involved in the top 10 office-lease transactions during the quarter involved deals in the Bellevue/Eastside area, according to a report by global real estate services firm Savills.
Some 1.7 million square feet of office space was leased during the first quarter of 2019, down 27 percent from 2.4 million square feet in the year-earlier quarter ― even as office inventory in the Seattle area increased during the period from 110.8 million to 111.4 million square feet, with another 3.4 million square feet of office space in the construction pipeline, the Savills report notes.
Of the 10 largest first-quarter office-lease transactions highlighted in the Savills report, a total of 540,286 square feet was leased in the Bellevue/Eastside submarket vs. 194,822 square feet leased in Seattle’s downtown.
“The addition of [in-demand] new space, coupled with scarcity of large options, is also placing upward pressure on asking rents,” the Savills report states. “Overall rents increased 17.0% year-over-year to $38.85 per square foot, while class A asking rents increased 12.6% over the same period to $47.33 per square foot.”
Driving the demand for office space is the usual suspect, the technology sector. However, another industry sector also was a major force in the first quarter: coworking space providers.
“Facebook significantly expanded its presence in the market this [first] quarter, leasing 337,996 square feet [in] the Block 16 building underway at the Spring District project in Bellevue/ Eastside,” the Savills report states. “… [Coworking real estate company] WeWork is also expanding its presence in the market, taking 49,232 square feet at 925 4th Ave. in the downtown [Seattle] submarket.
“With tech and coworking tenants willing to pay a premium for new and top-quality space, their rapid growth across the market will only further contribute to inflated asking rents.”
Adding to the office-leasing pressure is the projected strong growth in employment in the region. Savills projects that a total of 286,000 new jobs will be added in the Seattle area by year-end 2023.
The top three leasing deals for the quarter, according to Savills, were as follows:
1.) Facebook’s 337,996-square-foot-lease in Bellevue’s Spring District.
2.) T-Mobile’s 91,167-square-foot-lease at 3255 160th SE in the Bellevue area.
3.) Nordstrom Inc.’s 70,895-square-foot lease at 1001 4th in downtown Seattle.