The Seattle office market turned in a stellar performance in the third quarter, with the vacancy rate in the city dropping to 6.3%, down from 6.6% in the prior quarter, and space absorption for the period topping 2 million square feet ―with Amazon accounting for more than half of that.
The e-commerce giant chewed up the biggest chunk of space in the quarter by occupying 1.1 million square feet at the newly built Block 20 office complex in the Denny Triangle neighborhood.
Overall, the Puget Sound region, including the Eastside, recorded nearly 4 million square feet of net office-space absorption through the third quarter of this year, a 16.4% year-over-year increase and the largest jump over that period in the past decade, according to the office-market analysis prepared by Colliers International. A total of 6.7 million square feet of office properties were under construction across the region as of the end of the third quarter, with 75% pre-leased, and another 2 million square feet of space was delivered in the quarter.
In total, “38% of all Puget Sound tenants looking for space hail from the technology industry, not including Amazon, which is rumored to need several million square feet,” Colliers reports. “If Amazon were added, the percentage would increase dramatically.”
Sales activity also was robust, with 21 office buildings changing hands in the quarter at a total value of $943 million, though that was down by more than half from the prior quarter.
“Continued demand from … large tenants made it harder for smaller, traditional tenants to find space, however, as opportunities declined and rents increased across almost all submarkets,” Colliers reports.
While the news for the Seattle area’s overall office market is good on nearly every front, there are clouds on the horizon that could impact projects in the pipeline. “Tariffs on imported raw materials, fees designed to support affordable housing and new excise taxes will increase the cost of new construction, possibly resulting in reconsideration of some of the millions of square feet of proposed new development,” the Colliers report states.