Compliments of Jason Smith of Kidder Mathews, attached is a Seattle-area office real estate market review for Q1 2016. Here is a short summary:
- General leasing activity improved significantly outside of the Seattle and Bellevue central business districts (CBDs), which had led the region coming out of the recession.
- Regional first quarter absorption was just over 670,000 s.f., a bit off the 2015 pace, but well above the previous ten years; this left the regional vacancy at 7.87%.
- Rental rates continue to move up at a steady but modest rate, with some localized micro markets such as South Lake Union and Fremont feeling more pressure as sites for new inventory are nearly gone.
- Companies are definitely being careful about overextending, but it is expected that there will be at least two more years of strong demand following the employment growth peak in 2015.
- Construction activity increased in the quarter as only one project was delivered and two major projects got started.
- There are now 20 office projects underway: 15 in the Seattle CBD, three in the Bellevue CBD, one in Kirkland and one in Renton; 13 of the Seattle projects are speculative. Currently about 42% are pre-leased.
- Office property sales was strong in the quarter, with several major institutional-quality sales, both new construction and vintage properties. Non-CBD properties continue to see more interest.
- Rental rates moved upward slightly in the quarter, a trend expected to continue.
The full Q1 2016 market review can be found here.