August 2019
Retail
Relative
to other commercial sectors, retail trade activity is off to a slow start due
in part to several large-scale redevelopment deals. Despite this the outlook is
positive with vacancies at a 10-year low and record-high rents gaining
year-over-year.
Rent-growth and net absorption have stayed at record highs, particularly in the Seattle CBD. Skanska’s 40-story, 686K square foot 2+U Tower in downtown Seattle is already 60% leased with major tenants such as Indeed.com and Dropbox. Suburban markets like Issaquah and Renton are also seeing growth during this cycle as more residents are priced out of the urban core.
Office
The continued trend for office is the rapid absorption of vacancies, predominantly driven by tech companies. While rent growth continues to be higher than the national average, the Seattle area remains less expensive than San Francisco. Bay area companies like Google and Facebook are capitalizing on the relatively lower office rents, targeting South Lake Union specifically. Salesforce announced plans for a second HQ in Seattle with its acquisition of Tableau. Apple has also committed to all 640,000 square feet of 333 Dexter as it will more than doubles its Seattle-based workforce.
This growth cycle is not confined to Seattle CBD or South Lake Union. Several tech leaders are relocating or expanding on the Eastside, specifically Bellevue and Kirkland. This movement toward the suburbs is expected to continue as more tenants get priced out of the urban core. While supply pressures threaten to slow rent gains toward the end of the year the region’s outlook remains strong.
Industrial
After a banner sales year in 2018, industrial sales volume remains strong with the help of two large portfolio deals. These acquisitions, by Colony Capital and Clarion Partners respectively, illustrate a nationwide demand for last-mile distribution spaces in proximity to metropolitan hubs. With a major port and robust economic growth, the Seattle market continues to attract global interest. There has been a slight rise in vacancies and increased supply but rent growth remains higher than the national average.
