April 4, 2016

Office vacancy lowest in 15 years

More good news for Seattle: the office vacancy rate is the lowest it has been in 15 years, despite the strongest building boom since the recession.

A new report from Jones Lang LaSalle says the total vacancy rate in the region at the end of the first quarter was 9.1 percent, the lowest since 2001. Downtown Seattle and surrounding neighborhoods have a vacancy rate of 7.7 percent, the Eastside is 9.3 percent, the Northend is 11.9 percent and the Southend is 13.8 percent.

Vacancy has continued to fall, even though more than 2.25 million square feet of office space opened last year, the most in the post-recession era. More than 320,000 square feet opened in the first quarter, and another 2.9 million square feet is set to open this year.

Almost 6.8 million square feet of office space is under construction now, and 38.4 percent of that is preleased. Asking rents for new space average $48.55 per square foot, almost a 40 percent premium over average rents throughout the region.

Amazon.com was the biggest lease in the first quarter, taking 286,000 square feet at Schnitzer West's Urban Union in South Lake Union.

JLL reports there is more than 7.4 million square feet of “tenant demand” in the region, more than enough to cover the new construction. But JLL cautioned that many of those tenants are already here and will move from existing buildings to new space, opening large blocks of space in older structures.

To lure top tenants, JLL recommends investing heavily in amenities like an updated lobby, gym, conference center, bike storage and a mix of retailers.

Sales of office buildings in the first quartered totaled more than $1.2 billion. That is without a single trade in downtown Bellevue or Seattle's central business district, though JLL does not include South Lake Union in Seattle's CBD. Almost $500 million in office buildings sold in the areas surrounding Lake Union in the first quarter.