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December 12, 2013
Specialty: Corporate real estate services, specializing in tenant representation
Principals: Daniel Flinn, Parker Ferguson, Dan Foster, Matt Hermsen, Brian Hayden, Bob Mooney and Hans Kemp
Representative clients: Wells Fargo, Zillow, KPFF Consulting Engineers, city of Seattle
Daniel Flinn, principal at Flinn Ferguson, offered his take on local leasing activity and the need for more office space.
Q. What’s your read on the Seattle market from a tenant’s perspective?
A. Generally speaking tenants under 20,000 square feet have multiple options in the marketplace. The Seattle market is still working through the existing and soon-to-be-available commodity spaces (low-rise blocks of space) that make up the majority of the supply.
Once these spaces are re-leased, the Seattle CBD will be in need of additional new office space. Tenants who need more than one floor or have requirements for view and/or high-rise space will face challenges.
Historically, tenants in Seattle have not been willing to pre-lease office buildings in the CBD. With the commercial lending market dictating significant pre-leasing before construction can commence, we may need to see a significant increase in rates for existing space before new construction is attractive for tenants.
Q. What’s keeping tenants away from downtown Seattle? Is it time to build new office buildings?
A. The CBD’s older inventory and traditional architecture are very different from the more hip South Lake Union projects with the urban amenities that the current workforce is interested in experiencing. Amazon driving this market (as WaMu did in the CBD) also doesn’t hurt.
A new CBD tower such as Schnitzer’s or Daniels’ (development proposals) would be welcomed by traditional firms who need to be in the core and also by companies that want newer buildings, large blocks of contiguous space, onsite amenities, access to mass transit, and more efficient building systems.
The lease rates needed to build these high-rises will only be attainable once tenants in the market accept they will need to pay more and commit early.
Q. Where are a few areas where tenants have leverage in this market?
A. The most important areas are: good/great credit, flexibility, willingness to sign a long-term lease, and exposure to their best alternatives. By leveraging opportunities, tenants become educated and can make objective decisions. Not until these options have been uncovered and exhausted do we feel we have negotiated a good lease.
Q. What are some opportunities or concerns that you see in the year or two ahead?
A. With the proposed high-rises in the CBD, potentially one or two tenants will likely have the opportunity to brand the structure and in the process get more concessions as the developers are anxious to build the buildings.
The concern for the Seattle market is the point in the cycle where the growing companies and traditional firms alike need space but due to the constraints of the development process there is a significant lag, and companies start to look for alternatives in markets outside of Seattle and possibly outside of Washington.
Q. How has the firm adapted to the economy’s ups and downs?
A. We actually stayed very busy during the downturn primarily due to our focus on tenant representation. We also enlarged our focus, most recently adding two principals to our team, Bob Mooney and Hans Kemp, (who have) expertise in the biotech arena.