By Douglas Hanafin Washington Partners

Imagine a Seattle central business district twice the size within 10 years. A 60-million-square-foot office market, twice its current size of 30 million square feet. Imagine other infrastructure twice its current size.

• A doubling of the Convention Center: under construction.
• A doubling of a baseball and football venue: under construction.
• A doubling of a Federal Courthouse: soon to start.
• A doubling of a Seattle Main Library: soon to start.
• An expansion of the Seattle Art Museum into the Arcade Building site: likely to occur.
• A doubling of hotel rooms, Hyatt, The Ellington, Marriott, The Ritz-Carlton.
• A doubling of government offices with the city of Seattle rebuilding its campus and King County likely adding 500,000 square feet on Goat Hill.

Although it’s difficult to track the federal government as well as it tracks us, it is leasing more space. The FBI leases the entire 80,000-square-foot Northern Life Building. The Attorney General moved to floors 50, 51 and 52 in Two Union Square and is occupying 64,000 square feet. Immigration and Naturalization is now looking for 125,000 square feet. The feds are not getting smaller, nor are they seeking low-cost alternatives.

Imagine a Seattle twice its current size within 10 years. It’s happening.

Currently there are 30 million square feet of private sector, non-tenant owned office space in downtown Seattle (from the Kingdome to Lower Queen Anne, South Lake Union into Fremont and Eastlake). During the last three years, we have gone from a vacancy rate of approximately 15 percent, or 4 million square feet available, to a vacancy rate of approximately 2.5 percent, or 750,000 square feet available.

Additionally, during this period of time, Seattle has added approximately 3 million square feet of office space to the supply. On average, during the last three years, Seattle has absorbed approximately 2 million square feet per year. During the last 12 to 18 months, the demand for office space has gone into a hyper mode.

The tenant with the greatest impact has been Amazon.com, leasing more than 1 million square feet: 180,000 square feet at Pac Med plus exercising an option for an additional 240,000 square feet at the Pac Med campus; 450,000 at Union Station, 140,000 at 520 Pike Tower/ Decatur Building; and 80,000 at Key Tower.

What about the others?

Shopnow.com leased 130,000 square feet, all of Metropolitan Park North. The Shopnow.com space is backfilled by Tera Computer.

Onvia.com leased 20,000 square feet in 1000 Dexter. Six months into that lease, Onvia leased 100,000 square feet at the Mercer and Yale Building with encumbrances on the remaining portion of the building.

WatchGuard leased 92,000 square feet at 505 Union Station. WatchGuard will vacate 20,000 square feet at Occidental Mall.

Avenue A moved from 12,000 square feet at Metropolitan Park I to 40,000 square feet at Smith Tower. Shortly after Avenue A moved into Smith Tower, Avenue A leased all 30,000 square feet of the adjacent Collins Building.

F-5 Networks leased 85,000 square feet at 401 Elliott West leaving behind 30,000 square feet at the First West Building.

Rivals.com leased 15,000 square feet in the Polson Building. Six months into occupancy, Rivals is out of space so leased 50,000 square feet in the old Nordstrom store.

Internap is now looking for 200,000 square feet in downtown Seattle

IDX is currently negotiating to move from the 1001 Fourth Avenue Plaza to more than 300,000 square feet in the proposed Madison Financial Tower.

Getty Images leased 140,000 square feet at Quadrant Lake Union Center.

Go2Net leased 84,000 square feet at Pier 70. Rumor has it the company will be out of space upon occupancy.

Microsoft enters the downtown office market by acquiring Visio and its 300,000 square feet at the World Trade Center. Count on them leasing more space in the years to come.

These are a small sampling of the major transactions in the market. There are hundreds of high tech-tenants seeking space in downtown Seattle. Firms that just a short while ago we had never heard of:

Lizard Tech, E-Charge, N2H2, Flying Crocodiles, Freeshop, Mylackie, thedial, Sunhawk, Singingfish.

The type of tenant seeking space in Seattle is much different than those in the past. Conversations are not about the professional service firm expanding from 40,000 to 45,000 square feet over a 10-year horizon.

Things have changed in downtown Seattle and the focus is on accommodating the exponential growth associated with the high-tech tenant.

High-tech tenants have a specific wish list for space. They want an environment that offers character. Most don’t want high-rise space and many are on the sixth floor and below.

They prefer smaller buildings where they can set and control their unique environment. They want identity, the ability to have a building named after them. They are proud and want to make a statement that they have arrived. They know they are in a fiercely competitive environment where things will change quickly. There is a gold rush mentality where they feel the winner takes all. There is no room for error.

Many high-tech firms choose to locate in Seattle because it allows them to best support their ability to provide a unique cultural environment, one that is vastly different than those offered outside of downtown Seattle.

As a small example, where do you go for lunch if you office on the I-90 Corridor? Get in your car go to Jack-in-the-Box or Burger King? I don’t know.

There is a cultural environment offered in downtown Seattle that can’t be duplicated in an office park. Ultimately it provides a competitive advantage for high-tech firms to better recruit and maintain better employee retention.

To double the office market within 10 years will take net absorption of 3 million square feet per year. This is not out of the question. Current demand is there, however, during the foreseeable future (the next three years) supply will not meet demand, and rental rates will continue to rise.

People will mention a shortage of developable land. That is not the case. For example, the Goodwill and Wosca sites each could accommodate more than 1 million square feet. Paul Allen’s growing holdings on South Lake Union can accommodate several million square feet. Clise Properties has significant holdings in the Denny Regrade. There is no question that the land is there. The biggest challenge remains for developers to permit their projects, obtain financing, and build. So far, those that have, have been rewarded.