Seattle office rental costs soar
SEATTLE — It’s not just housing prices: Seattle is not the bargain it used to be for companies, either.
Historically, the city was a cheaper place to rent office space than a lot of other U.S. cities with advanced economies. That held true through last decade’s economic upswing, and during the recession.
But the city’s recent boom driven by Amazon and other tech companies has propelled Seattle up the ranks of the most expensive places to rent an office in the United States, passing Chicago and Los Angeles just in the last three years.
During that span, Seattle office rents have surged 31 per cent, or about 21⁄2 times faster than the national average, according to an analysis by Cushman & Wakefield for the Seattle Times.
Finding office space is getting harder, despite all those cranes putting up new office highrises.
The vacancy rate has dipped to 5.7 per cent, down from a high of over 20 per cent during the recession and the previous recent low of 8.8 per cent a decade ago.
Seattle now has a smaller share of offices sitting empty than San Francisco or Manhattan, the two most expensive commercial realestate markets in the U.S.
In fact, Central Seattle has the lowest vacancy rate among the 10 biggest downtown office markets in the country, according to Colliers International.
It’s easy to see why: Demand from companies has grown much more quickly than construction has kept up with.
Consider Amazon, which already occupies far more Class A office space in Seattle than any company has in any other big U.S. city. The company’s growth has been enough to just about singlehandedly offset new office construction.
Seattle has added 8.8 million square feet of office space this decade, according to the Broderick Group. Over that span, Amazon alone took about 8.1 million square feet as of last summer, and its footprint has only grown since then.
That leaves “no space for other tenants to move to,” said Hughes McLaughlin, senior director at Cushman & Wakefield in Seattle.
Adding to the demand, Facebook is moving into 870,000 square feet of space at South Lake Union, while Google is preparing to move into the entire 620,000-square-foot office portion of a project underway next to Lake Union Park.
Overall, tech companies now make up about 75 per cent of leasing in Central Seattle, up from about 50 per cent two years before, according to real-estate firm JLL. Commercial real-estate prices are rising at a rate similar to the city’s housing market. But while some people are being priced out of Seattle, brokers said there has been no mass exodus of companies.
Among big companies, the opposite is true: In recent years, Expedia announced its move from Bellevue to Seattle; Weyerhaeuser fled Federal Way for Seattle; and F5 inked a lease to move from the cheaper Interbay area to take over an entire new downtown skyscraper. Big companies based outside Washington state also have ramped up expansion in the priciest Seattle business districts, led by Google and Facebook, but also including the likes of Airbnb, Uber and Snap.
Office rents are charged by the square foot. Average annual rents citywide have surged past $40 US per square foot for the first time, surpassing Chicago (about $38) and Los Angeles ($39), according to the analysis from Cushman and Wakefield. That level is still well behind San Francisco ($70) and Manhattan ($72). Boston and Washington, D.C., remain more expensive than Seattle, as well.
Across all building types, the average rent in Seattle was $41.16 per square foot at the end of last year.