Like most things since the onset of the pandemic, commercial real estate has been beleaguered with uncertainty and prone to both promising developments and vulnerability.
Colliers International, Kidder Mathews, and the CBRE Group — each which releases quarterly reports detailing the state of the market — all highlighted in their most recent accounts how COVID-19 mandates had, as of this writing, loosened, allowing for more concrete returns to the office, in-person learning for the children of employees, and more positive changes. They are not necessarily a salve, though. The Colliers report, for instance, noted that these changes will continue having a material effect on office-space occupancy strategies, “which will likely reduce the sublease space on the (Seattle-area) market.”
As of the end of Quarter 2, Colliers found that in the greater Seattle area, move-outs continued to outweigh move-ins, with 263,000 square feet of office space removed from the sublease market as a result.
“The average amount of space to come on the market each month since March 2020 has decreased from 256,000 square feet through Q1 2021 to 172,000 square feet through Q2 2021,” Colliers reported. “While this is more than double the average amount of space to hit the Eastside market each month, it is much lower compared to the amount of inventory. Seattle has almost eight times more inventory than the Eastside.”
CBRE characterized tenants as being “in the driver’s seat” in the Puget Sound office market, though landlords in downtown Seattle and on the Eastside are making small accelerations through rising asking rents. There especially has been an uptick in levels of tenant interest in the Bellevue Central Business District, CBRE reported.
On the Eastside, the average rent quote was, as of the end of Quarter 2, $40.12 per square foot per year — down about a dollar per square foot from Quarter 1, according to Kidder Mathews.
The CBRE found that while most other submarkets in the area are still working toward pandemic recovery, the Eastside showed few signs of worrisome distress during Quarter 2. Large tenant contractions slowed, leaving net absorption at a negative 10,131 square feet. (This marks a change from the 50,000 square feet of positive absorption on the Eastside during Quarter 1.) Per the report, Class A rates in the Bellevue Central Business District rose 1 percent to $63.38 full service. Overall, CBRE found, Eastside rates ended in Quarter 2 at $50.72.
The firm added in its report that the Bellevue Central Business and Spring Districts especially lured tech users. Facebook signed the second-largest lease of 2021 (in Block 5 at Spring District), and Amazon signed for 137,104 square feet at the Redmond Town Center and another 55,500 square feet at the Skyline Tower. Pokemon also is leasing 65,768 square feet at Lincoln Square North. The Kidder Mathews report also highlighted the noteworthy sales of the Northup Office Center ($22.5M), Corporate Campus East ($62M), and GIX ($85M). All of the major 19 office projects currently under construction in the Puget Sound area are based in Seattle or the Eastside area; all of them …….