Seattle's office towers getting fuller, brokers report [The Seattle Times]
(Seattle Times (WA) Via Acquire Media NewsEdge) April 11--Downtown Seattle's office market continued to bounce back over the winter, according to recent reports from four brokerages.
More tenants moved into more empty office space during the first quarter, all say, driving the vacancy rate down. The last time the rate was lower was in spring 2009, according to brokerage Cushman & Wakefield/Commerce.
Since brokerages use different parameters to develop their statistics, their estimates of the vacancy rate vary widely, from 12 percent to 18.
But all agree on the trend. And they say it's likely to continue.
"I see the demand for space continuing to grow, and if you look at the amount of supply [under construction], it's virtually zero," said Greg Inglin, a senior vice president with Colliers International.
Amazon.com's seemingly exponential growth has accounted for much of the drop in vacancies, brokers agree, but the online retailer isn't the only player.
"Now we're starting to see some movement from the non-Amazon class, the companies where you don't wear shorts and flip-flops to work," said Richard Briscoe, a vice president with brokerage Kidder Mathews.
Those traditional office tenants -- law firms, insurance companies and the like -- until recently were cutting back on office space or holding steady, he said. Now, some are starting to expand.
Space in the most prestigious buildings is particularly tight, brokers say. Brokerage Broderick Group calculates the vacancy rate in what it considers downtown's top 10 towers is just 6 percent.
Empty space also is more difficult to find in downtown's northern reaches. The total vacancy rate in South Lake Union and the Denny Regrade is under 10 percent, according to Broderick, compared with 15 percent in the central business district and 23 percent in Pioneer Square.
Downtown's first "speculative" office building in several years -- no pre-signed tenants -- broke ground in South Lake Union last quarter: Spear Street Capital's 202 Westlake project.
"We think it'll do well," said Broderick's Damon McCartney.
Other brokers agreed, noting its location a block from Amazon's headquarters and its relatively small size -- just 110,000 square feet of office.
While other developers reportedly are dusting off long-dormant plans for new office towers, Colliers' Inglin said he doubts any will build without tenant commitments.
Several downtown buildings with high vacancies changed hands recently, or are expected to shortly.
An affiliate of CBRE Capital Markets acquired the 80 percent vacant Smith Tower through foreclosure.
Goldman Sachs affiliate Whitehall Street's 11-building Seattle-area portfolio -- which includes half-empty 1111 Third Avenue -- also could have a new owner soon. Whitehall is expected to default when its high-balance, interest-only loan matures this month.
Such ownership changes are good for the market, said Kidder Mathews' Briscoe: New owners, especially ones that haven't overpaid for a building, can apply more resources and fresh energy.
The overall vacancy rate on the Eastside also declined during the first quarter, according to brokerage reports. But Cushman & Wakefield/Commerce's statistics suggest that was entirely because of increased occupancy in downtown Bellevue.
The vacancy rate there slipped from 13.8 to 13.4 percent during the quarter, the brokerage said, while outlying areas remained flat at 13.6 percent.
Eric Pryne: 206-464-2231 or email@example.com
(c)2012 The Seattle Times
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