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1/31/08
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The Puget Sound office market closed out 2007 on a high note, thanks to rapidly rising rents, low vacancy rates, and steady absorption. And the outlook for the coming year remains very good, as local experts expect strong continued expansion in several business sectors along with job growth that should be well above the national average, which should lead to robust demand for space.
According to year-end data from CB Richard Ellis, the total vacancy for the Puget Sound market declined to 10.94 percent, while rents jumped to $29.75/sf/yr full service; up $4.11/sf/yr, or 16 percent. This marked the seventh consecutive quarter of rental increases, although current rents still fall short of the all-time record of $31/sf/yr, set back in 2001. Absorption in 2007 totaled 1.9 msf, on par with the region’s 10-year average.
Per CBRE, Class A direct rents in the Central Business Districts (CBD) of Seattle and Bellevue reached six-year highs of $38.37/sf/yr and $37.53/sf/yr, respectively. Even with this latest increase, rents in Seattle’s CBD are still below the cost of new construction.
Two Fortune 500 companies, Microsoft and Amazon, are major space users in the region that continue to absorb additional space. Microsoft expanded into the South Lake Union submarket in the second half of 2007, while Amazon recently announced its own expansion plans for the region, which could see the company take another 800k sf to 1.6 msf by 2011.
The forecast for 2008 from CB Richard Ellis is more of this same upward trend that the region has been enjoying, as rents for Class A space should approach an all-time high. Combined with development and expansion by the local Fortune 500s and the opportunity for other new development in downtown Seattle, the Puget Sound should continue as one of the strongest office markets in the country.
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