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7/12/24
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This market update was provided by real estate services firm CBRE
Puget Sound Q2 Office Insights
There were four leases over 50k sf this past quarter, a positive sign for leasing activity and tenant demand. Artificial intelligence companies and startups are driving momentum for leasing activity, but are primarily interested in smaller spaces.
Companies are still right-sizing, with some even finding they have downsized too much as more employees return to the office on a regular cadence.
Buildings that have recently been renovated with amenities and are well-located have been able to maintain their rents and offer tenants greater flexibility with free rent and tenant improvements. Tenants also gravitate towards sublease space that is move-in ready, which requires less capital from companies who are looking to minimize their costs.
Older buildings that have not been improved or have access to amenities have seen their rents decline further and have less flexibility with concessions.
Sublease space has stabilized and leasing activity has been steady, but it will still be a few more quarters until the vacancy rate plateaus.
Office insights provided by Michael Dash, Vice Chairman, CBRE
Puget Sound Q2 Industrial Insights
There was an uptick in sublease space, primarily down in Pierce County, as several 3PLs and end users put space on the market.
As far as construction goes, 60% of the 5.3 msf currently under construction is located in Frederickson. The majority of that is already previously committed to build to suit projects with Panattoni and Logistics Property Company. All of those projects should deliver in Q3 2024 and reflect robust absorption. The other large project under construction is Trammell Crow & Metlifes Seattle Metro Logistics in South Seattle, a premier multi-story 700k sf in-fill distribution center.
Currently, the smaller bay spaces in the 25k sf range seem to be most active. Spaces larger than 25k sf seems to be very quiet.
We are optimistic for the balance of the year for leasing to pick up a bit. Potential future interest rate cuts and clarity on the presidential election hopefully will have a positive impact.
Rents in the Class A distribution spaces have remained strong while the Class B assets have had much lower demand and significantly lower rents.
Industrial insights provided by Andrew Hitchcock, Executive Vice President, CBRE
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