Premier Business Centers

The Small Space Marketplace

List Your Space

Find Space

Home About Us Executive Subscriber Membership RENTV Conferences Newsletter Contact Us Advertise
July 16, 2024
 Search RENTV
 The REview
News Home Page
Southern California
Northern California
Pacific Northwest
Prop. Management
Press Releases
 R. E. Marketplace
Service Providers
Property Spotlight
 RENTV  Conferences
Subscriber Login:
Forgot Password?

Printer-friendly Version   Email an Associate
Seattle Retail Market Remains Stable


This report provided by real estate services firm Kidder Mathews

Seattle Retail CRE Market Update 1st Qtr 2023

The pandemic created a monumental shift in the way consumers live, work and shop and three years later, most markets are continuing to adjust. After an unprecedented amount of covid-induced retail closures in 2020, last year produced a resurgence of retail activity and a welcomed uptick in retail sales leading analysts to predict a return towards historical growth rates. So far in 2023, economic conditions appear to be similar to the end of 2022 as the U.S. economy works through ongoing inflation, slowing production and a tightening of monetary and financial conditions. As consumers continue to increase their online spending habits and place a premium on convenience and flexibility, retailers with strong omnichannel principles will continue to flourish by giving consumers the ability to purchase items in multiple ways.

In the Seattle market, retail activity paused a bit during the first quarter as leasing was down and vacancy rates ticked up. However, the market is expected to slowly gain velocity throughout 2023 as the economy strengthens, consumer confidence grows and employees continue to come back to the office. Retail activity in urban markets will remain lower than growth rates in the suburbs, largely due to the hybrid and work from home influences impacting downtown cores.


The retail market in Seattle remains exceptionally stable with very low vacancy rates across the region hovering between 2.4% and 2.9% market wide since mid-2018 and ending 1Q 2023 at 2.7%. Whereas many markets across the country experienced a significant softening effect on vacancy rates during the pandemic, the Puget Sound Region continued to display tremendous resiliency both during Covid-19 and the subsequent recovery. Kitsap and King Counties posted the highest vacancy rates at 3.2% and 3.0% while Thurston, Snohomish and Pierce Counties ended the quarter at 1.7%, 2.1% and 2.5%, respectively.


Although asking rents remained flat quarter-over-quarter, rent growth equaled 1.9% year-over-year and grew a total of nearly 20% over the past three years. While most of the recent surge occurred in both 2020 (10%) and 2021 (7.5%), asking rents have regressed to a more normal status and are forecasted to range between 3% and 5% per year over the next two years.


Retail development remained steady with both build-to-suit and pad developments. There is currently 603k sf of retail projects under construction across the region, led by Black Diamond Crossing in East King County (208k sf) and a handful of smaller strip centers, freestanding shops, and pad developments. A few smaller retail pads were completed this quarter totaling 13.5k sf.


After two straight positive quarters to end the year, 1Q 2023 posted negative 288.2k sf on net absorption. This was only the second quarter of negative activity over the past two years as the market averaged 110k sf per quarter over that span. As a result, the direct vacancy rate inched up from 2.6% last quarter to 2.7% this quarter, still historically low vacancy. Suburban retail continued to be relatively active compared to urban cores, mirroring trends across the county. Activity is expected to remain steady in 2023, even with the economic headwinds and various sector challenges.


Overall, investment activity in 2022 experienced a notable slowdown dropping from $2.5 bil in volume to $2.0 bil (for transactions over $1 mil). The slowing trend continued in 1Q 2023 with 57 transactions totaling approximately $210 mil and an average cap rate of 5.7%. If activity level persists through the rest of 2023, year-end totals will be comparable to covid year totals in 2020 when annual activity was $740 mil in total volume. Additionally, the average $/sf experienced a drop during the quarter to $307/sf during the first quarter. High interest rates and recessionary indicators will continue to impact leasing and investor demand, making 2023 a challenging year for commercial real estate and the retail market.

Source: CoStar
Report prepared by Kidder Mathews Director of Research, Gary Baragona

Return to the Archive page



Home | About Us | Newsletter | Contact Us | Executive Subscriber Membership | Executive Subscriber Home | Advertise
Southern California | Northern California | Pacific Northwest | Southwest | Retail | Multifamily | Financing | Property Management
Archives | Press Releases | Service Providers | JobWorks | Property Listings

Copyright © 2024 by RENTV, All Rights Reserved
Website designed by Regency Web Services, Inc. and powered by Lightning Media