Office building attendance in downtown Seattle this past November increased year-over-year from 15-20% to 35-60%, as more companies establish in-office mandates, according to a new report from CBRE.
But only a “trickle” of tech tenants signed new leases downtown in the fourth quarter of last year, the report said, as leasing activity shifts toward professional service, legal, and finance firms.
The adoption of hybrid work policies at tech companies has hit the commercial real estate market hard. Total vacancy in the Seattle area reached 16.7% in the fourth quarter of last year, the highest level in more than a decade for the tech hub, according to a new report from JLL.
And now with widespread layoffs across the tech sector, the need for physical offices could deteriorate even further.
Several tech giants are deciding to give up office space. Meta said this month it would sublease a 6-story building near downtown Seattle and a 325,000 square-foot space in nearby Bellevue. Microsoft said it will not be renewing its lease at a 561,494 square-foot space in downtown Bellevue.
Amazon is cutting at least 2,300 Seattle-area jobs, and The Seattle Times reported this month that the company is pulling about 2,000 employees from a downtown office building.
As part of its restructuring plan announced Jan. 4, Salesforce said it would cut 10% of its workforce and reduce its real estate footprint. Employees at its Seattle-based subsidiary Tableau Software were affected by the layoffs.
“As companies continue to re-evaluate their space needs and the economic outlook remains murky, expect the [Seattle-area] office market to remain tenant favorable and availability to continue to rise,” the JLL report noted.
Real estate leaders say it’s too soon to tell if the tech layoffs will cause a further pullback in leasing activity.
Even with the recent cuts, many firms still have a much larger employee base compared to pre-pandemic levels.
“Theoretically their square footage occupied per employee is still at all-time lows,” Tim Harrison, research director for the Pacific Northwest at JLL, said in an email.
Harrison hinted that layoffs could actually become a forcing function to get employees back in the office.
“I think the next six months will be quite telling in how strict return-to-office policies will be and how many employees start coming into the office again out of fear of potential layoffs,” he said. “That will obviously directly impact how much of the space these companies have leased/built actually gets used.”
Companies are still opening new offices. Meta recently expanded in Bellevue’s Spring District and plans to open a new building, called Building X, in Redmond, Wash., this summer.
“There is still demand for high quality office space that has nice views and is close to public transportation, retail and restaurants, and those rents have remained on the high end during the pandemic,” said Brian Biege, senior vice president with CBRE’s tech and media practice in Seattle.
Microsoft is in the midst of a major redevelopment of its original Redmond headquarters — though the company recently confirmed to GeekWire that it is pushing back the timeframe for some buildings, saying it wants to make sure the interior spaces reflect the needs of employees and the requirements for office space in the new era of hybrid work.
Amazon similarly said this past summer that it was pausing work on several new office towers in downtown Bellevue to determine how its office floor plans need to be adjusted to reflect the new needs of employees.
Biege noted the cyclical nature of the tech industry said he’s bullish long-term about growth coming from new innovations.
“CBRE economists anticipate a recovery to start towards the end of this year,” he said. “Once the economy starts to recover, commercial real estate will follow.”
