Seattle-area office vacancy rates have more than doubled from pre-pandemic levels, reflecting the ongoing impact of macroeconomic uncertainty and work-from-home policies on the region’s reeling commercial real estate sector.
Vacancy rates rose to 12.2% in the second quarter, up from 11.2% in the first quarter and 2019’s low mark of 5.79%, according to a new report from commercial real estate firm Kidder Mathews. It’s the sixth consecutive quarterly increase in regional vacancy.
“The regional office market is clearly struggling and highly volatile at present, particularly in Seattle,” the report said. “Looking forward, future office demand trends and concern over high sublet vacancy and availability rates remain big questions.”
The report points to layoffs, hiring freezes and office closures as factors slowing the region’s commercial real estate sector.
Seattle tech companies responded to economic headwinds by reducing headcount and halting hiring. Many are also downsizing their real estate footprint given the headcount reductions and shift to hybrid work policies.
- Meta said in January 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.
- Salesforce in May put the Tableau headquarters building in Seattle up for sublease.
- Amazon last year paused construction on five towers in Bellevue, citing ongoing uncertainty about the impact of hybrid work on its office designs.
- Redfin said in April that it put some of its Seattle headquarters space up for sublease.
Some companies such as Flexport and DoorDash are bucking the trend and expanding in the Seattle area. And many firms are forcing employees back to the office, reversing some of the work-from-home policies implemented during the pandemic.
But it’s not enough to ease concerns about the commercial real estate market.
“The end of 2023 will be telling as to future demand trends based on corporate requirements dictating work-from-home/in-office policies, new office layouts, and employee density ratios,” the report noted.
Regional employment growth was 3.1% in 2022 and is expected to reach 3.3% in 2023, followed by a lower projection of 1.5% in 2024, according to data from Puget Sound Economic Forecaster cited in the Kidder Mathews report.
