Vacancy Rates for Seattle Office Market Could Hit 15% in 2009

Brokerage firm Cushman & Wakefield predicts by the end of next year Seattle's downtown office vacancy rate could hit 15 percent and rents could be falling because of the deteriorating economy, substantial spec space coming on line and potential downsizing by local firms.

Photo By Benjamin Minnick
Starbuck’s 288,000-square-foot building at 505 First Ave. S. is among those being constructed in downtown Seattle without an announced tenant. Kinzer Real Estate Services said in July that Starbucks would put the building and Starbucks’ adjacent 185,000-square-foot 83 King building up for sale, while also working to lease those spaces. The building is slated for completion in early 2010.

Cushman Senior Director Matt Christian made the forecast as part of the firm's third quarter 2008 market update released Thursday.

Vacancy “could be in the 12 percent to 15 percent range” and “as we look longer term rents are certainly going to go down,” he said.

Here's why: There are no announced tenants for the 2.2 million square feet of office space slated for completion in 2009, he said. Seattle-based Safeco — recently acquired by Liberty Mutual — is also expected to start downsizing to become more efficient, and another Seattle firm, financially troubled Washington Mutual, could unload more of the 1.6 million square feet it leases or owns downtown.

“Nobody knows what's going to happen to WaMu,” Christian said. “Do they give back 100,000 square feet, do they give back a million square feet. ... A million square feet could have a big impact on downtown.”

This means better deals for office users, who are seeing downtown landlords offer increased tenant improvement packages and free rent, said Christian.

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