Posted on: Monday, December 24, 2001
Seattle office vacancy rate triples with tech crash
By Elizabeth Hayes
Bloomberg News
SEATTLE — Seattle's office vacancy rate rose to 13.8 percent in the fourth quarter, the highest since 1993, as Internet companies, law and advertising firms shrank and buildings opened, according to Cushman & Wakefield.
Downtown Seattle's vacancy tripled from a year earlier to 13 percent, from 4.2 percent, the broker said. The suburb of Bellevue, Wash., harder hit by contraction among technology companies, had a 24.8 percent rate, up almost six-fold.
"Everyone is pulling back," said Garth Olsen, a senior director at Cushman in Seattle.
Internet retailer Amazon.com, advertising company Sedgwick Road and law firm Orrick Herrington & Sutcliff are among the companies putting Seattle space up for sublease.
Seattle's office market mirrors what's happening in the rest of the country. The U.S. office vacancy rate rose to 12.3 percent at the end of the third quarter, its highest since 1996, according to Torto Wheaton Research, as the Internet boom faded and the economy fell into its first recession in 10 years.
Rents fell 9 percent in downtown Seattle from last year, to $34.25, and 17 percent to $30.88 a square foot in Bellevue, according to the report.
With the vacancy rate in low single digits last year, developers responded with new projects. Downtown, 1.35 million square feet of space came on line this year and another 1.4 million square feet rose on the Eastside, including Bellevue.
More new office space is on the way in Bellevue, including the first building at Bentall Corp.'s Summit complex and Lend Lease Real Estate Investments Inc.'s 27-story office tower, part of the Lincoln Square mixed use project. Together, they encompass more than 800,000 square feet of office space.
With only 12,000 square feet leased at the Summit complex and no leasing at Lincoln Square, Bentall plans to temporarily cap one of its office buildings at three stories, instead of the planned 11 stories, said Tom Bohman, a director at Cushman.
"These projects were really planned and in process before the market changed," Bohman said. "There was a ton of demand. Nobody would have predicted the economy and market would have fallen off as much as they did."
Companies continue to seek tenants for unwanted space. Some of the biggest blocks available are from Amazon.com; Internap Network Services Corp., which helps businesses transmit data over the Internet; RealNetworks Inc., which makes software for playing Internet audio and video; and Onyx Software Corp., according to Cushman.
"One positive sign in the numbers is if you dissect them it appears the give-backs of space in the form of sublease space have come to an end," Bohman said. "The rate of increase in sublease space is flattening out."
