Office, Retail, Industrial: Not Much Going On

If you have even decent space in town, you’ve probably leased it already, for the asking price, if not more. At least that’s what the numbers from local brokerages tell us. Whether it’s office, industrial or retail, demand continues to meet or beat supply.

Office — Lot full. There is almost no available commercial space in Seattle and Bellevue. Plain and simple. Colliers International placed downtown office-space vacancies at 0.62 percent for the second quarter. CB Richard Ellis was only slightly higher at 1.01 percent, and placed Bellevue’s downtown vacancy rate at 0.69 percent.

Moreover, Colliers found that 84 percent of the 4 million square feet currently under construction is spoken for. Brokers are now successfully marketing space that won’t become available until 2002 and beyond, which can be unstable when a newly-public web company may want 180,000 sf one day, but because of stock market fluctuations, can only afford 100,000 the next.

Amazon.com is a good example. Earlier this year, Amazon.com was looking for 750,000 square feet in the region. Now, most likely because of its stock-market performance and continuing losses, that request is off the table, and the company is reportedly putting some space back onto the market. They’ll no doubt be able to sublease it at a profit.

  The numbers don’t get much better regionwide. CB Richard Ellis pegged that rate at 2.82 percent in the second quarter, down from 3.50 percent the previous quarter. As a result, the price for prime downtown space is rising even higher. In downtown Seattle, average asking rates rose from $33.68 to $35.54, and on the Eastside rates rose from $26.74 to $31.73 this quarter. The newest space is eclipsing $50 a square foot.

  Industrial —The Puget Sound vacancy rate dropped to 3.91 percent in the second quarter from 4.68 percent in the first quarter, according to CB Richard Ellis. In the Kent Valley specifically, 2.8 million square feet was leased in the second quarter, sinking the vacancy rate to 2.68 percent from 5.49 percent in the first quarter. The Eastside vacancy rate is down to 2.53 percent after 426,000 sf was leased in the quarter.

New construction and buildings returned to the market by Boeing and others have helped keep rates steady. But it likely won’t last long. Unstable dot coms could open up space, but there seems to be a line of such companies looking for space.

Retail —Vacancy rates dropped to 3.45 percent vs. 5.45 percent at the halfway mark last year, according to CB Richard Ellis. Despite an additional 600,000 square feet of space coming on the Seattle market, the vacancy rate dropped to 1.6 percent.

The tight retail market combined with vacancy rates in the office market of less than 1 percent make downtown Seattle one of the best commercial markets in the country. Bellevue/Eastside rates also dropped, hitting 2.84 percent compared with 4.25 percent in 1999.