In Q1 2020, the Puget Sound Office market saw net absorption of 2.1MM SF, largely in part to Amazon’s Belltown occupancies of Block 20 and Block 21 in Belltown. At 7.8M SF, Puget Sound currently ranks 3rd in the nation for SF of office space currently under construction, trailing only Manhattan and Washington DC. The delivery of the current pipeline of projects has been pushed back due to the halt in construction activity in recent months, giving rise to concerns that the delays could further squeeze the availability of office space resulting in higher rents in an already supply constrained market.
The Industrial market saw 1.1MM SF of net absorption in Q1 2020, with 7.1MM SF under construction. E-commerce and third party logistics continue to be the driver of market demand for warehousing. Notable investments included Prologis’ purchase of $233M in industrial assets along the I-5 corridor in Q1, accounting for 86% of industrial investment sales.
The multi-family market saw 2,009 units delivered in Q1, and occupancy rates increase 60 bps since Q1 of 2019. Unlike retail and hospitality sectors which rely on disposable income, multi-family is the most well positioned asset class to weather the storm for the simple reason that people will always need a place to live.
The previous quarter’s halt in economic activity has led to an uncertain outlook for most businesses in the Puget Sound along with the rest of the country. In the context of the larger economy, data from a Harvard Business Review study revealed that prior outbreaks back to 1918 were resolved by V-shaped recoveries. While the truth remains to be seen, local sentiment remains hopeful that due to the expanding presence of established high tech companies, the Puget Sound region will be poised to recover faster than most markets across the US.