Employment growth is a major factor in the strength of any local real estate market and the most significant employment growth today is being driven by tech firms across the country. That being said, the ability to attract and retain top talent remains the key to sustained employment growth which then supports the demand for real estate across all major asset classes.
In CBRE’s recent 2019 Scoring Tech Talent report, Seattle ranked 2nd in the nation for top-ranked tech talent. While second only to the San Francisco Bay Area, Seattle ranked #1 for educational attainment at 62.6% – twice the national average. Additionally, Seattle has the highest percent of software developers and programmers in its tech talent pool at 50.9%, 6.6% higher than it’s nearest competitor – the San Francisco Bay Area. With current class A office space rents at a 27% discount to the San Francisco Bay Area along with 10% lower wages, it is clear why the world’s largest tech companies are expanding their presence in the Greater Seattle area so aggressively.
More than 2 million square feet of office space was absorbed in the Puget Sound office market, over half of which (1.1 million square feet) was occupied by Amazon in the Block 20 project delivery located in the Denny Triangle. With Seattle class A office vacancy in the CBD down 26% YoY, from 7.4% to 5.5%, what’s more interesting is that out of the 9.5 million square feet of class A office space that exists in the entire Bellevue CBD, only a little over 300K square feet of class A office space remains available (3.9%, down 37% YoY), which by conservative estimates would only be enough space for about 1,000 employees.
This will likely change over the next few years as the Bellevue CBD is in the early stages of its largest expansion in history, with 5.9 million square feet of new office space currently proposed. The 3D rendering by David Boynton shown above illustrates the dramatic change coming to the Bellevue skyline. Combined with the Seattle CBD, over 7.3 million square feet of new office projects are proposed over the next 4 years. This doesn’t include the nearby 2 million square feet of office space that Microsoft is adding for their Redmond campus redevelopment.
Class A office rents are increasing with Seattle CBD at $52.17, up 2.2% from Q2 or 5.9% YoY, and Bellevue CBD at $58.84, up 4.2% from Q2 or 15.2% YoY.
In the local industrial market, Amazon and Home Depot leased the nation’s first ever three story warehouse from Prologis in Georgetown for a total of 590K square feet. The adoption of this new type of product exemplifies the innovations required in order to accommodate the growing demand for same day shipping services in an otherwise land constrained market.
Notable trades were 901 5th (Pitchbook headquarters) for $305MM by NY real estate fund Vanbarton Group and the Sunset North Corp Center along I90 for $227MM by a joint venture with Kennedy Wilson and Security Benefit Life Insurance Company.