The Greater Seattle Region ended the year with strong employment growth fueled by tech companies, with 59,200 jobs created in the region during 2019 and the unemployment rate at 2.9% according to the Bureau of Labor Statistics.
Year end net absorption of office space totaled 5.8M s.f. with 6.76M s.f. under construction (81% of which is already pre-leased). Vacancy for the office market in the 4th quarter stands at 5.87%, down 23 bps from 6.10% last year.
The office market saw $4.8B trading during Q4 with $10.3B trading for the whole year. Cap rates for multi-family were driven down to the mid to upper 4 percent range, some of the lowest rates in the country due to strong interest from institutional firms and REITs.
Much of the development for office has been moving toward the Eastside with 8 major office projects under construction totaling 2.8M s.f, 89% of which is already committed. Amazon being one of the main drivers of the construction has firm commitments for 3.5M s.f. of office space in the Bellevue CBD and potentially more coming in the future. Facebook has claimed leases on Block 16, Block 24, and Block 6 in the Spring District for a total of 863K s.f.
Sales activity increased in the 4th quarter ahead of the increase in excise tax in 2020. Notable transactions include KKR’s first entry into the Seattle market with the purchase of the Summit in Bellevue for $742M and the F5 Tower in Seattle for $458M part of a $1.2B deal. Invesco purchased the Bravern in Bellevue for $585M and Unico purchased the Westlake Tower in Seattle for $236MM.
In the capital markets space, CMBS saw an uptick in activity as Fannie and Freddie paused slightly following the Treasury announcement that they would each have hard caps of $100B to lend between Sep 2019 and Dec 2020. The resulting rise in agency spreads made CMBS more competitive as volume rose 27% to $95.2B in 2019 from $75.2B in 2018.