Seattle buildings filling up; some rents on the rise

Seattle's office-vacancy rate continued its steady tick downward in the third quarter.

Expanding companies have gobbled up more than a million square feet, the equivalent of a typical downtown office tower, according to a report from real-estate brokerage Cushman & Wakefield.

The growth has come from established companies such as Amazon.com, which has reportedly leased several floors of the 76-story Bank of America Tower; startups such as Zillow.com, a real-estate venture led by former Expedia Chief Executive Richard Barton; and expanding construction, marketing and law firms.

If the demand for space continues at this pace, the completion of WaMu's new downtown headquarters will not be the headache for landlords that it was expected to be a year ago. Much of the space WaMu occupies in other buildings already has been leased.

Top-tier class-A buildings such as Two Union Square and Bank of America Tower are getting so full that landlords have raised rates by $2 to $5 a square foot, said Wende Sauvage, a Cushman & Wakefield associate specializing in downtown Seattle.

While it's the first time in years that the words "rent increase" have been uttered in downtown Seattle office buildings, rents are more than $10 below the highs of 2000 and well below the $35 a square foot developers say they need to start the next wave of office buildings. The average class-A space rented for $26.96 a square foot in the third quarter, Cushman & Wakefield said.

The biggest beneficiary of all this is Chicago-based Equity Office Properties, which owns nearly one-third of the region's office space, including the Bank of America Tower.

"They are just shy of a 90 percent-occupied portfolio," Sauvage said. "That is a huge change. They were in the high 70s a couple of quarters ago. They've been rescued by Amazon and also a couple of their existing tenants."

In Bellevue, the office-leasing picture has been a little quieter, in part because there are no large blocks of space left to lease. Six huge companies, including Equity, Texas-based Hines and local developer Schnitzer Northwest, are ready to build towers as soon as they can lock up anchor tenants.

Bellevue's vacancy rate has "been down, down down," said Tom Bohman, Cushman & Wakefield's Eastside director.

"You look at it over the course of the last two years, [and] it's a phenomenal turnaround for downtown Bellevue," Bohman said.

The real-estate-investment market has been red-hot. The latest example was a deal announced months ago that closed last week: Harbor Steps in downtown Seattle.

The 758-unit luxury-apartment and retail complex sold for $191 million to Equity Residential, the Chicago-based sister company to Equity Office, according to papers filed with King County.

Tom Boyer: 206-464-2923 or tboyer@seattletimes.com