Seattle's office-vacancy rate expected to fall

Despite mixed reports from the second quarter, commercial real-estate agents agree the office-vacancy rate in Seattle is likely to fall during the rest of 2011.

Two brokerages reported vacancies fell slightly last quarter. A third said the rate rose a tick.

But that brokerage — Cushman & Wakefield/Commerce — said the increase was more a statistical blip than evidence of a trend.

Each brokerage calculates vacancies differently. Colliers International, whose statistics reflect buildings in greater downtown and North Seattle, pegged the rate at 17.53 percent, down from 17.83 percent in the first quarter.

Kidder Mathews — which calculates the vacancy rate for the entire city and includes owner-occupied buildings as well as for-lease space — put the rate at 13.46 percent in June, compared with 13.92 percent in March.

Cushman, which looks only at buildings with space for lease in greater downtown, said the second-quarter rate was 20.2 percent, up from 19.8 percent three months earlier.

But Matt Christian, a senior director at the brokerage, said the increase is somewhat misleading, reflecting only "short-term hiccups as tenants move in and out."

Amazon.com, for instance, vacated about 500,000 square feet last quarter at the Columbia Center and 705 Union Station, negating almost all the gain from its move into a new 540,000-square-foot building in South Lake Union.

But the fast-growing online retailer, which is relocating and expanding on downtown's northern fringes, now has moved out of all its old office space farther south. And it's slated to start moving into another 460,000 square feet at 1918 Eighth in the Denny Triangle this quarter.

When that signed lease and others like it are consummated, the vacancy rate will fall farther, Christian said.

"It should be 17 percent or less after all the deals we know about are in," he predicted.

Kidder Mathews made a similar point in its quarterly market report, noting that most leases signed in the last two quarters haven't taken effect yet and don't show up in the vacancy statistics.

All three brokerages reported positive "absorption" last quarter — a measure of how total office-space occupancy has changed, regardless of changes in supply.

Mature technology companies and startups are growing and driving demand, said Dan Dahl, a Colliers senior vice president. "Space with a story and sizzle is what's moving," he said. "Landlords are starting to push back on things."

The average asking rental rate for Class A office space last quarter in greater downtown was $31.26 per square foot per year, Cushman & Wakefield/Commerce said, the highest in two years.

But asking rents for Class B and C space showed little change. Kidder Mathews said overall asking rents citywide were virtually unchanged.

On the Eastside, all three brokerages reported vacancy rates declined last quarter — "pretty minimally, but the trend is still positive," said Tom Bohman of Cushman & Wakefield/Commerce's Bellevue office.

"Landlords aren't doing the fall-on-the-sword type deals any more like they were doing last year."

Eric Pryne: 206-464-2231 or epryne@seattletimes.com