2018 Broker Forecast: Is the Air Getting Thin? [April Breakfast Recap]

April Breakfast: 2018 Broker Forecast: Is the Air Getting Thin? [Event Recap]

Mt Rainier with text

Four speaker headshots

Lightrail, coworking, and a tight, tech-driven market, oh my!

Wende Miller, Senior Leasing Director for Talon, moderated the 2018 Broker forecast on Wednesday, April 18. Wende’s questions and facilitation kept everyone engaged and seeking insight on the current broker forecast for the Seattle and Bellevue areas. 

She was joined on stage by the panel representing both landlord and tenant predictions. Paul Sweeney, Principal and Co-Founder of the Broderick Group, and JJ Shephard, Managing Director of JLL, gave insight through the lens of the landlords respectively. Steve Scharz, Senior Vice President of CBRE, on the other hand, provided insight from the tenant perspective. The discussion covered a lot of ground from current demand and tenant trends to how the market will weather, as well as landlord strategies for the future. All agreed and were backed by statistics that Seattle is an affordable city as compared the other major metros on the West Coast. We all left with a new saying thanks to Steve: “Lock in the rate of two-zero-one-eight!” 

JJ kicked off the discussion by showing the tech-dominated absorption statistics for Seattle, underscoring that Seattle is still an attractive, affordable city for many Bay Area companies seeking to move here. In fact, of all moves in the nation, Seattle is ranked at #1 and we have about 4.1 million square feet of net absorption, with 30,000 square feet of that in office. His prediction is that we will hit an equilibrium in the next couple of years and see about 5-6% vacancy.

Paul talked about the vacancy rates and current state of affairs in Bellevue and the Eastside, with the CBD showing a 7.7% vacancy (8.7% for the entire area) and 71% rental rate growth in the past eight years. This is the tightest he’s seen the market in 18 years and seeing a lot of movement with big credit companies. He forecasts that there won’t be relief in supply for about another three years and the CBD demand exceeds space options with an estimated 2% vacancy next year.

Steve shared 10 ways in which tenants are shaping the tech-dominated market and essentially driving it. The CBRE occupier report covers how workplace trends affect office leasing, such as phasing in unassigned seating, leveraging multiple amenities and term flexibility. The trends have even been seen in typically slower-to-adopt industries such as the legal industry. 

Paul shared ways that landlords are competing for larger space, and not just larger tenants. He made the point that companies prioritize employees and their associated costs more than their real estate costs. Therefore, if the talent and employees are in the CBD, companies want to be there rather than the suburbs. That said, the suburban areas are competing with the downtown areas by utilizing things like ‘hub’ buildings and shuttling employees, but just not at the same demand.

The audience had a chance to pepper the panel with questions mid-way through the panel as well as at the end. Different perspectives were shared among the panel on “locking in the rate of two-zero-one-eight” along with a discussion on the differences between Fortune 500 companies and smaller tech companies competing in the same market. Predictions were made that the areas near transit centers will be the next to see the most growth and that there are campus opportunities around Puget Sound. Employers seek different types of employees and that drives their ideal spots to locate. Other factors include retail and how to get employees to the location, thus, increased density in the downtown core may be in our future. Steve saw opportunities for the north and south side growth if an organization pioneers the location and gets a critical mass of people there. JJ mentioned SoDo as an ideal place for future growth, but it is not zoned for office, and he made the prediction that the university area would be the next best area. Paul sees developments coming online soon like Hines’ Summit buildings, the Spring District, and the Vulcan properties in Bellevue to see the most growth and success.

The panel would not have been complete without the discussion of coworking space. There was concern from all in its growth and longevity. Coworking space took 700,000 square feet of space in 2015 and two years later it grew to a booming 1.4 million square feet. Coworking is now part of all corporate real estate strategies, either filling them in full or using them for shadow space. However, these types of stand-alone companies are usually not profitable, and they tend to buy long and sell short. Although coworking fills an important gap for smaller companies, only time will tell when the economy changes on whether the model will still play a meaningful role in our market.

The discussion included talk about the big tech companies in the market as well as whether Seattle or Bellevue will see the most growth. All three panelists agreed that tenants will continue to establish themselves on both sides of the water for space and talent, not picking one or the other.

At the end of the morning, it seemed that landlords remain humble, tech companies continue to dominate the region’s portfolio in a very tight market, light rail development will predict our areas of growth, and tenants are driving the reinvention of the workplace. One thing is for certain, there is much to be seen in the next few years.

Be sure to check out the slides from the morning’s presentation by going to the NAIOP WA State app. Look for the paperclip icon (materials) for the 2017 April Breakfast.

If you have not yet downloaded the app, you can search for NAIOP Washington State in the Google or Apple app stores or click here. Your login is your email address and password, which is set to your last name unless you have changed it. To update your password, click here to request a password reset link or contact [email protected].

Media coverage of this event: With Diminishing Office Inventory, Region Will Soon Struggle to Meet Tech’s Protracted Growth


This article was written by NAIOP Washington State and Marketing Communications Committee member Sarah D. Fischer of CallisonRTKL. 


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