Downtown Seattle dying? Not so fast | News

SEATTLE – In early February, I wrote about a troubling sign for the future of downtown Seattle.

An index measuring business demand for new office space showed that in December the Seattle market had seen the largest decline in the nation since the pandemic began. and that despite the fact that our office employment numbers had fully recovered.

What a difference a few months can make.

The same index now shows that demand for office space in the Seattle market has risen again since the start of the year, exceeding pre-pandemic levels.

New York-based VTS, which provides leasing and asset management software for commercial real estate rental companies, has been creating this index number for major markets since January 2018. The interest in new office space this month was set with an index value of 100 for each market.

From 2018 to 2019, Seattle had an average monthly index score of 90. That was, of course, before the pandemic closed offices and millions of employees had to work from home. By December 2020, Seattle’s index number had dropped to a grim 17, which prompted me to write my previous column.

But Seattle saw a huge boom in 2021, and interest in new office space grew every month. By March, the index of interest in office space was above the pre-pandemic average, reaching 107.

“It can have a dramatic effect when you combine some of the pent-up demand for office tenants to return to the marketplace with improving employment,” said Eli Gilbert, director of market research at VTS. “The growth in the Seattle employment base is the highest of any core market.”

And of course the upswing would not have been possible without the introduction of the COVID-19 vaccines.

“A lot of tenants are starting to see the light at the end of the tunnel,” Gilbert said. “You want to at least start looking for storage space. It can take months, if not quarters, to turn it into a signed lease.”

So dramatic is the turnaround in demand for new office space in Seattle that I felt I should pursue this story. And in all honesty, I may have been too alarming in my previous column – although I did state in my defense that the December lows may only represent a brief delay between hiring new workers and renting office space, and not a long-term trend away from physical ones Offices.

I’ve also found that the low level of interest in office space in our market in December could be due to our dominant industry – technology – adapting better than other industries to a remote work environment. Tech companies could afford to wait on getting back to the offices, I wrote.

And to a certain extent that seems true. According to VTS, while demand for new office space at tech companies in Seattle has improved significantly in 2021, it is still well below pre-pandemic levels. However, growing interest in office space from other key industries in Seattle – healthcare, legal, and professional services – has made up for it.

The VTS index is an early indicator of interest in new office space. For example, it records the number of office space visits by potential tenants. Tours are important as this is the first time a company hits the market. It is important to note, however, that the index does not track signed leases or moves.

After my previous column was published, I heard from dozens of readers – some of whom were quite upset with me – that they hadn’t pointed out what they thought was obvious: that the demand for office space was due to the months of protests and property destruction had declined; and the homelessness crisis in downtown Seattle, which of course represents the greatest concentration of office space in our market area.

It is true that some companies have left downtown and cited issues such as concerns about employee safety. And, of course, these concerns should not be rejected.

I asked Gilbert about this in terms of the remarkable boom we’re now seeing in demand for office space in Seattle.

“Companies know where the talent is and where the people want to be,” he said. “There are reasons companies want to be in Seattle, and frankly, a few months of protests won’t change the decade-long appeal for office.”

There will always be the “downtown sucks” crowd, he added – those people who don’t care about urban spaces and focus solely on the problems.

However, Gilbert says the Seattle market fundamentals are solid and expects strong demand for office space to continue. However, there is still the possibility of COVID-19 cases recurring which could affect the situation.

Most of the other major markets in VTS ‘report also rebounded, but only Seattle outperformed the pre-pandemic average. Los Angeles, Washington, DC, and San Francisco got pretty close. New York and Chicago rebounded well, but Boston was still 49% below its pre-pandemic average.