Commercial Real Estate Report Seattle – Q4 2022

Seattle Commercial Real Estate Market Q4

Is the commercial real estate market slowing down or is it picking up

Seattle commercial real estate covers several different sectors, including but not limited to retail, office, and multi-family. We will look at those sectors to determine the status of the Seattle commercial real estate market during the fourth quarter of 2022.

Seattle Office Buildings

The office market continued to be soft due to remote work. This is most apparent in Downtown Seattle, where vacancy rates hovered around 25% at the end of 2022. Following suite, Bellevue and the Eastside were also affected, and both saw significant departures. However, there have been some interesting sales. A medical office building at 3003 81st Place SE sold for $3.3 million on Mercer Island. The buyer, S Properties LLC, purchased the two story, 3,683 square foot building for approximately $896 per square foot.

A two building office park developed in 1984 called Belle-View Office Park sold in October for $18.66 million. The purchaser, PFI Belle View LLC, bought the 3.679 acre campus at 275-325 118th Avenue SE in Bellevue. The seller was Bellevue Park Investment LLC. The two buildings house 57,512 square feet of office space and sold for $504 per square foot. Similarly, a two property portfolio sold in Ballard to Cceg Gateway In Ballard LLC for roughly $7.86 million. The first building located at 5401 Leary Avenue has 3,785 square feet of office space. The second building at 5405 Leary Avenue has 6,643 square feet of office and retail space. 

Seattle Retail Market

Nationwide, retail sales didn’t hit projected numbers for the holiday season. This is most likely due to inflation coupled with heavy discounts. Nevertheless, there was a 5.3% increase in spending in November and December. Interest in retail spaces remained steady. Near the University District, 660 NE Northlake Way sold for $1.35 million, just shy of $399 per square foot in November. Built in 1958, the 3,384 square foot building sits on .07 acres and was an owner-user sale. 

Inglewood Village LLC bought a shopping center located at 14130 Juanita Drive NE in Kirkland for $14.3 million. The shopping center sold for about $220 per square foot and hosts restaurants as well as retail spaces, including a QFC. Similarly, a shopping center at 15137-15171 NE 24th Street in Redmond was sold for $28.5 million, or $813 per square foot. There’s 35,025 square feet of rentable space at the shopping center, called Overlake Square. The purchaser, Carmel Partners, is based in San Francisco.

928 NW Leary Way
Office Suite Available in Newly Constructed Building

Industrial Market

Rising interest rates dampened industrial sales, however, they helped to maintain strong leasing rates. More renewals, coupled with low supply and high demand made vacancy rates hover around 4%. Regardless, noteworthy sales of industrial properties occurred in the fourth quarter. GMT Elliot Portfolio LLC, a company associated with local investors, purchased 5 industrial buildings in Interbay. The complex consists of roughly 135,667 square feet and changed hands for $127 per square foot, or $17.3 million. It holds tenants such as Holy Mountain BrewingBell’Occhio HomeChampion Party Supply, and more. A 27,939 square foot distribution building in the Beacon Hill area sold for $6.25 million, or $223,70 per square foot. The building, originally constructed in 1952, was renovated in 1995. The class C building is located at 5940 S Martin Luther King Jr. Way. 

A sizable industrial building in Renton sold for $120 million, selling to LPR Renton Logistics LLC for $261.24 per square foot.   The warehouse building is located at 300 SE 27th Street. The property, developed in 1996 on 34 acres, is fully leased to three tenants. In the Duwamish area, a warehouse sold for $1.51 million, or $280.19 per square foot. Built in 1940, the 5,400 square foot building was purchased by Nizlat LLC.

Multi-Family Sales and Development

Rent growth slowed during the fourth quarter to around 2%, down over 8 points from the first quarter of 2022. Heavy construction of multifamily homes played a large role. Towards the end of the quarter, Downtown Seattle had 3,213 apartments under construction. Similarly, neighborhoods such as Capitol Hill, South Lake Union, and the University District saw a respectable number of construction as well.  

Kiara, a 41 story apartment building whose construction was completed in 2018, sold for $322.7 million in December. Bought by Ponte Gadea Kiara Inc., an investment arm of the founder of Zara, Amancio Ortega, for roughly $700,000 per unit. Located at 111 Terry Avenue N in South Lake Union, the building sold for roughly $912 per square foot and closed 2022 with a 9.9% vacancy rate. 

In Capitol Hill, two parcels at 1314 E Union Street were sold to 14th and E. Union LLC for $6.8 million. The building sold for $582.99 per square foot and was built in 1963. Euclid Development purchased the multi-tenant building in November with the intention of developing a 138 unit apartment building. Casa Nita Apartments, also in Capitol Hill at 430 12th Avenue, sold for a little over $5.89 million. Built in 1925, the 3 story building has 26 units, which sold to Kp Casa Nita LLC for $226,650 per unit. The building sits on .28 acres and sold for $271.84 per square foot. The property had a 6.1% vacancy rate at the time of sale at the beginning of December. 

Does the Future Look Brighter for the Seattle Job Market?

While inflation slowed, hiring freezes from large companies such as Amazon point towards uncertainty. Nationwide, the unemployment rate rose slightly from the third quarter to 3.7%. In the Seattle area, however, the unemployment rate was much lower at 2.6% in late December.  Regarding commercial real estate, a survey was released which sheds light on the status of construction. The survey, released by The Associated General Contractors of America and Sage, included information from 1,032 respondents. Of those respondents, there were 42 participants from Washington. Nationally, construction of retail fell 22% and private office fell 21%. Comparatively, in Washington, retail construction fell 10% and private office fell 25%.

Q4 Job Market

Where Can I Find a Seattle Commercial Real Estate Broker?

There are many Seattle real estate companies, but Ewing & Clark has been providing our city with real estate service since 1900.  Feel free to reach out to Ewing and Clark or one of our Seattle real estate agents that knows the Seattle commercial real estate market.  If you prefer, start today on our Greater Seattle commercial MLS search and let us know what you want to see.