Commercial Real Estate Report Seattle – Q4 2023

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, industrial, and multi-family. We will look at those four sectors to determine the status of the Seattle commercial real estate market during the fourth quarter of 2023.

Seattle Office Buildings

Despite the rise in return to office mandates at Meta, Amazon, and Tesla, new leasing volume is down approximately 20% from early 2020. Not only that, the spaces being leased are smaller since many companies, especially in the tech sector, are trying to cut costs. However, TikTok is attempting to increase its footprint by 132,000 square feet at Lincoln Square North tower in Bellevue. The space was previously leased by Microsoft. These types of expansions create hope for a rise in sales and leasing activity in 2024, and there were notable sales during the third quarter of 2023. For instance, Bo Chen purchased The Cascade Alarm Building at 220 S Findlay Street in South Seattle from Gary Pollastro in mid-November. The 3,000 square foot, one story building sold for $1.3 million, or $433.33 per square foot. Built in 1982, the Class C building sits on .23 acres. 

Local business Haas Development & Construction Co. purchased an office building from Dowbuilt in early December. Located at 4001 Aurora Avenue N in Fremont, it was a sale leaseback transaction. The 3 story 20,093 square foot building was constructed in 1953 and renovated in 2012. The Class A building sits on 13,504 square feet. It sold for $369.53 per square foot and was 100% leased at the time of sale. Also in December, a Class B building at 201 Queen Anne Avenue N in Queen Anne sold to buyer Stream Real Estate Development & Investment. The seller was East-West Investment Co. The 52,270 square foot office building was constructed in 1985 and had no tenants at the time of sale. The property sold for $7 million or $133.92 per square foot. 

Seattle Retail Market

The retail sector remains stable, and the vacancy rate stayed under 3% in King County. Elevated interest rates heavily impacted both investor and leasing demand. However, overall development expanded to its highest total since 2022. Mid-December saw the sale of a bank building at 815 2nd Avenue in Downtown Seattle. Locally based Landmark Event & Catering purchased the property from KeyBank for $95.07 per square foot for a total of $1.96 million. Built in 1924, the two story building holds 20,577 square feet. The Central Frame Building, constructed in 1937, sold to Krunal Desai for $2.25 million. The building, located in Ballard, has 3,864 square feet. The one story Class C property sold for $582.30 per square foot. 

A two property portfolio at 4455 148th Avenue NE and 4685 148th Avenue NE sold for $11.92 million, or $72.57 per square foot. The portfolio consists of one retail building and one multifamily property. Pro Sports Club Physical Therapy sold to Bay Club in early December. The retail space, occupied by PRO Medical ClubBay Club, and 2020 Lifestyles Medical Center is approximately 133,349 square feet. Built in 1973 the property sits on a 10.14 acre lot in Bellevue as part of the Microsoft campus. The sold price for both properties was $11.924 million, or $72.57 per square foot. 

Office/Retail/Flex For Sale in Queen Anne
Office/Retail/Flex Space Available For Purchase in Queen Anne

Industrial Market

Industrial saw a strong jobs performance, suggesting a larger demand for industrial space. Leasing slowed throughout 2023, but was still above pre-pandemic levels, and there’s strong indicators that it will continue to do well. For instance, Boeing is expected to move into approximately 2 million square feet in 2024. A Class C warehouse located at 1521-1525 NW Ballard Way was sold for $2.95 million in mid- October. The seller, John Dunato, sold the industrial building to Scott Diager for $269.41 per square foot. Both the buyer and seller are local. The property, built in 1977, was 100% leased at the time of sale. The listing brokers were Bob Meyer and Richard Riley of Ewing & Clark.

Also in October, the 30,000 square foot Ferguson Building at 12530 165th Avenue NE sold. It was built in 1980 and sold for $10 million, or $333.33 per square foot. The single tenant Kirkland warehouse is classified as Class C and sits on 2.05 acres. Lee Johnson Auto Family purchased the property from Richard Budke. Yet another Class C building containing 20,700 square feet, located at 1421 S Dearborn Street sold in early November. Sharon M Selset sold the warehouse, built in 1925, to Minh Van Bui for $3.2 million, or $154.59 per square foot. 

Multi-Family Sales and Development

There’s been a large focus on the construction of affordable housing in hopes that higher supply will lower the cost of in-city living. The Amazon Housing Equity Fund aims to prove the private sector can assist the community in attainably priced housing. Developers are also taking advantage of the Multifamily Tax Exemption program, in which they receive property tax exemption for up to 12 years. In exchange, rents are lowered for tenants that meet income requirements. JPMorgan Chase & Co. sold The Wilcox at 2003 NW 57th Street in Ballard to Timberlane Partners for $45.1 million. Priced at $342,045, the 132 unit building was built in 2007 and was 6.8% vacant at the time of sale. It’s roughly 92,087 square feet and sits on .52 acres. 

Arlo, an apartment building at 4720 Rainier Avenue South in Columbia City, sold for $97 million in late December. Georgia based company Wood Partners sold to Carmel Partners, who are located in California. The 243 unit, 7 story building was constructed in 2021. It contains 243 units, which sold for $399,177 each. The apartment building was 9.5% vacant at the time of sale. Uptown at Kirkland Urban at 550 Upton Court sold for $483,784 per unit, or $89.5 million. The 6 story building, constructed in 2019, has 185,000 square feet and was 7% vacant at the time of sale. The buyer, Kirkland based Weidner Property Management LLC acquired the apartment building from PGIM, Inc. 

Does the Future Look Brighter for the Seattle Job Market?

According to the Washington State Economic and Review Forecast, job growth has been stronger than predicted in the November Forecast. Unfortunately, the unemployment rate increased to 4% in December, up 0.2% from November. In the Seattle metropolitan area, job growth fell below 2.5%. Residential construction continued to slow through the fourth quarter. Seattle-area home prices increased month over month, and personal income estimates were also on the rise. Nevertheless, consumer price inflation continued to be higher than the national average, up to 4.4%, while the national average was 3.4%.

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.