Basic economics state that bubbles cannot be identified as they occur and cannot or should not be prevented (they can be speculated as can anything). We’ve typically seen Seattle offer 10 year cycles of peaks and valleys which makes our current circumstances unique as our recovery nears the longest in modern history coming up on its 9th birthday in June.
Looking at Seattle, Supply and Demand of office space combined with the strength and hiring from our local businesses are the main considerations. With Amazon, Google, Facebook, Oracle among other groups growing locally, demand remains strong. Historically, Seattle used to depend on the whole office market’s demand to move the needle. Today, a select group of businesses are the driving force behind our continued success and seem the obvious one to look at to determine any cooling or a continued run.
The vacancy in Seattle is just below 10% with the delivery of Madison Center. Rumored leases has this building near capacity by the end of the year. Another 1.3M square feet will deliver in early 2020 with 2&U and 333 Dexter – both of which have had strong activity as well. My bullish assumption is that by the end of the year, one if not both buildings will be spoken for.
Long story short, the office construction in Seattle has been conservative based on demand. Even if the demand in the city were to slow, vacancy and new supply is low enough, that it should not decrease rental rates.
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