The massive shift toward remote working last year led to speculation over the future of telecommuting – and the implications for commercial real estate. A new report by Coldwell Banker Richard Ellis (CBRE) found that leasing activity in the Puget Sound region continues to recover, particularly on the Eastside. However, uncertainty remains as employers continue to contemplate new workplace policies.
Driving much of that leasing activity is the region’s growing tech workforce. Another recent report by CBRE ranked Seattle as the number one city for tech labor and second behind San Francisco in terms of its technology talent pool. Though San Francisco’s tech workforce of 373,000 dwarves Seattle’s 184,000, last year Seattle metro nabbed 14 of the 100 largest tech office leases – the most total leased space of any city, and over the past year the tech sector made up the vast majority of new office space leased (3.5 million square feet) in the Puget Sound region.
The CBRE report concluded that while in the current leasing market “tenants are in the driver’s seat,” commercial rent rates are also increasing as workers steadily return to traditional workplaces in major employment locations like downtown Seattle. The Eastside’s current vacancy rate is 10.6 percent; it is almost half that of Seattle’s and has decreased for the first time since March 2020.
At the same time, many employers are adopting an “activity-based work model” in which employees can choose the setting in which to work. The report said that the “only common request (from workers) is for more flexibility. Despite leasing and touring activity, companies are still taking a cautious approach with long-term office commitments, as workforce planning discussions continue.”
A separate report by Kidder Matthews noted that “while there has been clear improvement in the job market, until we have fully recovered from the pandemic, the regional office market will remain volatile. However, with expected job growth, healthy employment rates and continued tech demand, the fundamentals are encouraging moving into the second half of 2021.”
Although tech giants continue to build or lease office space across Puget Sound, the national trend has small companies pushing most for the traditional workplace. A CBRE survey of 185 employers found that 81 percent of small companies had office space access for at least half of employees, compared to just 66 percent for larger companies. That same survey found 87 percent of large employers believe a hybrid work policy will become the norm.
Another noteworthy trend within the Puget Sound commercial real estate market as well as the tech sector is the growing preference among employers to locate on the Eastside rather than Seattle. Facebook recently leased a 330,000 square foot office building in Bellevue, making it the largest commercial lease so far this year in the region. Meanwhile, Amazon plans to convert a former Macy’s Store in Redmond Town Center into a workspace.
“The Eastside provides vibrant communities with thriving downtown districts, amenities, access to public transportation, and business-friendly environments,” Amazon’s Puget Sound Region Director of Global Real Estate and Facilities Patrick Miller said in a statement. “We’ll continue to work with the community and local leaders as we invest and bring 25,000 tech and corporate jobs to Bellevue and additional jobs to Redmond.”
It was also recently revealed that online brokerage firm Robin Hood plans to lease a mass timber office building in Kirkland, while online pet store Chewy will occupy a 43,509 square foot corporate office in Bellevue.
“We think that is a trend we’re continually going to see,” CBRE Corporate Real Estate Advisory Services Senior Vice President Brian Biege during an Aug. 11 live panel.