Even as some of the Seattle area’s largest tech firms shrink their spaces, the region’s tech office market is, by one measure at least, the best in the world.
For the first half of the year, the Seattle area outperformed other tech hubs in office leasing activity by tech companies. The region’s five largest lease deals totaled more than 1 million square feet, about double what San Francisco had, according to a recent report from commercial brokerage Savills.
Second to Seattle was Los Angeles, which had just under 900,000 square feet total for its largest five deals. The closest international city was Delhi, just behind third-place San Francisco.
Most of the activity in Seattle has been expansions and new, bigger locations. That’s bucking a major trend from the past few years, which saw tech giants like Amazon and Microsoft drop entire office towers from their real estate portfolios.
Amazon has left at least three major office buildings in Seattle since the beginning of the COVID pandemic as it expanded to more than 12,000 employees across seven fully leased office buildings in Bellevue. All three of the offices Amazon vacated are in Seattle’s Denny Triangle neighborhood, within a few blocks of the Spheres.
The company has another lease expiring at the end of next year in the Met Park North tower on the edge of its Seattle campus. The Broderick Group is advertising the property as available once the lease runs out.
Microsoft recently vacated four office towers in downtown Bellevue as it retreats to its Redmond campus, which is in the middle of a massive expansion and renovation. As of last year, the company is no longer a top 10 employer in Bellevue due to its office moves. Three years ago, it was the city’s largest employer.
As those companies clear out, a new tier of tech companies can expand or relocate into prime office space. The issue for the city of Seattle is that most of the activity is taking place across Lake Washington in Bellevue.
“Downtown Bellevue’s premium space and strong demand position it for continued growth, while Seattle’s higher availability suggests a slower recovery,” another recent Savills report said.
Office availability in both cities is higher than levels that could be considered healthy, but Seattle is faring worse. Savills notes availability rates for the commercial business districts of Seattle and Bellevue hit 31% and 21%, respectively, last quarter.
Entertainment giant Pokémon and cloud computing company Snowflake both signed single leases for more than 300,000 square feet in Bellevue this year, according to reports from several brokerages.
Snowflake’s lease demonstrates how Bellevue’s market is rebounding quicker than Seattle’s. The company scooped up its new Bellevue office in a sublease deal with Facebook parent company Meta, which decided last year it wouldn’t occupy the Block 6 building in Bellevue’s Spring District. Meta also decided it would leave an office in Seattle’s South Lake Union neighborhood, the 333 Arbor Blocks West building, but hasn’t yet found a tenant to sublease.
TikTok, the social media platform owned by Beijing-based ByteDance, has been gobbling up the most space in Bellevue. The company has ventured into e-commerce with plans for a Seattle-area hub. Since launching TikTok Shop last year, the company has leased roughly 327,000 square feet, bringing its total in the area to about 450,000 square feet.
The biggest tech lease in Seattle last quarter was from Remitly, a Seattle-based digital remittance company that helps people send money internationally. The company subleased about 86,000 square feet from Amazon in downtown Seattle’s Rainier Square tower, which is now roughly 80% full. Amazon backed out of the tower in 2019.
“While some of the bigger tech companies had been looking around Bellevue for most of last year, a smaller company like Remitly took advantage of the Rainier Square sublease,” said Eric Lonergan, executive managing director of Savills’ Seattle office. “I think we’ll see more of that type of deal in Seattle.”
Kendall Sadler, Remitly’s director of communications, said in an emailed statement that the company is planning to move its headquarters in 2025 out of a smaller office around the corner in the 1111 Third tower to accommodate growth and provide additional space for collaboration.
Bellevue may be attracting Amazon’s growth, TikTok’s e-commerce hub and a Puget Sound-area satellite office for OpenAI, but Remitly elected to stay in Seattle proper for the talent close by.
“Seattle is an incredible hub for talent, technology and innovation, and Remitly is proud to have roots here,” Sadler said. “Our primary focus continues to be growth in Seattle.”
Outside of Remitly’s deal, tech lease transactions in Seattle were largely missing from office market reports. One of the only highlights was San Francisco-based artificial intelligence company Databricks, which grabbed almost 20,000 square feet in the West 8th, one of the towers Amazon vacated last year.
Databricks’ lease fulfilled some optimistic prognostication from Kilroy Realty, the owner of West 8th. Robert Paratte, Kilroy’s chief leasing officer, said earlier this year during an earnings call that tenants would line up for plug-and-play office space.
“We have good activity at West 8th where we’re exchanging paper with two different prospects,” Paratte said in February.
Once Amazon left the tower, Kilroy reported in an annual filing that its occupancy dropped from full to 20%.
But there’s a chance Bellevue could serve as a bellwether for Seattle, rather than a jealous rival. Connor McClain, a senior vice president with commercial brokerage Colliers, said Seattle is seeing an uptick now that deals in Bellevue have cooled down. And prospective companies are new to the market, he said.
“My gut is that these companies understand how they want to use their office; they’re no longer kicking the can down the road with small lease renewals,” he said. “They’re implementing return-to-office policies, and we’re going to see that leasing velocity return to Seattle.”
Seattle’s availability may plateau, too, as the market resets. Once buildings sell for less, buyers can offer lower rents to fill them.
“There’s no crystal ball, but there’s one way to go in Seattle and that’s up,” McClain said. “It just might take us a little longer.”
