Second quarter 2007 Metro Trends

Grubb & Ellis Market Trends reports cover real estate market conditions in North America and arm our clients with the most up-to-date information possible on vacancy and absorption rates, rent comparisons, sales prices, new construction, economic background analysis and more.
Look to our Metro Trends quarterly reports for the latest data analysis of local markets.

These two-to-six page reports include analytical commentary and detailed tables displaying data by submarket. Metro Trends cover every major market in North America and are available approximately three weeks after the end of each quarter.

Downtown Bellevue office market flourishing

Developer Kemper Freeman took hold of a pair of scissors adorned with gold ribbon Thursday and ceremoniously marked the opening of a 28-story office tower at Lincoln Square, delivering the first of four new office projects planned for downtown Bellevue. About 200 people attended the ribbon-cutting, adding to the upbeat mood already felt throughout downtown's development community. Retailer Eddie Bauer will move its headquarters there from Redmond, and Microsoft will take the tower's top 15 floors "It's happy-dance time," Leslie Lloyd, president of the Bellevue Downtown Association, said during a subsequent ground-breaking ceremony at the Hyatt Regency Bellevue, where Freeman plans a second tower with 351 additional rooms, bringing its total to 733. "As they say, it's all good." A day earlier, online travel agency Expedia said it will move its headquarters from the Interstate 90 corridor in Bellevue's Factoria neighborhood to another tower being built downtown. With Redmond-based Microsoft expected to take two more buildings under construction at the Bravern Office Commons, downtown Bellevue is now left with just one office project that has unleased space: 26-story City Center Plaza . . . Also, rents are up as real-estate investors from outside the Seattle area pay top dollar for office buildings. In April, Boston-based Beacon Capital Partners paid the Blackstone Group of New York between $360 and $395 a square foot for some of the area's most prestigious office buildings, including the 76-story Columbia Center in downtown Seattle. "They have to raise rents, and probably a lot quicker than most tenants were in a position to absorb," to justify the prices they paid for buildings, said Charlie Hampton, a broker with Grubb & Ellis in downtown Seattle. "Everyone is buying to make a profit." Grubb & Ellis released a report last week showing that asking annual rental rates for premium office space are up 17 percent in Seattle's central business district and 28 percent in downtown Bellevue.
Hampton said he's advising businesses looking for more office space to consider making do with what they have.

First quarter 2007 Metro Trends

Grubb & Ellis first quarter 2007 Metro Trends are now available. The link in the title links to an interactive map of the United States in the Grubb & Ellis Research & Knowledge Center. The map drills down to more than 80 reports across the country as well as the North American Office Market Trends and Industrial Market Trends.


Interested in the latestmarket conditions?
Our Market Trends reports are published quarterly with the latest information on local and national markets. These reports include analytical commentary and detailed tables displaying data by submarket. Turn to them each quarter to see what is happening in every major market in North America.

CBDs Show Upside: Job growth has western CBDs standing tall again

Seattle

Seattle’s CBD office vacancy rate falling below 10 percent for the first time since early 2001 has led to a construction boom.

With vacancy declining rapidly in the CBD and rents on the increase, downtown Seattle is finally seeing the office construction boom that is already in full swing in the suburban Bellevue market.

Seattle’s CBD vacancy rate has dropped below 10 percent for the first time since early 2001 and will continue to decline as job growth in the Puget Sound region remains strong. Class A and B asking rates have risen significantly in the past year; Class A asking rents are approaching $30 per square foot for the first time since mid-2002, and Class B rates are at a 5-year high. Net absorption in Seattle’s CBD at year-end 2006 totaled more than 1 million square feet for the first time since the waning days of the technology boom in 2000.

In early 2006, sweeping zoning changes in Seattle’s downtown core were adopted to encourage high-rise development. This, coupled with the improved health of the office market, encouraged development to kick off in earnest in late 2006. A number of major projects have begun construction or are planned to start in 2007. By the end of this year, more than 2 million square feet of new office space could be under construction.

Major projects include Touchstone Development’s West 8th (483,000 square feet), Vulcan’s 2201 Westlake (302,000 square feet), Group Health headquarters (278,000 square feet), Schnitzer Northwest’s 818 Stewart (230,000 square feet) and Martin Selig’s 333 Elliot (137,000 square feet). At this point, only the Group Health Headquarters and 333 Elliot projects are significantly pre-leased. It remains to be seen what tenants will take up the new space, but local developers are betting that demand will remain high and a number of large users waiting in the wings will absorb significant chunks.



— Nick Papa is the research manager in Grubb & Ellis Company’s Seattle office.

Grubb & Ellis 2007 Market Trends

Market Trends Reports
Grubb & Ellis Market Trends reports cover real estate market conditions in North America and arm our clients with the most up-to-date information possible on vacancy and absorption rates, rent comparisons, sales prices, new construction, economic background analysis and more.


Metro Trends Reports
Look to our Metro Trends quarterly reports for the latest data analysis of local markets. These two-to-six page reports include analytical commentary and detailed tables displaying data by submarket. Metro Trends cover every major market in North America and are available approximately three weeks after the end of each quarter.

Grubb & Ellis Releases 2007 Real Estate Forecast

Grubb & Ellis provides real estate market information for more than 100 local markets throughout North America. Use the map to zero-in on the offfice, industrial, retail, multi housing, land and investment overviews for your areas of interest. Print a sinlge report, or customize a report to suit your needs.

For a broader perspective, download the U.S. and global forecast reports summarizing out expectations for the coming year.

Office market is sizzling in Bellevue

There's a mad scramble in Bellevue's central business district to finish construction on at least four new office buildings. With the lowest vacancy rates and the highest rental prices in the region, Bellevue is driving the local office market, according to Grubb & Ellis Co.'s preliminary office market figures released Wednesday.

New landlords want to take advantage of office rental rates, which jumped 19 percent to $32.06 per square foot per year in the fourth quarter, compared with a year ago.

"The group who ends up out of the ground first wins the projects," said Tim Smith, a senior adviser with the local office of Grubb & Ellis, a major Chicago-based real estate brokerage.
Tenants like to rent space in buildings that are finished. Many of the projects under construction were planned during the tech boom, but construction stalled during the bust. Now that construction has resumed, demand for space is expected to remain tight until the buildings are completed.

Tight Seattle office space now landlord's market

Seattle's commercial real-estate market tightened in the final three months of this year, a sign that leverage in lease negotiations is shifting from businesses that rent office space to those that own it.

The office vacancy rate in downtown Seattle fell to 9.8 percent in the fourth quarter, a report released Wednesday by the Grubb & Ellis brokerage firm showed. That was down from 13.4 percent a year ago.

A vacancy rate below 10 percent marks the point at which it becomes a landlord's market and developers begin discussing plans for new buildings, said Nick Papa, a research analyst at Grubb & Ellis. Landlords are now able to raise rents as leases come up for renewal.