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.

Seattle Economic Indiacators - November 2006


Jobs & Labor - Bureau of Labor and Statistics (October 2006) Current Trend
Seattle/Bellevue/Everett MD Rate (Non-Seasonally Adjusted) 3.9% Falling
Washington Unemployment Rate (Seasonally Adjusted) 4.8% Falling
Job Creation last 12 Months- Seattle/Bellevue/Everett MD 44,300 +3.4%
Job Creation last 12 Months- Washington 101,200 +3.6%

Economic Indexes - (October 2006) Current Trend
National Activity Index - 0.31 Negative
National Activity Index - 3-month average -0.19 Negative
Puget Sound Index of Leading Economic Indicators (2nd Quarter) 1.13 -1.2%
US Industrial Production-Manufacturing
Current/Pct. Change from October 2006 115.5 -0.2%
3 Months Ago/Pct. Change from July 2006 115.5 +0.4%
1 Year Ago/Pct. Change from October 2005 110.4 +4.1%

Inflation - Bureau of Labor Statistics (October 2006) Current Trend
CPI/Annual Change (Urban)-Seattle All Items 209.8 +3.2%
CPI/Annual Change (Urban)- West All Items 207.1 +2.2%
CPI/Annual Change (Urban)-United States All Items 201.8 +1.3%
PPI/Annual Change (Finished Goods)-United States 158.4 -1.6%

Housing Data - National Association of Realtors/ MLS (October 2006) Current Trend
King County Median Sales Price/Change from prior year (excludes condos) $432,600 +16.3%
Snohomish County Median Home Sale Price/Change from prior year $357,300 +17.3%
Pierce County Median Home Sale Price/Change from prior year $279,500 +14.9%
Building Permits - King County/Change from prior year 5,162 +62.0%
King County Housing Affordability Index (3rd Quarter 2006) 69.2 Negative

Interest Rates and T-Bill Rates Current Trend
Federal Reserve Bank Prime Loan Rate 8.25% Flat
30-year Fixed Rate 6.18% Falling
1-year ARMs 5.53% Falling
10 Year Treasury Bill (Trend is change from this time last month) 4.57% Falling

Other Data Current Trend
U.S. Gross Domestic Product -2nd Quarter 2006 +2.2% Rising
Dow Jones Industrial Average (YTD change) 12,307 +14.3%
Consumer Confidence Index (Change from September 2006) -0.47% Falling