Originally published on August 30, 2023, by Gary Baragona for NAIOP.
The slow recovery of the U.S. economy continues to have an impact on the office market in Seattle as well as across the county. Despite steady job growth and moderate economic recovery gains during the first half of 2023, the Puget Sound regional economy is still struggling and will face continued headwinds during the near term, bringing an enduring sense of uncertainty and concern. According to the Puget Sound Economic Forecaster, regional employment grew by 3.1% in 2022 while job growth is forecasted to increase by an additional 3.3% in 2023 before dipping to 1.5% in 2024. Additionally, the consumer price index was at 8.9% to begin the year, with inflation forecasted to rise by 5.2% in 2023 and 3.1% in 2024.
Despite recent job growth, the Seattle office market is experiencing a steady rise in vacancy, increasing from 5.8% in the second quarter of 2019 to 12.2% at the end of the second quarter of 2022, a 640-basis point jump over just a three-year period. Current vacancies are at a 10-year high and just registered the 12th quarterly increase over the past 14 quarters. One year ago, regional vacancy exceeded the 10% mark for the first time since 2013, and it has now eclipsed 12% for the first time since 2011. Additionally, more than 19% of the current vacancies are from sublease space, which is approximately 18% higher than it was last quarter. The increase was primarily due to an uptick in Eastside sublease vacancies over the quarter.