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April 25, 2014

So. Sound office market not 'Seattle strong'

Business Examiner

The first quarter of 2014 marks the beginning of the fifth year of the office market recovery from the great recession that crash landed in 2009, according to the quarterly review from Kidder Mathews, one of the largest independent commercial real estate brokerages, with an office in Tacoma and headquartered in Seattle.

Occupancy continues to inch upward, though less consistently in the secondary markets. For example, South King County saw tenants giving back nearly 98,000 s.f., just less than that submarket’s loss for all of 2013, and bringing a 12.60 percent vacancy rate. The availability rate is the highest in the region at 15.9 percent, also showing the least improvement over the past five years. Rental rates are the lowest in the region, but that has yet to generate significant leasing momentum.

The Pierce County market vacancy rate rose to 10.28% in the first quarter, following a net negative absorption of 24,149 s.f. Looking forward, the availability rate fell to 13.4%, the lowest rate since CoStar started reporting that indicator. Asking rent rose slightly in the quarter, but actual deals have not followed that trend.

State Farm Insurance continues to move staff into their new downtown Tacoma space, which is expected to be a catalyst of that submarket’s recovery. Sales in this market have been limited to smaller properties, including a growing number of owner/use acquisitions.

Across the region, the primary office vacancy rate is just below 10 percent, almost back to the 9.6 percent rate at year-end 2008, just before the fall.

To see greater detail in this report on the regional office marketplace, click here.

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