The second quarter saw continuing improvements in Seattle’s office market, although the changes were more incremental than a year ago. The Seattle economy continues to outperform the nation, and its modest slowing is about as predicted. One new development that may have some effect on the office market is the proposed purchase of Safeco by Liberty Mutual. The 85-year old company had led the recovery in the Seattle CBD office market when it relocated its headquarters into 508,000 s.f. at 1001 4th Avenue Plaza and 2nd & Seneca Towers. The depth of the layoffs has not yet been released, but a significant overlap exists between the two companies.  On the positive side, the long-anticipated Microsoft lease in City Center Plaza was formally announced in early May. The City Center Plaza 570,000 s.f. lease by the software company is added to: 735,000 s.f. at The Bravern; 750,000 s.f. in Advanta; and 350,000 s.f. in Lincoln Square, as it secures expansion space outside of its built-out campus. They are also rumored to be considering a million square foot addition in the Seattle market.

Despite economic troubles on the national and local level, the San Francisco office market continued healthy growth as the final quarter of 2007 came to an end. The market has cooled considerably relative to the first two quarters of 2007, yet demand for space persists and market fundamentals remain sound. The vacancy rate dropped for the 18th consecutive quarter dipping into single digits (9.9%) for the first time in seven years while net absorption again was positive at 162,245 s.f. Asking rents remain higher than 2006 levels, however, a number of building owners have backed off their stated rates for good credit tenants. San Francisco, although not immune to economic turmoil, seems well equipped to stave off much of the potential threat. With venture capital investment pouring into online start-ups, cleantech and biotech firms, demand for space from these sectors will continue to breathe life into the San Francisco office market. For the near future, we expect the market to remain healthy, albeit moderating.

Download First Quarter 2008 San Francisco Office Market Report

Download Year-End 2007 San Francisco Office Market Report

The Portland regional office market has started off 2008 with mixed results. The market has demonstrated ongoing demand by tenants needing to occupy additional office space, but not enough demand to occupy all of the new space delivered to the market during the first quarter. As a result, the market experienced positive absorption, but at the same time the overall vacancy rate moved slightly higher. Portland’s regional employment growth continues to exceed the U.S. average, but regional job growth has slowed over the past year.