It's been five years since people in the commercial real estate industry have been this optimistic.
The Eastside office market in general and downtown Bellevue in particular have "definitely shifted" to favor landlords, says Paul Sweeney, a broker with the Broderick Group.
Downtown Seattle? The vacancy rate is still high at 16 percent but trending down "very quickly," CBRE broker Jesse Ottele says.
It's a similar story - rising rents/shrinking inventory - in the Kent Valley industrial market, where there are rumors that Amazon.com could be looking for another 1 million square feet of space, says broker Matt Wood of Kidder Mathews.
Strong job growth in the region is the main driver in all markets. Amazon said Monday it is hiring more than 1,000 people in Seattle, and Microsoft needs nearly 1,525 tech workers, according to a Forbes survey.
The brokers' upbeat assessments are spurring talk of new development. Bill Pollard, an investor with Talon Private Capital, says this is typical of every real estate cycle. Even though rents aren't quite high enough to justify new construction, developers tee up projects and "off we go to the races again."
Pollard and the brokers spoke yesterday at a NAIOP program about shifting markets.
One of the biggest shifts is in Bellevue's central business district, where there are 568,000 square feet of active deals pending. "That's huge," Sweeney said. Rents have increased 10 percent in the last two months, and "landlords are really starting to hammer the tenants."
Sweeney said brokers used to almost beg office users to move to Bellevue. Now tenants are willing to pay at least two times as much to be downtown compared to Redmond, which he called "the most beat-up market" and "not cool anymore."
Tech tenants favor the CBD because they want to be near amenities, especially transit, to help recruit top talent.
The big question is which developer will be first to build. The odds-on favorite is Bentall Kennedy with the next phase of the Summit project. The garage is done so the building could be completed in 16 months, Sweeney said.
Other possibilities are Beacon Capital Partners, which has a site on Northeast Eighth teed up for a 32-story project; Kemper Development's mixed-use project on the old Safeway site; Wright Runstad & Co.'s Spring District east of downtown; and SRO, which has a site at interstates 405 and 90.
Rents need to be $33 to $36 a square foot to justify construction, Sweeney said. They're now at $30 for general Class A space.
One intriguing suburban market is Kirkland because "everybody wants to know what Google is going to do," Sweeney said. Google "really likes Kirkland," he said, and is expected to grow there.
Google has 195,000 square feet at Lakeview Plaza, which SRM owns. Sweeney said SRM has acquired property next door and could accommodate Google's growth, or Google could end up in Touchstone's Kirkland Parkplace, a 1.2-million-square-foot office/technology project in downtown. The planned project also has space for retail and a hotel.
Ottele said there is a big shift from area code 425 to 206, with Eastside tenants scouting for space on the west side of Lake Washington. This shift is driven by new tolls on the Highway 520 bridge and by the fact that many companies' employees live in Seattle.
Fueled by Amazon.com's growth, the market saw rents rise as much as 15 percent last year, and Ottele said brokers expect the increases to continue as Bay Area tech companies come here to tap into the pool of talent.