Seattle office rents plunge faster than any U.S. city as vacancies hit record highs

Seattle’s downtown office market is facing one of the steepest declines in the nation.

According to a new CoStar analysis, Seattle leads the country in falling office rents, with vacancies hitting record highs. Experts warn the slump could reshape Seattle’s commercial real estate, cutting into property values and city tax revenues while raising questions about the future of downtown.

A graphic displaying the annual percent change in asking rent for office spaces in Seattle. (Graphic courtesy of CoStar Analytics)

“Though the amount of space available to lease has leveled off lately due to planned demolitions and conversions removing some properties from the market, the region’s vacancy rate continues to rise more quickly than that of the rest of the country,” the analysis found. “Seattle’s office vacancy rate stands at 17.3% and is projected to peak at 18.3% in 2026.”

According to the study, the steepest drops in office space usage occurred in Seattle’s downtown, Belltown, and Queen Anne neighborhoods. Some suburban locations managed flat-to-slightly positive rent growth, but this growth has done little to offset the broader downward trend.

But the study also believes office vacancies throughout Seattle can improve over time.

“The leveling off of availability signals a likely improvement in vacancy rates in the near future,” the study shared.

Concessions on the rise

Additionally, concessions continue to increase. Seller concessions are a strategic arrangement in a real estate transaction where the seller covers certain costs or fees associated with purchasing a home. This could be a number of things, including covering closing costs, repairs for a stretch of time, inspection fees, property taxes, and attorney fees.

Earlier this year, Seattle led all major U.S. metropolitan areas in concessions for home buyers, a trend that continues to escalate nationally. Redfin claimed the increase in seller concessions is due to a “sluggish” demand for home purchases, with reasons ranging from the region’s high prices, taxes, and overall economic uncertainty. Redfin reported that 13% of pending home sales were canceled in March.

“High-end offices are seeing tenant improvement allowances of up to $100 per square foot for typical build-outs, with even higher amounts for complex or premium projects,” the study read. “Both improvement packages and free rent abatements have surged since 2020, with many citing increases of a third or more during the first half of the decade.”

Follow Frank Sumrall on X. Send news tips here.