Seattle’s office vacancy rate hits 26.6%, second-worst in nation. In days, it becomes Katie Wilson’s problem

Seattle’s office market just landed another unwanted distinction. The city has the second-highest office vacancy rate among major U.S. markets, trailing only San Francisco, according to the latest national office report from CommercialCafe.

The vacancy rate in Seattle sits at 26.6%, well above the national average of 18.5% and higher than regional peers like Los Angeles (14.4%), Phoenix (17.8%), and Denver (approximately 23%). Downtown Seattle is even grimmer, with vacancy rates nearing or exceeding 35% in some reports, and certain submarkets like Pioneer Square topping 50%.

The grim numbers arrive as Mayor-elect Katie Wilson prepares to take office on January 1, 2026. Wilson, who narrowly defeated incumbent Bruce Harrell in November, campaigned on a proposal for a “well-designed vacancy tax or fine” on empty commercial space to incentivize owners to fill it. Business groups have expressed concern that her progressive tax ideas could make the problem worse, not better, potentially accelerating the shift of jobs to suburbs like Bellevue.

What Mayor-elect Katie Wilson has said about Seattle’s office vacancy crisis

Wilson’s campaign focused on broader downtown revitalization, though her public comments centered more on ground-floor retail vacancies than upper-floor office space.

Her key positions include:

• Vacancy tax: Wilson advocated for taxing or fining owners of vacant commercial space to encourage better use rather than leaving storefronts and offices empty.
• Office-to-housing conversions: She expressed interest in converting underused office buildings to residential housing where feasible, aiming to increase downtown’s residential population and boost vibrancy beyond business hours.
• Broader revitalization: Wilson tied these ideas to affordability, homelessness reduction, public safety improvements, and preparations for the 2026 FIFA World Cup as opportunities for permanent upgrades to downtown Seattle.

The Downtown Seattle Association (DSA) and other business groups have warned that additional taxes on struggling commercial property owners could backfire, pushing more companies across Lake Washington to Bellevue and worsening the very vacancies Wilson aims to address.

Wilson has emphasized coalition-building and openness to input as she prepares to govern.

Jon Scholes, CEO of the DSA, offered a measured take. He acknowledged daylight between Wilson and the business community on taxes, but called her thoughtful, praising her focus on moving people off the streets and into shelters and homes. Scholes, a longtime fixture in Seattle civic life, said the gap between Democrats and progressives in the city is narrower than it was five years ago.

Tech weakness hits Seattle harder than most cities

Seattle’s heavy reliance on the tech industry is a big part of the problem. Layoffs, footprint reductions at giants like Amazon and Microsoft, and permanent remote work shifts have crushed demand for office space.

“Seattle still taxes like tech is privileged to be in Seattle,” one commenter wrote on the r/SeattleWA subreddit, where the CommercialCafe report sparked a lively debate.

Others pointed to the exodus across Lake Washington.

“Companies don’t mind moving across the lake to Bellevue,” another commenter noted. “Meta, Google, etc. are opening new offices there and closing Seattle offices pretty regularly.”

Bellevue offers proximity to Redmond, where Microsoft is headquartered, and sits closer to many of the bedroom communities that serve the region. It also has more undeveloped land and room to build.

‘Society changed. Real estate investors dumped a fortune into spaces nobody wants.’

The Reddit thread captured the frustration many feel about the state of Seattle’s commercial real estate.

“Society changed,” one highly upvoted comment read. “Real estate investors dumped a fortune into corporate spaces nobody currently wants, at a time when housing needs and costs are sky high. Until they can rezone and adapt, they will sit empty.”

Another commenter, who works remotely, put it bluntly: “I’ve worked remotely since the pandemic and have no intention of ever wasting my time commuting back and forth to an office again. The world is different, now. We don’t need to be in offices.”

Some see a silver lining in falling commercial rents.

“If this brings down the cost of commercial rents, that’s a big bonus for businesses,” one commenter wrote. “Commercial rents have been insanely high for over a decade.”

But others noted that landlords are responding by jacking up retail rents on ground floors to make up for lost office income, which ripples through to higher costs for restaurants and shops.

Some signs of life in Seattle office market

It is not all bleak. Recent major lease renewals show demand persists for high-quality, well-located space.

Slalom recently extended its 76,000-square-foot lease in Pioneer Square through 2034, a signal that some tenants still see value in creative submarkets with character.

Seattle also remains one of the few top markets with average sale prices above $200 per square foot, a positive for investors and owners despite the high vacancy.

And for tenants? It is a buyer’s market. Landlords are offering aggressive concessions, including larger tenant improvement allowances, months of free rent, and flexible lease terms.

What comes next for Seattle’s office market?

The path forward remains unclear. Some argue the city needs to rezone and convert empty office towers to housing. Others say that it is easier said than done, given the cost and complexity of converting modern office buildings.

“Office towers built after the 1950s are notoriously expensive to convert to housing,” one Reddit commenter noted. “If it were profitable, more would have already been done.”

Charlie Harger is the host of “Seattle’s Morning News” on KIRO Newsradio. You can read more of his stories and commentaries here. Follow Charlie on X and email him here. 

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