Tech layoffs and hiring freezes continue to impact the commercial real estate market in and around Seattle, according to a new report from Kidder Mathews.
“The regional office market is clearly struggling and highly volatile at present, particularly in Seattle,” the report said. “Looking forward, future office demand remains a big question.”
Vacancy rates in the Seattle region jumped to 11.2% in the first quarter of 2023. That’s up from 10.5% in the previous quarter; up from 9.9% in the year-ago quarter; and nearly double pre-pandemic levels. Sublet vacancy also remains high, at 18%, up from 16% in the fourth quarter.
The report from Kidder Mathews cited inflation and rising interest rates as additional headwinds for the commercial real estate industry, which is facing increasing scrutiny following recent bank failures.
More than 560 tech companies have laid off nearly 170,000 employees in 2023, according to Layoffs.fyi, a continuation of cutbacks that began last year amid the broader tech downturn. Seattle-area tech giants such as Microsoft, Amazon, and Smartsheet have laid off workers this year, as well as a number of startups.
Many companies are downsizing their real estate footprint given the headcount reductions and shift to hybrid work policies.
Meta said in January it would sublease a 6-story building near downtown Seattle and a 325,000 square-foot space in nearby Bellevue. Microsoft said it will not be renewing its lease at a 561,494 square-foot space in downtown Bellevue.
The Puget Sound Business Journal reported this week that Meta is subleasing more space in downtown Bellevue.
There are still 23 major office projects under construction in the Seattle region, and Meta completed its Building X in Redmond, Wash., in the fourth quarter. “Other office projects remain planned in both Seattle and the Eastside, but developers are hesitant to commence new speculative projects,” Kidder Mathews said in its report.
Amazon has some of the largest ongoing projects with several towers in downtown Bellevue, though the company said this past summer that it was pausing work on five towers to determine how its office floor plans need to be adjusted to reflect the new needs of employees.
Amazon said last month it was cutting 9,000 jobs globally, in addition to the 18,000-person layoff it announced in January.