By Registry Staff
The Eastside, particularly Bellevue and Kirkland, has been a hotspot for real estate development and corporate expansion over the past decade. However, recent market developments have cast a shadow of uncertainty on what was once a buoyant situation. Broderick Group’s recent Q3 2023 market report shows rising vacancies, weak tenant demand, increased sublease availability, rising debt costs, and reduced presence in Bellevue. Microsoft’s decision to do so is forcing developers to rethink their strategies.
Despite the headwinds, several projects are moving forward in downtown Bellevue and Kirkland. Specifically, two projects in downtown Bellevue and one in Kirkland are currently being constructed on a speculative basis without prior lease agreements in place.
The Eight (Bellevue): Developed by Skanska, this 552,000-square-foot tower on Northeast 8th Street in downtown Bellevue is nearing completion and expected to be delivered in early 2024. The Eight is the closest to announcing a signing lease in the next quarter, with multi-tenancy expected.
Four106 (Bellevue): Houston-based Patrinley Group’s 480,000-square-foot Four 106 at Northeast 4th Street is currently in the ground with a concrete core and is scheduled for delivery in the second quarter of 2025.
kirkland ascent: Talon’s Kirkland Ascent, a 57,000-square-foot, three-story building, is nearing completion by the end of the year. Located in Kirkland Market just north of Bellevue, it offers corporate users seeking this amount of leased space the opportunity to uniquely brand the entire building.
Although construction activity continues, demand for whole building occupancies remains subdued. However, these new developments are seeing increased touring activity, indicating potential interest from potential tenants, Broderick’s report said. The Eight is the closest to announcing a deal for next quarter, cautiously suggesting the market is gradually stabilizing.
Meta, the technology conglomerate formerly known as Facebook, continues to expand in Bellevue’s Spring District. Construction is underway on Block 5 (327,000 sq ft) and Block 13 (215,000 sq ft), both leased by Mehta. The buildings are expected to be delivered in late 2023 or early 2024, expanding Meta’s Spring District footprint to 1.8 million square feet. Meta’s involvement confirms the technology industry’s continued interest in the Eastside even as other industries face uncertainty.
At this time, no additional office development projects are under construction or scheduled to break ground in the near future throughout the Eastside. This cautious approach is consistent with general market sentiment, with developers carefully monitoring tenant demand and economic indicators before embarking on new ventures. The Eastside real estate landscape is undergoing a recalibration as developers seek to align their strategies with the evolving dynamics of the post-pandemic era.
Broderick’s report says a total of 16 million square feet of development is proposed starting in 2026. Only 1% of this is pre-leased by Google at Kirkland Urban. Once his three projects mentioned above are completed, the total market inventory will be approximately 43.7 million square feet. It should be noted that in his 2004, the first year measured in the current report, market inventory fell just short of his 30 million square feet.
The East Side office market is currently facing challenges such as increased vacancy and rent adjustments. But there is some optimism about Amazon’s return to office and expansion in Bellevue. Meta and Google’s return-to-office policies set a trend among mid-sized technology companies and signal a resurgence in tenant demand.
Despite these encouraging signs, there is a serious oversupply problem, with 25% of Eastside office space available for lease. Broderick’s report said recovery will take time and require continued demand from new tenants, which could take several years.
During this recovery, tenant demand has shifted toward amenity-rich Class A buildings with desirable features such as walkable amenities, transportation access, views, high ceilings, open-air deck space, and natural light. I am. Older buildings with outdated infrastructure and limited amenities can face challenges. Similar to past economic downturns, there will be a flight to quality, with Class A office space being leased first and rents rising as inventory dwindles, while cost-conscious tenants seek lower-cost alternatives. You may choose.