Office leases are getting shorter, but signs point to growth
The way we work has fundamentally shifted since the onset of the pandemic. Work from home and hybrid options have presented employees with a new level of freedom, while puzzling employers over how to handle their office requirements moving forward. In their search for a new normal, many companies have returned to the office, but they’re hedging their bets: office leases in Seattle are getting shorter.
According to data from CompStak, in the first quarter of 2022, the average office lease in Seattle was down to just 58 months, compared to 71 months in the last quarter of 2021. Pre-pandemic, Seattle was averaging 65-month leases in the first quarter of 2020.
The average rent decreased as well, coming down from $57.74 per square foot in the last quarter of 2021 to $54.48 in the first quarter of 2022.
Although leases in the area are shrinking, vacancies are as well. The overall vacancy rate in Seattle remains elevated around 10%, but about 2.4 million square feet of office space was leased in the first quarter of the year, in line with the pre-pandemic average. Additionally, an estimated 10 million square feet was leased in the 12 months preceding March 2022, compared to 9.1 million square feet leased in all of 2019.
The recent shortening of leases is mostly due to employers wanting to keep their options open for hybrid and flexible approaches in the future. It’s hard to anticipate how much space a given company may need when new Covid variants and the continued popularity of remote work create uncertainty about how and where employees will work.
The Eastside commercial market has not seen the same dip as Seattle, with the average length of office leases increasing to 69 months in the first quarter of 2022, only slightly down from 70 months in Q4 2021, and up from 58 months in the last quarter of 2019.
Part of the Eastside’s resilience in this market is likely due to the prevalence and influence of big tech employers in the area. Companies like Amazon and Microsoft have committed to at least a partial return to office, and with a squeeze on commercial inventory in the area, companies are willing to bet big on their leases.
While there’s no way to know exactly what the working landscape will look like a year from now, it’s clear that for many, the office is not just a thing of the past; employees should be prepared to make an appearance at the office, especially if their employers have committed to the space for the foreseeable future.