Capital Markets: 2020 Predictions

Seattle’s office market was scorching hot in 2019, setting records for sales volume ($9.8B) and price per square foot ($1,067). See our previous blog post for a quick review of 2019.

Led by Partner Stuart Williams, our expert Capital Markets team offers their predictions for key figures in the Seattle office market in 2020.

Compared to 2019 performance, higher estimates for 2020 will be shown in blue.

Lower estimates will be shown in red.


Net Absorption: 3.5M SF

With 3.5M SF under construction, several large buildings will be coming on line to help meet the growth needs of tenants in our region. Thus, we expect net absorption to be slightly higher than 3.5M SF, which represents a growth rate of 1.7%. Once again, big tech will drive the growth. Just like in 2019, we expect Seattle’s growth to be in the top-5 in the U.S. (third in 2019 behind New York and Dallas).


Rent Growth: 4.2%

While we continue to be bullish on the Seattle market, the amount of new product coming on line helps explain the slight decrease in rental rate growth we expect to see in 2020. This statistic is where our team had the biggest disagreement, since some folks think the growth rate will be north of 5% due to the fact our rental rates are still low compared to other major gateway markets, and should arguably be in the top-5 in the country.

Cranes work feverishly in South Lake Union. More than 6M SF of new office product is set to deliver in 2020 across the market according to Costar, the largest amount since 2000.

Sale Price per SF: $1,150

Since we were finally right on our $1,000/SF number, we are even more bullish in 2020. The record pricing has generally been on sales of single-tenant tech buildings with long-term leases in South Lake Union. Based on rents in the $48-50/SF NNN range, parking income of $3/SF and a cap rate in the 4.25-4.50% range, we get to a value of approximately $1,150/SF.


Sales Volume: $4B

While it is difficult to say how much sales volume was inflated by impending excise tax changes, we think at least 1/3 of the volume was due to the excise tax increase. Given that 2019 set the Seattle office market record for sales volume at $9.86B we are predicting a significant decrease in sales for 2020. On the other hand, this represents an average of $6.9B for two years, which is still significantly greater than any other two year period.


International Buyers: 25%

While the percentage of sales to international buyers is going up, we expect total volume to decrease significantly because we don’t expect as much product on the market in 2020.

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