Projections for the 2023 Seattle Office Market

1. Inflation levels will hit a healthy rate (3%) by July 31, 2023. The Fed will not increase interest rates further in the final 6 months of 2023.

This will provide confidence to industry – notably growth industry (tech) – that raising capital and exit multiples are in the not too distant future.

2. Sales volume of commercial assets will be twice as high in the 2nd half of 2023 compared to the 1st half.

Our expectations from the capital markets is a wait and see approach. Activity will pick up again when buyers sense a bottom. We anticipate heavy demand when this occurs given the amount of capital on the sidelines currently.

3. Amazon will announce a Return to Office protocol.

Amazon is the company we’ve been waiting on as it relates to announcements around RTO. Amazon was the first to go remote and the key to our city working its way back to health. With the stock now trading at pre-pandemic levels, all growth and value created through the pandemic is gone. Given the tenacity of Amazon, we believe they will do what’s necessary to right the ship and this likely includes more time spent in office.

4. WeWork on the brink… but will survive.

WeWork should have enough cash to survive 2023 but their recent credit downgrade, a slump in tenant demand and the lowering of rental rates across the board has us concerned. A substantial amount of inventory was given back during lockdowns and unless demand increases next year, our predictions for 2024 may not be as positive.

5. In 2023 there will be zero new office space developed… anywhere in the Puget Sound.

We believe this is the only asset class where this is true… But unfortunately, we simply have too much office space. Until we start seeing positive absorption or a tenant is willing to pay a substantial premium to kick off a project (not likely), it may be a few years before we see office development of any kind.

6. Office use will be at 60% of pre-pandemic levels by the end of 2023.

While this sounds low, it’s a 50% increase from what we have today. We expect the increase will be mostly in the tech sector as they are such a large part of our working population and remain the most remote by far. Per earlier comments, if tech values are down, we expect more diligence around doing whatever is necessary to perform.

7. Amazon will put at least two of their Bellevue buildings on the sublease market.

Amazon has stopped the construction of tenant improvements in their Bellevue office towers as they consider how best to build out space for the future. We expect two or more of these buildings to be marketed as available with below market rates and a healthy improvement allowance similar to their strategy at Rainier Square in downtown Seattle.