Projections for the 2024 Seattle Office Market

1. Negative Absorption will be 2x better than it was in 2023.

2023 gave us a nasty negative absorption number of 1.3M square feet (1.3M square feet came back onto the market through subleases or companies vacating space). I do not expect 2024 to be a year of recovery as much as I expect it to be a year of hitting bottom and starting to see some recovery momentum as we work toward 2025.

2. Amazon will announce a return-to-work protocol of 4 days a week or more.

I’m basing this guess on rumors we heard floating around in December that this may be coming – although nothing official yet. I cannot think of anything more impactful to our region than the return of that many employees to the downtown sector – both in setting momentum for others to follow, to supporting local business and retail that depend on those bodies.

3. 2024 will be the year of office defaults – I estimate 10M feet in debt restructuring or defaults.

Two solutions for building owners who have debt coming due in the next 12 months and are underwater – reconsolidate debt (write a very large check to the bank) or sell/hand keys back. If banks can figure out a way to kick this can down the road until interest rates drop and/or the office market recovers, we could avoid this but I’m losing confidence those two things will happen fast enough and anticipate 2024 will be a year of reckoning.

4. Rental rates in the Seattle CBD will drop 10% year over year.

I make this estimate based on the one above. If building values are reset through default or reconsolidation of debt, asking rates can and will go down. Furthermore, if attractive subleases continue to flood the market, landlords will be forced to compete or risk sitting on vacancy for another 1-2 years while markets recover.

5. Office sales volume will be 2x greater than it was in 2024.

I anticipate interest rates will remain flat the first half of 2024 and we’ll see slight dips in the 3rd and 4th quarter. This, coupled with expiring debt, should produce more sales volume than we saw in 2024. My hope is this number is far greater than 2x, but we’re playing it conservative.

6. One major commercial real estate firm will go bankrupt or be acquired.

I hate to be this negative but its reasonable to guess that we’ll see some consolidation within this space given the impacts of the pandemic followed by last year’s interest rate hike. It’s caused a 4-year period of inactivity in many sectors and the brokerage business is profitable only when there is activity.