Year In Review | 2023

What I Got Right:

Amazon will announce a Return to Office protocol.

Amazon not only announced a Return-to-Work Policy but has continued to make that protocol stricter as the year progressed. We’ve heard rumors that a 5-day RTW protocol may be announced in 2024 which would be a seismic shift away from the hybrid work model we’ve seen popularized, specifically in the tech world.

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

This may have been a gimme, but given how 2023 went, I’m going to take my wins. Not only did no office space get developed, but many projects were put on hold as developers (and more importantly money partners) take the wait and see approach to overall office demand and economics. I would anticipate 2024 looks very much the same in lack of development while the equilibrium of supply and demand recalibrates.

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

In a report from the Chamber of Commerce in May of 2023, 62% of downtown Seattle employers reported employees coming into the office three or more days per week. Tuesday-Thursday continues to be the most popular days (as those that drive can attest) and are also the days of the Week Amazon reports.

What I Got Wrong:

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

I was close on this one… Inflation in June 2023 was 3% and in July 3.2% but like most of 2023, proved to be more stubborn that expected. This was a far cry from the 9% inflation we experienced the Summer before and given inflations flattened nature over the past 6 months, it has given some confidence interest rates have topped out as we have not seen a bump since July 2023 – making it 5 months, not 6 like I estimated.

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

Sales volume in the 1st half of the year totaled $226M compared to $278M in the 2nd half of the year, so a far cry from double. My incorrect guess here follows the incorrect guess above. Inflation remained and therefore so to did increased interest rates. I also expected more bank sales of office properties specifically and was surprised at the banks abilities to get creative and kick the can down the road on loan extensions…. For now.

WeWork will be on the brink... but will survive.

Again… so close. They got to November 6th before they filed for Chapter 11. The future of WeWork will be an interesting one. Flex space has its place in real estate and the brand is well known. If they are able to position themselves into a profitable model (yet to be seen), there is a future for this brand.

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

Amazon thus far has kept all their Bellevue real estate and we’ve even heard some rumors that they may be short on seats for employees in the region. Not only did they keep their new Bellevue towers but have signed short term extensions on some Seattle locations – although many short in lease duration.