Apple is expanding in Seattle, finalizing the largest single lease of office space in the city since the pandemic’s onset.
The iPhone maker is bucking the trend of tech companies choosing Bellevue for new offices by taking more than 190,000 square feet of space in South Lake Union from Meta, according to a report from commercial brokerage Colliers.
Meta announced in January 2023 that it would offer to sublease its office in the Arbor Blocks 333 building, on Eighth Avenue North in Seattle. The parent company of Facebook was making big real estate decisions at the time and going through rounds of layoffs. It also said it would offer the Block 6 building in Bellevue’s Spring District for sublease.
Since then, Meta has moved out of another Seattle office and offered another Spring District office, the Block 5 building, for sublease.
Apple has been quiet in the Seattle area since it leased two 12-story buildings at Dexter Avenue and Thomas Street in 2019, when it announced it planned to add 2,000 jobs in the Seattle area. The company had about 2,000 employees based in the Puget Sound region as of last year, according to the Puget Sound Business Journal. Apple did not respond to requests for comment.
Colliers’ report said Apple isn’t subleasing the Arbor Blocks 333 building from Meta, which ultimately terminated its lease. Apple is signing a new lease, the largest new one in the city since 2019.
Since the beginning of the COVID-19 pandemic, some of the largest office moves in Seattle have been high-profile vacancies by Amazon. The e-commerce giant has moved employees out of more than 1 million square feet of office space since 2020, most of it in the Denny Triangle neighborhood.
Some big deals have been inked recently. Perkins Coie, Seattle’s largest law firm, announced last year that it was signing a 150,000-square-foot lease in the Russell Investments Center tower on Second Avenue in downtown Seattle. However, the firm is moving out of an office about twice the size of that in the nearby 1201 Third tower.
Colliers said tenant demand in the city is “uneven but increasing,” and the leasing cycle is coinciding with companies making firm decisions on office space. Many companies had leases expiring after 2020 and signed short-term extensions to sort out office needs.
“At this point enough companies are making their second leasing decision, which will solidify more certainly the direction of the office market than those decisions made in 2020, 2021, or even 2022,” the report said.
Connor McClain, a senior vice president at Colliers, said he doesn’t expect to see a flood of similar deals hit the market but it could be a turning point for Seattle. About 30% of the city’s office space is vacant, according to Colliers.
“It’s the first shot in the arm Seattle has gotten since 2020 as all of the activity has taken place in Bellevue recently,” McClain said. “We’ve knocked out 10,000- and 20,000-square-foot deals but we haven’t had that size and the sexy name of an Apple.”
Last year, companies like TikTok, Snapchat, Walmart and Zoom all struck new deals in Bellevue’s office towers. McClain likens the leasing activity in Seattle and Bellevue to a pendulum, one that he believes will swing back to Seattle.
Seattle’s office vacancy also looks to be flattening, even as new properties are completed. A new office project in Fremont finished construction last quarter but it was already fully leased to Brooks Sports.
Another tower in the University District opened at the end of last year, which was 50% leased by the University of Washington.
There are no more general office projects under construction in Seattle, according to Colliers. As long as Amazon or another major tenant in the city doesn’t pull out of more offices, the vacancy rate for Seattle may have already reached its peak.
South Lake Union is performing better than other parts of Seattle. In the downtown core, vacancy sits at about 29%, according to Colliers. In Belltown and part of the Denny Triangle, vacancy has crested at 34%. Pioneer Square is also struggling with more than 27% of its office space empty.
Those empty buildings are affecting the real estate portfolios of some who own swathes of downtown office properties. Martin Selig Real Estate has 18 office buildings tied to more than $800 million in troubled office loans.
Tenants haven’t swarmed to Seattle’s vacant office buildings lately, but Colliers said there were more companies searching for office space in the city at the end of last year than in 2023.
“I think the correction for Seattle’s office market is going to start happening,” McClain said. “It’s just a matter of time before that happens.”
Alex Halverson: 206-652-6352 or ahalverson@seattletimes.com.
