Published August 2003

Economy continues to take toll on office market

By Eric Fetters
Herald Business Writer

The office vacancy rate in Snohomish County didn’t budge much during the second quarter, as the weak economy and cheaper lease rates on King County’s Eastside continue to take a toll.

“It seems like, in general, the northern markets are slower,” said Brian Toy, an associate broker with Cushman & Wakefield in Seattle. “The bulk of leasing activity seems to be around Bellevue and Seattle.”

The county’s office vacancy rate rose from 18 percent to 18.8 percent during the last quarter, according to Cushman & Wakefield’s latest report.

That compares with a 21 percent vacancy rate at this time last year, and a 7 percent vacancy rate in the second quarter of 2000.

Another property firm, CB Richard Ellis, reported that second-quarter office vacancies rose from 21.4 percent up to nearly 22 percent, while Colliers International indicated a slight improvement, from 18.3 percent to 17.7 percent.

Despite the differing figures, the bottom line is there hasn’t been much leasing of county office space during the past few months.

“The office market is still pretty soft, especially in Lynnwood,” said Gregg Riva of Colliers, who recently helped ZF Mathers, a boat controls manufacturer, lease more than 25,000 square feet of office space in Mukilteo.

ZF Mathers, a subsidiary of a German-owned marine parts manufacturer, is consolidating and moving its operations in Burlington and Tukwila to the North Campus Business Center in Mukilteo’s Harbour Pointe area. The company of approximately 60 employees plans to move this fall, Riva said.

But there are still huge amounts of empty space available, especially in Lynnwood’s Quadrant I-5 buildings, the Cosmos Lynnwood Center and in Mukilteo’s Harbour Pointe Tech Center.

Toy said he doesn’t expect any major move in the office leasing market until the region’s jobless rate improves. Also, Snohomish County’s traditional price advantage is being undercut by areas closer to Seattle.

A good example is downtown Bellevue, where the vacancy rate remains above 20 percent. According to Cushman & Wakefield, the asking one-year lease price for first-class office space in central Bellevue is $23.68 per square foot. That compares to $24.27 per square foot in Snohomish County.

The only bit of recent good news for Snohomish County’s commercial real estate market involved industrial space. After the Boeing Co. put more than 1 million square feet of space up for lease in Everett and Mukilteo, the county’s industrial vacancy rate leaped upward at the start of 2003. Brokers’ estimates of the county’s industrial vacancy rate range between 14 percent and 28 percent.

While those numbers are several percentage points higher than last year, Travis Industries’ recent lease of 476,000 square feet in one of Boeing’s former buildings helped dramatically, Riva said. The maker of wood stoves and fireplaces plans to move in during the next six months.

Somewhat offsetting the effects of that deal was Goodrich Corp.’s decision to put up for sale a vacant 151,000-square-foot building near Paine Field.

Tom Wilson, an account executive at Cushman & Wakefield, predicts more leasing activity in the near future involving former Boeing buildings.

“Boeing will continue to dictate the future of the markets in the northend (Snohomish County),” Wilson said. “They’re not only the biggest employer there, they’re the biggest landlord.”

Back to the top/August 2003 Main Menu