Although an “end” to the coronavirus pandemic feels more tangible than it has in the last year, it’s also a given that ensuing returns to “normalcy” will remain complicated for many industries. Commercial real estate is no exception.
Recently, real estate firms Colliers International and Kidder Mathews released reports detailing their respective first-quarter findings — updates that also mark the one-year anniversary of the onset of the pandemic.
Both companies noted in their reports that although there is some new optimism brought on particularly by wider accessibility of vaccines, unsteadiness in the region’s commercial sector should be expected in the nearer term.
“There is a light at the end of the tunnel with three vaccines against COVID-19 making their way through Washington state,” Colliers stated in its report. “This confidence has led to significant increases in tour activity and leasing discussions, although these deals are unlikely to result in positive absorption in the near term as deals negotiated now may not occupy space until early next year.”
Kidder Mathews’ optimism also came with a caveat.
“While there has been gradual improvement in the job market, until we have fully immunized the critical mass, the regional office market will remain volatile,” its report states.
In the Puget Sound area as a whole, Colliers International reported that nearly 3 million square feet of new offices will be completed in 2021 — a 32 percent dip from 2020.
Zeroing in on Pierce County, Kidder Mathews found that of all the regions in the Puget Sound area, the county had the lowest rate of office vacancy, at 5.94 percent. Overall office availability rate increased to 8.5 percent in Quarter 1 from the 8 percent in fourth quarter 2020. Average rent increased slightly, currently standing at $26.66 per square foot per year, as opposed to the $26.26 of fourth quarter.
Kidder Mathews noted that in the first quarter, there are no new major office sales or new construction stats to report in Pierce County. The bulk of new construction is happening in Seattle or on the Eastside, and 76 percent of those spaces are precommitted.
Colliers International highlighted how individual companies handle hybrid models as potentially impactful. “The dynamics that fuel Seattle’s growth are the same as before the pandemic: large employers, high quality of life, and diverse industries throughout the region,” the Colliers report states.
The Kidder Mathews report noted that while it was encouraged by improving unemployment rates, other COVID-19-related impacts on the Puget Sound’s office market are still surfacing.
Some of those effects include rising vacancy, slowed-down sales and lease volumes, and negative net office absorption in the majority of the region’s market areas. Still, Kidder Mathews avoided making declarations about what we should expect in the coming year.
“It remains to be seen,” the report states, “how 2021 will play out.”