Economy: Job Count And Unemployment Both Rise
The Seattle metro area added 14,600 jobs year-over-year (YOY), with the latest total figure at over 2.1 million. The unemployment rate, however, also rose, up 40 basis points (bps) YOY to 5.0%, above the U.S. rate of 4.2%. As measured by the Consumer Price Index for All Urban Consumers, Seattle metro area prices advanced 4.4% YOY, driven by higher energy (+15.9%) and food (+5.3%) costs. Minus food and energy, the index rose 3.3% YOY, mainly due to cost increases to recreation (+7.0%) and shelter (+2.6%).
Supply And Demand: Vacancy Nearing 36%
Overall vacancy in the Downtown Seattle office market reached 35.8% in the third quarter of 2026, up 70 bps from the 35.1% reported one year ago. Notable move-outs in recent months include Amazon vacating 81,000 square feet (sf) at 428 Westlake, F5 moving out of 77,000 sf at its namesake tower, and Stoel Rives exiting 39,000 sf at One Union. Class A vacancy rose 60 bps YOY to 35.2%, with vacancy in trophy class buildings at 36.5%. Direct vacancy climbed 3.9% YOY to 16.6 million square feet (msf), while sublease vacancy declined 19.8% YOY to 1.7 msf. Vacancy is expected to remain high in the near term; however, declining sublease availability and the lack of new supply should moderate vacancy growth in the longer term.
Overall absorption for the third quarter was reported at negative 116,000 sf, an improvement of 72.7% YOY. The year-to-date (YTD) total reached negative 631,000 sf, up 68.9% YOY.
Pricing: Minimal Rental Increase Yoy
Downtown Seattle’s average asking rent closed the third quarter at $47.29 per square foot (psf) on an annual gross basis; this was a YOY increase of 1.0%. The Class A figure reached $51.93 psf, rising 1.8% YOY. Despite the continued rise in vacancy, rates for trophy space remained near pre-Covid levels, averaging $53.76 psf. Rents are projected to stabilize heading into the final quarter, as subleases, which generally have lower rents in place, continue to decline and new supply continues to dwindle.
Construction: Pipeline Remains Static
The construction landscape for the Downtown Seattle office market was unchanged from a year ago, with no new deliveries and none scheduled. The most recent completion in the market was First Light, which added 108,000 sf to the Denny Regrade submarket in 2024. There is approximately 5.0 msf in the proposed construction pipeline, though with vacancy at 35.8% in the downtown area, it is unlikely that significant speculative office developments will break ground in the near term.
Leasing Activity: Activity Up Significantly Yoy
Downtown Seattle reported nearly 1.9 msf of new deals signed through the first three quarters of 2026, a 30.1% YOY increase. Nearly 472,000 sf was signed in the third quarter, matching the figure reported a year ago. Approximately 37.1% of the square footage leased was in downtown’s largest submarket, Seattle CBD. Nearly 15.8% of all new leases signed during the quarter were at or above 10,000 sf, though tenants taking at least 25,000 sf have continued to be a small part of total leasing activity, with 4.4% of all new downtown deals signed since the start of 2020 at or above that number.
Renewals signed in the third quarter were four times the figure from a year ago, at just over 428,000 sf. The YTD total was nearly 1.1 msf. Nearly 15.5% of all renewals signed since the start of 2020 were at or above 25,000 sf, including seven deals signed in 2026.
Sales: Office Sales Down Substantially Yoy
Nearly $34.0 million (M) transacted in the Downtown Seattle market through the first three quarters of 2026, down 67.6% from the $105.0M that sold at this point last year. In the most noteworthy sale of the quarter, Plaza 600, located in the Seattle CBD submarket, sold for $12.5M ($57.56 psf). The 217,000-sf property, which Orton Development purchased from a joint venture of Urban Renaissance Group and BentallGreekOak, traded for 87.1% below its December 2019 sale price.
The Seattle MSA reported $443.0M in office sales through three quarters of 2026, down 56.8% from the $1.0 billion that traded at this point a year ago. Capital markets activity is likely to remain challenged in the near term, as office sales volume has waned substantially and pricing continues to adjust. However, distressed and repriced assets may create selective investment opportunities as buyers seek attractive basis levels in fundamentally well-located properties.
