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: Momentum Builds As Market Nears Bottom
The Seattle industrial market has edged above the 10.0% vacancy threshold in 2026, ending the third quarter at 10.2%, up 140 bps YOY. Vacancy growth was driven by a combination of recent speculative deliveries, tenant consolidations, and several large spaces vacated.
Overall absorption in the third quarter turned heavily red to the tune of negative 1.2 million square feet (msf), pushing the year-to-date (YTD) total into the red as well, reaching negative 659,000 square feet (sf). Despite the rise in availability, brokers are beginning to report noticeably healthier leasing fundamentals than the statistics alone suggest, something that is expected to become evident over the next few quarters. The environment is becoming increasingly transactional, lease proposals have expanded, and occupiers are actively re-entering the market. In particular, demand for large-block industrial space in the 300,000 to 700,000-sf range has improved significantly, while advanced manufacturing and aerospace-related users continue to lead all other sectors with the most active requirements.
Pricing: Emerging Competitive Conditions Still Favor Occupiers
While occupancy fundamentals softened during the year, rents continued moving in the opposite direction. Average asking rents in Seattle increased 8.3% YOY to $1.04 per square foot (psf) on a monthly triple-net (NNN) basis. Much of this resilience has been driven by landlords’ focus on preserving face rates while instead utilizing concessions and creative lease structures to secure tenancy. Industry discussions also note another tactic called “space pocketing”, where tenants commit to large blocks of space but phase occupancy over time. This creates additional negotiation points and adds options for tenants, although NNN expenses, insurance costs, and net taxes continue to pose challenges. Diligent landlords remain aggressive in protecting occupancy and maintaining competitiveness, which may allow rental rates to creep down in the coming quarters.
Construction: Shrinking Pipeline To Support Future Recovery
A more significant shift within the Seattle industrial market continues to be on the supply side. A total of over 1.1 msf (100% vacant) across three projects was added to the market in the third quarter, bringing the YTD total to just under 2.9 msf. What appeared to be a positive quarter for new development gave way to pipeline contraction that were still very much present. Just four projects remain under construction, totaling just under 1.3 msf, with another 14.4 msf of proposed projects in the pipeline. New projects struggle to break ground amid leasing risk, financing costs, and higher vacancy levels. This slowdown is, however, increasingly being viewed as a positive long-term catalyst which should allow organic growth to absorb existing inventory. The reduction in future supply is expected to help stabilize vacancy and improve landlord pricing power over the coming years.
Leasing Activity: Better Second Half In Store
While leasing volume in the third quarter of 2026 rose 31.8% YOY, surpassing 2.2 msf, the overall market activity remains behind last year's pace, with 6.3 msf leased YTD compared to 7.1 msf through the third quarter of 2025. Equally notable, market sentiment surrounding leasing activity has improved substantially compared to the first half of the year. Brokers consistently describe the environment as far more active, with increased competition among tenants and landlords alike. The South King County submarkets have been a driving force, accounting for 56.6% of all deals YTD. Renewals remain a large component of market activity and often extend transaction timelines, creating a "hurry up and wait" environment in which deals remain active but require extended periods to reach execution. Nevertheless, active proposals across most client requirements, increased institutional interest, and stronger engagement in larger box spaces are trending higher, even if completed deal statistics have not yet fully reflected the improved sentiment.
