Boeing leaves a big hole in office vacancies

  • Bryan Corliss / Herald Writer
  • Friday, August 31, 2001 9:00pm
  • Business

By Bryan Corliss

Herald Writer

Nearly a third of the available office space in south Snohomish County was vacant during the second quarter, largely as the result of the Boeing Co.’s departure last year from the Quadrant I-5 Center in Lynnwood.

Overall, Snohomish County offices were almost 20 percent empty during the quarter, according to recently released reports from two real estate firms, CB Richard Ellis and Trammell Crow Co.

The tech wreck is wreaking havoc on commercial real estate elsewhere around Puget Sound, the reports said, with vacancies jumping from between 2 and 3 percent to roughly 10 percent in the past 12 months.

One vacancy filled

Cypress Semiconductor has signed to be the first tenant at the Opus Northpointe Corporate Campus in Lynnwood.

Cypress will take up 66,528 square feet in the complex, which is set to total 719,000 square feet when complete. Northpointe will cover 90 acres off 164th Street SW.

The move will allow Cypress to consolidate its semiconductor and microsystems units in one site. Now, the company’s 150 employees are split between Woodinville and Bothell.

Cyprus is scheduled to move into the building in November 2002.

"The swiftness with which the vacancy has increased has everyone in the market buzzing," the CB Richard Ellis report said.

The situation is perhaps not as bad as the numbers look for Snohomish County, said Derek Hand, vice president of Colliers International in Bellevue. "People tend to get lost in the vacancy numbers," he said.

The market for office space in Snohomish County is small, Hand said. As a result, it’s prone to wild fluctuations, and the departure of one big tenant such as Boeing can greatly skew vacancy rates, he said.

Around Puget Sound, office vacancies have either tripled or quadrupled during the quarter, to about 10 percent, the companies report. Historically, that’s not so bad, according to the Ellis report. But it’s a marked turnaround from last year, when dotcoms and high-tech companies were snapping up office space as fast as it became available.

Now, those same companies are out of business or slashing employees, and they’re putting their now-unused office space up for sublease — nearly 1.8 million square feet of it in downtown Seattle and the Eastside, according to Ellis, and more than 3.5 million square feet regionwide, according to Trammell Crow.

That’s led to a glut of office space, which is driving down rents, the companies report.

Area office vacancies

  • Snohomish County: 19.5 percent

  • South King County: 10.7 percent

  • Downtown Seattle: 9.6 percent

  • Eastside: 9.3 percent

  • Tacoma/Federal Way: 5.6 percent

  • Downtown Seattle: $33.72 per square foot

  • Eastside: $29.80 per square foot

  • South King County: $22.25 per square foot

  • Snohomish County: $21.54 per square foot

  • Tacoma/Federal Way: $19.45 per square foot

    Sources: Trammell Crow Co. and CB Richard Ellis.

  • The regional average for Class A office space is down more than $2 a square foot since last year, according to Ellis. Downtown Seattle asking lease rates fell $5.37 per square foot in just six months, from a record peak of $39.09 a foot in the fourth quarter of 2000 to $33.72 in the most recent period.

    Eastside rates are also down about a dollar a foot, to $29.80, the report said.

    In Snohomish County, the overall vacancy rate hit nearly 20 percent during the quarter, according to the Trammell Crow report, which identified more than 500,000 square feet of empty offices countywide.

    Of that, 295,000 square feet is the empty former Boeing space, said Shelley Gills, who compiled the numbers for Trammell Crow.

    Rents also dropped in Snohomish County. The average asking lease was $21.54 per square foot, according to Ellis, down 65 cents from the same time last year. Trammell Crow agreed that rents are down and put the current average at $21.65 per square foot.

    But compare that to the Seattle and Eastside markets, Hand said. There, vacancy rates have soared, and the situation is complicated by the fact that scores of landlords are desperately seeking sublessors to take over the space that failed dotcoms no longer can fill.

    Compared to that, "I don’t think we’re too bad off," he said.

    You can call Herald Writer Bryan Corliss at 425-339-3454

    or send e-mail to corliss@heraldnet.com.

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