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Bellevue holding its own on downtown vacancy rates
Bellevue's urban skyline has continued filling out in recent years, with construction on some of the cities largest high-rises just now coming to an end.
That leaves a lot more office space to fill, which could spell disaster in the current economy. But vacancy rates in the central business district remain in the single digits, according to OfficeSpace.com.
"I have clients who come from California, and they don't see the recession here," said Glen Scheiber, a development manager for the Legacy Partners real-estate firm. "I think Bellevue will dodge the bullet."
The vacancy rate for office properties including sublets throughout Bellevue is 10.5 percent, while Seattle is slightly higher at 11.3 percent.
Those figures represent jumps of 2.7 percent and 3.4 percent respectively since 2007.
That may be a downturn, but things have been worse in recent history. Bellevue's vacancy rate including sublets hit 14.8 percent in 2001, while Seattle's figure was 12.4 percent that year.
Two things occurred during that time: a spate of new construction and an economic downturn.
The building count in Bellevue rose 10 percent between 2000 and 2001, while Seattle saw a 30-percent increase during that time.
Meanwhile, there weren't enough people to occupy those spaces.
The dot-com bust had a lot to do with things, according to Gary Guenther, Senior Vice President of the commercial real-estate firm GVA Kidder Matthews.
"Venture capitalists gave money to these companies, and they started buying up space with the expectation of hiring a lot of people," he said. "Then everything fell through."
Overbuilding is generally a primary factor behind high vacancy rates, Guenther said.
But Bellevue doesn't appear to have that problem. The number of buildings under construction there increased by only 3 percent last year.
"The good news is that Bellevue didn't overbuild," Guenther said. "With new construction, the vast majority has been leased."
Microsoft further helped matters by gobbling up virtually all of the office space at Bellevue's newest mixed-use high-rises, City Center Plaza and The Bravern.
That isn't the case in Seattle, where only 20 percent of the unfinished office space is pre-leased.
Downtown Portland hasn't fared much better, with 23 percent of its incomplete office projects signed.
Bellevue has just two office towers in the works, while Seattle and the greater Portland area have about 20 apiece.
Denver, by comparison, has 13 buildings going up, with 52 percent of the space pre-leased.
Bellevue's vacancy rates are relatively low, but that doesn't mean developers in the city are off the hook. Many of their projects are on hold until the recession passes.
"I'd say there are five office sites in some phase of planning that are not moving forward in this cycle," Guenther said.
The Summit III project in downtown Bellevue is a case in point. The site is fenced off for construction, but the work crews have been absent of late.
"The challenge right now is demand," Guenther said. "People are trying to contain their costs."
Joshua Adam Hicks can be reached at 425-453-4290.