A global real estate service firm has identified 108th Avenue Northeast in Bellevue as the 12th most expensive central business district street in the country, and its experts say future office space will likely cost even more.
The average rent on 108th Avenue Northeast was $38.58 a square foot, and topped out at a little more than $45 a square foot, according to a study released by Jones Lang LaSalle that examined 40 office markets in the United States.
“Bellevue is in one of the tightest CBD office markets in the country, because they’re in such a strong demographic, a strong workforce,” said Trisha Raicht, LaSalle vice president for research in the Northwest. “The downside is with a healthier market comes inflation and the market for office space is significantly tighter for office space than it was a few years ago.”
But Bellevue and its downtown real estate is still at a far more affordable cost than some other West Coast markets, which is drawing in more and more tech companies that also benefit from recruitment opportunities here, Raicht said.
San Francisco’s California Street ranked fourth in the CBD market at a little more than $62 per square foot. Closer to Bellevue, Seattle’s Union Street – between Second and Seventh avenues – ranked 10th at $38.92 per square foot on average. In the top ranking is Manhattan’s Fifth Avenue at an average of $102 per square foot.
Businesses not getting squeezed out of 108th Avenue Northeast are making tighter space work to their advantage, said Riley Shephard, an associate with Jones Lang LaSalle. He said tech companies are fitting more employees into smaller spaces and accepting the higher cost because of the quality of the buildings and the ability to be in an area where top-tiered talent can be recruited.
“You kind of have to have that cool office space,” Shephard said. “You have to sort of have that next best thing and that’s just how it’s evolved. … The buildings that are there can accommodate the denser footprint of these employers.”
“It’s more important for them to have the space where they want it and accommodate their growth,” added Raicht, “than having their real estate constraining their business growth.”
Businesses are not shying away from 108th Avenue Northeast, which means a shortage of vacant space coupled with a lack of other options. Shephard said the cost of constructing new buildings is so expensive, it would push rates higher to justify the cost.
“The reason we haven’t seen some of the new construction take off … our rates almost aren’t high enough to justify the new construction,” he said, adding of future buildings, “It’s probably going to be between $35 and $38 net, so add $10 or $12 to that sum and you’re going to be in the upper 40s upper 50s, and I don’t think we’re too far from getting these on 108th.”