Downtown Bellevue sees signs of office activity, but recovery is far off – Beragampengetahuan

Bellevue’s downtown office landlords have had a few wins recently. After a year of space shedding by Big Tech companies and rising vacancies, downtown has landed a string of lease deals, including a big one from Pokémon.

But these wins are still the exception on the Eastside.

Take the I-90 corridor area. Once a favored spot for company headquarters, it is now the most likely place on the Eastside to find “for lease” signs, empty parking lots and cleared out buildings. More than 40% of the office space was available for lease in the corridor at year’s end, according to the commercial real estate brokerage Broderick Group. The vacant square footage has grown nearly tenfold — from 223,000 square feet in 2019 to 2.1 million at the end of last year.    

“If I owned a building along the I-90 corridor, I’d probably be a little bit more concerned than if I own a building in other submarkets,” said Jeff Chaney, an executive vice president at commercial real estate firm Kidder Mathews’ Bellevue office.

The office market slumped last year across most of the Eastside, including downtown Bellevue and the I-90 area that both saw the first wave of Microsoft workers leave major buildings. Microsoft, which announced plans in 2022 to shed more than 2 million square feet of office space outside of Redmond, is letting its leases expire over the next two years in several major downtown buildings. The company has already left two campuses in the I-90 corridor.

Microsoft didn’t respond to questions for this article.

At Eastgate, about 10 minutes outside downtown Bellevue, several large buildings within walking distance of each other are available. The 71,000-square-foot former Verizon headquarters at 3245 158th Ave. S.E. has a large “for lease” sign stretched across the top of the building facing the highway.

Nearby, Microsoft moved out last year from its former Advanta complex on 156th Avenue Southeast, which consists of three seven-story buildings totaling 600,000 square feet and a multidecked parking garage.

Behind Microsoft’s former complex, several buildings totaling 700,000 square feet once owned by Boeing are available for lease.

And down the hill from those buildings, T-Mobile’s former 70,000-square-foot building at 3305 160th Ave. S.E. is also available. On a recent Wednesday, a black VW Atlas was the only vehicle parked in a lot designed for 300 cars.

It is not clear how long these buildings will be unoccupied. Some of the empty I-90 buildings date to the 1980s and are competing with newly built towers. Meta, the parent company of Facebook, for example, is attempting to sublease entire new buildings that it had intended to occupy at the Spring District, a created neighborhood with shops and apartments near downtown.   

But Chaney said he has seen downturns in the office market recover before, and some of the buildings in the I-90 corridor could be snapped up quickly. He said these are all first-class properties that could be scooped up by a single tenant or many smaller ones.

“The great thing about Bellevue is, because it’s not as big a market as Seattle, it doesn’t really take much; you just need a particular user to come in, and a lot can change,” Chaney said.

 “So, I’m not being too grim as it relates to the I-90 corridor because it’s a good market.”  

Bellevue stands out

Downtown Bellevue has seen early signs of recovery with a string of smaller lease deals last year followed by the Pokémon deal last month.

In what’s touted as the Puget Sound’s largest lease deal in nearly three years, the entertainment and card-game company will take over nearly two-thirds of the newest office tower to rise in Bellevue’s downtown, The Eight on Northeast Eigth Street.

The downtown Bellevue market “has been extremely active since last spring,” said Charlie Foushée, an executive vice president for Skanska, which developed the 26-story The Eight tower that will open in March.

Pokémon has committed to 374,000 square feet of office space, the equivalent of 16 floors. The rest is 152,000 square feet of parking. The company plans to occupy the building early next year.

That deal is far bigger than anything that was signed last year. Most recent downtown Bellevue leases have been in the 15,000- to 25,000-square-foot range. ByteDance, TikTok’s parent company, landed the next largest lease last year and took over 66,000 square feet in the Key Center.

Zymeworks Biopharmaceuticals, GE Healthcare, the telecommunications company Lumen Technologies and the trading app Robinhood also signed leases downtown toward the end of last year.

The uptick in interest is good news for Bellevue, Chaney said.

“These companies are great names,” Chaney said, referring specifically to the Pokémon lease and other tech companies that have been touring downtown buildings more frequently. “And so, certainly they’re maybe not as strong as some big cap technology companies like Microsoft, Google or Meta, but they’re all really strong, creditworthy tenants.”

Foushée said he expects that other companies will quickly gobble what’s left in The Eight tower.

“We have tremendous amount of interest,” Foushée said. “I would say that we have more interest than remaining space available.”

But despite these wins, office landlords have a glut of space available in office buildings across most of the Eastside, which encompasses the downtown, the I-405 suburbs, Kirkland and Bothell, Mercer Island, the area around Redmond and the I-90 corridor east to Sammamish Lake.

The overall Eastside vacancy rate more than doubled last year to 17.5%, leaving it with a total of nearly 7.3 million vacant square feet at year’s end, the Broderick Group said. In its year-end report, the brokerage called this “historical availability that will take years to recover.”

Microsoft’s move to shed office space outside Redmond as of last year adds to the office woes, including in downtown Bellevue.

According to the Broderick Group, the downtown vacancy rate is expected to climb to nearly 23% in 2025 from the current level of 10%. The rate was just 3.6% before the pandemic in 2019. In downtown Bellevue, Microsoft will let leases expire on 1.7 million square feet in downtown properties through 2025. The company is leaving the City Center Plaza, The Bravern I and II buildings and Lincoln Square North. The Broderick Group said the company has already moved most workers out of downtown.

Patrick Bannon, president and CEO of the Bellevue Downtown Association, has an office across from the City Center, where Microsoft has been moving employees out.

“With those employees being reassigned, there’s less foot traffic on a day-to-day basis, and that’s noticeable,” he said.

And that’s not limited to Microsoft workers. With remote and hybrid work becoming more mainstream, the demand for office space hasn’t returned to normal. Bannon estimates that the number of daily workers in Bellevue’s downtown on weekdays is still down 20% to 30% from the pre-pandemic days.

On a positive note, as Microsoft scales back its Bellevue presence, Seattle-based Amazon has been expanding there, and its presence is likely to attract more tech-oriented companies.

Amazon presently occupies eight downtown buildings. The Seattle-based e-commerce and retail giant already has 11,000 workers in downtown Bellevue, with plans to more than double that number over several years.

Last September, Amazon opened its “Sonic” tower at 555 108th Ave. N.E. in Bellevue. It has built out 450,000 square feet, or 20 floors, of the planned 42-story building so far, and 1,000 employees were assigned to the building.

The company soon will occupy a new 17-story, 300,000-square-foot tower at 85 106th Ave N.E., spokesperson Zach Goldsztejn said. He said another 1,000 Amazon workers will be assigned to this building called “Dynamo.”

Like other Big Tech companies, however, Amazon is evaluating how it uses office space. The company put on hold four downtown office buildings. Construction on these buildings — the Artiste on the corner of Northeast Eighth Street, West Main Towers II and III between 105th and 106th avenues Northeast, and Bellevue 600 on 108th Avenue Northeast — was paused once the shells of the buildings were completed, Goldsztejn said.

“Our long-term commitment, and this remains unchanged, is to bring 25,000 jobs to Bellevue,” Goldsztejn said.

Why Bellevue

Downtown Bellevue still has several features going for it that should attract companies. Microsoft is leaving behind desirable first-class buildings. This has created an opportunity for smaller and midsized tech, health and financial services companies to lease space in Bellevue, a market that might have been difficult for them to enter in the past.

Office tenants are also looking closely at the location and amenities offered in an area, brokers say. These include shops and restaurants, community parks, low rates of crime and homelessness, and the quality of the school district. Bellevue scores high points in these areas.

Bellevue’s amenities were one reason the Monroe, La.-based Lumen Technologies recently committed to 12,000 square feet in the Lincoln Square North Tower, spokesperson Kerry Zimmer said. The company plans to move in sometime in the late spring.

Downtown Bellevue also has newer, quality buildings that tenants favor. Foushée said The Eight tower was designed with the post-COVID reality of hybrid work in mind, to encourage workers to want to be in the office. Every third floor, including the rooftop, has an outside deck area where employees can meet or relax. The building has a large fitness center with lockers.

On the first floor, a lounge area mimics a large hotel lobby, with places to sit and work. It also holds 11,000 square feet of retail space, an open plaza and pavilion. The second floor features a 10,000-square-foot balcony that all tenants will share.

“We have to now deliver office buildings that, quite frankly, are better than home,” Foushée said.