More good news in the Eastside office market. Attached please find the market numbers and graphs for current vacancies, absorption, and new construction for the Eastside Office Market.

A quick summary follows:

-Net Absorption was 136,355 SF for the third quarter, putting the year to date total at 698,598 SF. Following are the main deals that have contributed to YTD absorption, most of which were signed some time ago:

135,000 RSF: Eastpointe CC/Sanmar (sale to owner/user occupant)
67,000: Sunset North/ArenaNet
58,000: Valley View Kirkland/Silicon Designs (sale to owner/user occupant)
55,000: Skyline Tower/Expedia
35,000: Laguna South/HCL
20,000: Lake Washington Park/iSoftStone
21,000: 112th @ 12th/Coca-Cola
19,000: Plaza Center/Penn Mutual (expansion/renewal)
18,000: 200 Building/GLY

-Class A and B vacancy on the Eastside is 15.3% (excludes owner user and buildings under 10k RSF), a slight increase from 15.2% vacancy the prior quarter. The recent completion of Overlake Medical Pavilion is largely responsible for this increase, adding 190,000 SF of near-vacant product to the Eastside market.

-Bellevue CBD vacancy stands at 14.7%, up from 14.1% the prior quarter.

-Redmond is the softest Eastside Submarket at 20.6% vacancy.

-Contiguous Blocks of Space- Per CoStar, there are only 3 spaces that can provide a 100k RSF or more contiguous on the Eastside, this statistic alone will encourage many developers to re-focus on when to deliver their next office development

-Leasing Activity has not been dramatic, it continues to slowly improve and with very little construction (see projected Construction Supply statistics per attached), vacancy will steadily decline over the coming years as expected, and noted in our attached projections. The only sizable project that can add space as you know, before 2015 is Summit III (320,000 RSF). Given their short time to delivery with garage already complete, pre-leasing would likely be a pre-requisite (if they did move forward so should not negatively impact the market when Summit III does deliver

-Finally Evidence of Market Reversal- While there continues to be caution from tenants in the market, the statistics seem to be finally in place to provide strong evidence to tenants that the market is reversing and tenants need to get deals done, and be prepared for increasing rents over the next 3 years.

Please click here for Broderick Group’s 3rd Quarter Eastside Office Market Report.

Finally some good news in the Eastside office market, attached please find the market numbers and graphs for current vacancies, absorption, and new construction for the Eastside Office Market. While overall activity still slower than we would like, the numbers reflect our best quarter of absorption in years. A quick summary follows:

-Net Absorption as previously discussed was huge, approximately 500k RSF this past quarter (by way of comparison from 2006 to 2010, we averaged about 407,000 RSF ANNUALLY), a lot of this was space in Totem Lk (Kirkland) and Bothell, but also Bellevue CBD recovered from a bad first quarter. Following are the main deals that have contributed to YTD absorption, most of which were signed some time ago:
135,000 RSF: Eastpointe CC/Sanmar (sale to owner/user occupant)
67,000: Sunset North/ArenaNet
58,000: Valley View Kirkland/Silicon Designs (sale to owner/user occupant)
55,000: Skyline Tower/Expedia
35,000: Laguna South/HCL
20,000: Lake Washington Park/iSoftStone
19,000: Plaza Center/Penn Mutual (expansion/renewal)
18,000: 200 Building/GLY

-Class A and B vacancy on the Eastside is 15.2% (excludes owner user and buildings under 10k RSF), a very large drop from 16.7% vacancy the prior quarter

-Bellevue CBD vacancy stands at 14.1% (drop from 14.8%) the prior quarter

-Redmond is the softest Eastside Submarket at 20% vacancy.

-Contiguous Blocks of Space- Per CoStar, there are only 2 spaces that can provide a 100k RSF or more contiguous on the Eastside, this statistic alone will encourage many developers to re-focus on when to deliver their next office development

-Leasing Activity has not been dramatic, it continues to slowly improve and with very little construction (see projected Construction Supply statistics per attached), vacancy will steadily decline over the coming years as expected, and noted in our attached projections. The only sizable project that can add space as you know, before 2015 is Summit III (320,000 RSF). Given their short time to delivery with garage already complete, pre-leasing would likely be a pre-requisite (if they did move forward so should not negatively impact the market when Summit III does deliver

-Finally Evidence of Market Reversal-While there continues to be caution from tenants in the market, the statistics seem to be finally in place to provide strong evidence to tenants that the market is reversing and tenants need to get deals done, and be prepared for increasing rents over the next 3 years.

Please click here for Broderick Group’s Eastside office market report through 2011 second quarter end.

CURRENT STATE OF THE MARKET:
With the Bothell and I-90 Corridor submarkets leading the way due to large leases by Google, ArenaNet, RH2 Engineering and the sale of Eastpointe Corporate Center to SanMar, the Eastside office market saw a dramatic increase in absorption during the second quarter. With 504,161 square feet of space absorbed during the second quarter, it was the most positive quarter of absorption in nearly three years. This growth, in addition to the positive absorption of 58,082 square feet during the first quarter, leaves the year-to-date absorption at 562,243 square feet for the market as a whole (nearly equal to the end of year numbers for 2009 and 2010 combined). As Tenants have taken more space, vacancy has dropped 140 basis points from the end of Q1, finishing the 2nd quarter at 14.2% overall. Significant market data points experienced by the Eastside this quarter include:
• Vacancy has dropped 140 basis points from the end of Q1, finishing the 2nd quarter at 14.2% overall.
• Net absorption was positive, finishing the quarter at 562,243 square feet absorbed.
• Average asking rates dipped slightly, but are down only $0.27/SF from Q1 (indicating we may be near bottom in terms of rental rates).

Click here for complete Second Quarter Real Report 2011

Please click here for Broderick Group’s Eastside office market report through 2011 first quarter end.

CURRENT STATE OF THE MARKET:
Though demand for office and high-tech space has remained stagnant over the last several quarters, general sentiments on the overall economy have turned positive. The Eastside market has yet to benefit from any major activity, but that will change as there are a number of deals close to being completed in the Bellevue CBD. Furthermore, there is a lack of large contiguous spaces available to any large user in the market, particularly the Bellevue CBD. With a lower level of supply, and no significant new construction expected for up to three (3) years, rents will finally reverse course, and we expect by the Fourth Quarter of this year that rents will finally start to grow again. While tenant activity overall is still sorely lacking on the Eastside, there is strong evidence to indicate a turn in the market.
• The overall Eastside Office Market vacancy rate remained the same, ending at 16.6%.
• Net absorption in the first quarter was positive, ending the quarter with 58,082 square feet of net absorption.
• Average asking rates decreased slightly, but it was the smallest drop in over 2 and a half years, ending the first quarter at $27.35/SF Full Service.

Click here for complete First Quarter Real Report 2011