Heading into September with the looming Tax on Earnings passed by the Seattle City Council, there was substantial speculation about the potential reaction of large companies like Amazon and the affect on commercial real estate. Amazon occupies about 35 per cent of the leasable square footage in the downtown core. The first volley in this war was fired during the second week of the month. Amazon announced the leasing of an additional 2 Million square feet in Bellevue. This follows on to their commitment to raise their presence in Bellevue from the current 3,000 employees to about 15,000 employees. This last lease raises the stakes by another 10,000 employees. This rivals the HQ2 commitment in Virginia.
At the same time Amazon announced that they were not renewing a lease for 180,000 square feet in a building on Westlake. By itself, this was not enough to obsess over. The constant movement and leasing of large blocks at the expiration of a lease is not in and of itself a concern. But this must be viewed in the context of Amazon subleasing the 700,000 square foot commitment for office in the new tower at Rainier Square, which was announced last year. What is more concerning is the fact that the new tax will affect 700 businesses in the City of Seattle.
The single-family housing market has set new records at the end of this summer. Townhouse development has tapped into the “affordable” market which is an area of concern in the multi-family industry. The number of new multi-family projects coming to the marketplace is hitting a new low. At the same time, close in industrial real estate is in high demand and gives no sign of slowing down. This is all happening in the context of a pending election in November and a recall petition being filed against the most radical member of the counsel, Sawant. Another recall petition is gathering signatures. The bottom line for Seattle commercial real estate…wait and see. If business unites and tax revenues materially fall, as may reasonably be expected, then reality may force a change to collaboration with business on the part of city government.