Seattle Commercial Office Space for Rent

Q1 2026

Seattle Commercial Real Estate Market Report

Focus: Q1 2026 Market Trends

Executive Summary

The Seattle commercial real estate (CRE) market is navigating a dynamic Q1 2026, entering a period of recalibration and early stabilization following a challenging economic backdrop. The Office sector continues to grapple with elevated vacancy, though return-to-office mandates from major tech employers and large-scale renewals are providing a much-needed boost to downtown occupancy and foot traffic. Industrial fundamentals reflect a softer leasing environment where supply additions have outpaced demand, pushing vacancy higher even as net absorption turned positive in the Puget Sound. Retail remains relatively tight at 4.0% vacancy, characterized by a split dynamic where small-box properties perform well while large-box spaces face longer backfill timelines. Meanwhile, the Multifamily market is settling into a functional recovery, characterized by stable vacancy, modest rent growth, and a significantly contracting construction pipeline that will limit future supply pressure.

TenantBase Proprietary Data highlights the distribution of active tenant demand over the last 90 days:

  • Retail/Storefront dominated market activity with 61.93% of all searches (270 out of 436 total deals).
  • Warehouse was the second most active sector at 27.29% (119 deals).
  • Office accounted for 11.24% of total search volume (49 deals).

Office Market

Market Overview The Seattle office market is showing early signs that the sharpest increases in vacancy may be behind it, supported by a resurgence in renewals and in-person work policies.

  • Vacancy & Absorption: Overall vacancy in Downtown Seattle reached 35.6% in the fourth quarter of 2025, while the Seattle Suburban office market saw vacancy drop slightly to 22.3%. Overall region-wide vacancy stood at 22.8%. Despite downtown's negative absorption, the broader region produced its first positive net absorption quarter since 2021, totaling 190,727 square feet.
  • Flight to Quality: A clear flight to quality remains evident, with Class A average asking rents in Downtown Seattle reaching $52.16 per square foot. Tenant demand for top-tier, mid-sized spaces in the 10,000 to 25,000 square foot range continues to gain momentum.
  • Construction Halt: The construction landscape is largely dormant, with zero office deliveries in Downtown Seattle or the suburban market in 2025. This lack of new development is expected to limit future supply and create conditions for vacancy to gradually decline as demand improves.

TenantBase Activity

  • Demand Share: Office accounted for 11.24% of total search volume.
  • Lease Term Preference: Tenant demand shows a strong preference for short-term commitments, with Less than one year representing 43.90% of specified office deals (18 out of 41), followed by 3-5 Years at 24.39%.
  • Size Requirements: The average lower-bound requirement for 3-5 Year leases is 2,100 SF (with upper bounds up to 4,100 SF), indicating that active office tenants are primarily seeking smaller, highly efficient footprints.

Industrial & Warehouse Market

Market Overview Seattle's industrial market is experiencing continued softness as the market absorbs recent supply additions, leading to a highly tenant-favorable environment.

  • Vacancy & Absorption: The Seattle industrial market ended the fourth quarter of 2025 with a vacancy rate of 9.2%, while the broader Puget Sound region saw vacancy rise slightly to 10.4%. The Puget Sound market recorded 386,969 square feet of positive net absorption for the quarter, though new supply continued to outpace demand.
  • Submarket Dynamics: East Pierce County led the region with 1.8 million square feet of positive absorption, supported by large build-to-suit projects. Conversely, four significant deliveries added over 1.8 million square feet of new inventory to the broader market, contributing to the rise in vacancy.
  • Demand for New Product: High construction costs, rising permitting fees, and restrictive debt markets are making speculative projects difficult to justify. Regional construction activity totals 3.67 million square feet, but the pipeline is expected to thin considerably going forward.

TenantBase Activity

  • Demand Share: Warehouse space captured 27.29% of total search volume.
  • Lease Term Preference: Industrial tenants display a strong preference for near-to-mid-term horizons, with 1-2 Years (39.39%) capturing the bulk of specified demand, followed by 3-5 Years at 30.30%.
  • Size Requirements: Requirement footprints scale for mid-term commitments. The average lower-bound requirement for 3-5 Year terms is 5,409 SF, reaching up to an average upper bound of 8,636 SF.

Retail Market

Market Overview Retail across Seattle ended 2025 in a period of recalibration, marked by softening demand and an uptick in available space for large-format retailers.

  • Vacancy & Construction: The regional retail vacancy rate increased to 4.0%, surpassing the 10-year historical average of 3.8% due to an uptick in new deliveries and slower tenant expansions. New deliveries included the 74,000-square-foot Floor & Décor in Woodinville, the largest delivery in the past three years.
  • Leasing Drivers: Market-wide net absorption was negative 588,000 square feet in the fourth quarter, bringing the annual total to negative 1.1 million square feet. Small-box properties continue to perform well, while large-box spaces face longer backfill timelines or pressure for redevelopment.
  • Consumer Trends: Retail rents have continued to rise over the long term, but average net asking rents declined slightly to $24.46 per square foot in Q4 as concessions rose in select submarkets.

TenantBase Activity

  • Demand Share: Retail/Storefront activity dominated the market with 61.93% of all search volume.
  • Lease Term Preference: Retailers prioritize operational stability, with 3-5 Years (29.09%) and 5+ Years (23.64%) capturing the bulk of specified demand.
  • Top Locations: Locational interest was heavily concentrated in the urban core and key Eastside hubs, with Seattle proper capturing 36 deals, followed by Bellevue (16 deals) and Kirkland (13 deals).

Multifamily Market

Market Overview The Seattle multifamily market is settling into a more functional recovery, characterized by stable operating fundamentals and a sharp drop in new construction.

  • Rent Growth: Average asking rents reached $1,990 to $2,032 per month, reflecting a modest 1.0% increase year-over-year.
  • Vacancy & Supply: The multifamily vacancy rate held steady at 7.4% year-over-year. The construction pipeline contracted significantly, with units under construction dropping to 17,089, a 23% decline from the previous year.
  • Market Drivers: The cost of homeownership in the region averages $5,067 per month, outweighing monthly rents by roughly 2.3 times. This stark affordability gap continues to support strong renter demand and limit turnover to home purchases.

2026 Outlook

Moving further into 2026, the Seattle CRE market is well-positioned for gradual stabilization as the supply pipeline corrects across multiple sectors.

  • Office Rebalancing: Return-to-office mandates from major tech employers will continue to increase downtown occupancy, and the complete lack of incoming supply will eventually allow the market to chip away at its elevated vacancy rate.
  • Industrial Absorption: The 2026 construction pipeline is expected to thin significantly. Pauses in new construction will be a critical factor in the market's eventual recovery, allowing existing vacancy to be absorbed organically once demand improves.
  • Multifamily Tightening: As the wave of new deliveries slows, the Seattle apartment market will increasingly resemble a normalized, post-reset environment, ensuring that landlords maintain stable pricing momentum and steady absorption.

Sources

  1. Kidder Mathews: Seattle Industrial Market Report
  2. Cushman & Wakefield: Downtown Seattle Office MarketBeat Q4 2025
  3. Cushman & Wakefield: Seattle Suburban Office MarketBeat Q4 2025
  4. Kidder Mathews: Seattle Office Market Report
  5. Cushman & Wakefield: Seattle Industrial MarketBeat Q4 2025
  6. CBRE: Puget Sound Industrial Figures Q4 2025
  7. Savills: Seattle/Puget Sound Q4 2025 Industrial Market Report
  8. Kidder Mathews: Seattle Retail Market Report
  9. CBRE: Puget Sound Retail Figures Q4 2025
  10. Kidder Mathews: Seattle Multifamily Market Report
  11. Kidder Mathews: Releases Q1 2026 Report on Seattle and Puget Sound Apartment Market
  12. CBRE: Puget Sound Multifamily Figures Report Q4 2025
  13. TenantBase Proprietary Market Data (Dashboard Export: SEO Market Reports, March 22, 2026)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.