Seattle Commercial Office Space for Rent

Q4 205

Seattle Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Seattle commercial real estate (CRE) market is navigating a complex recovery period as it approaches 2026, driven by a "flight to quality" and stabilizing fundamentals [1]. The Office sector shows initial signs of a turnaround, with AI sector growth fueling demand for trophy assets despite continued negative absorption [2, 3]. Industrial markets are facing headwinds, with vacancy rising to nearly 9% as new supply outpaces cooling tenant demand [4, 5]. Retail vacancy remains tight at 3.8% despite negative absorption, while Multifamily fundamentals are steadying as the region absorbs a significant wave of new housing supply [6, 9].

TenantBase Proprietary Data [14] highlights the distribution of active tenant demand over the last 90 days (341 total deals):

  • Retail/Storefront dominated market activity with 63.64% of all searches [14].
  • Warehouse was the second most active sector at 30.50% [14].
  • Office accounted for 6.45% of total search volume [14].

Office Market

Market Overview Seattle's office market is witnessing a "flight to quality," where top-tier buildings outperform while older inventory struggles with high vacancy [1]. Artificial Intelligence (AI) companies have emerged as a primary driver of new leasing activity, offsetting some of the contraction in the traditional tech sector [2, 3].

  • Vacancy & Availability: The regional vacancy rate rose to 22.7% in Q3 2025, marking the fifteenth consecutive quarterly increase [3]. However, sublease availability has declined by 25% year-over-year, suggesting the market is stabilizing [3].
  • Net Absorption: The market recorded negative net absorption of 1.08 million SF in Q3 2025 [3].
  • Rental Rates: Class A asking rents dipped slightly to $50.81 per SF (Full Service Gross) [2].
  • Market Drivers: Leasing volume reached 4.7 million SF year-to-date, with AI-related demand accounting for a significant portion of activity [1, 2].

TenantBase Activity [14]

  • Demand Share: Office accounted for 6.45% of total search volume [14].
  • Lease Term Preference: Demand is polarized between short-term flexibility and long-term commitment [14]:
    • Less than one year: 46.15% of deals [14].
    • 5+ Years: 30.77% of deals [14].
    • 2-3 Years: 15.38% of deals [14].
  • Size Requirements: Tenants seeking long-term stability are searching for significantly larger spaces. The average lower SF required for a 5+ Years term is 2,500 SF, compared to 667 SF for a Less than one year term [14].

Industrial & Warehouse Market

Market Overview The Seattle industrial market is experiencing a "reset" as vacancy climbs to its highest level in a decade, driven by a surge of new construction and softer tenant demand [4, 5].

  • Vacancy & Rent: Vacancy increased to 8.8% in Q3 2025, an increase of 130 basis points year-over-year [5]. Average NNN asking rents slipped to $1.47 per SF (blended), with landlords prioritizing occupancy over rate growth [5].
  • Demand & Supply: Net absorption was negative 713,000 SF in Q3 2025 as large tenant move-outs outweighed new leasing activity [5].
  • Construction: The development pipeline has contracted to 6.64 million SF, down significantly from 2022 peaks, which is expected to help rebalance the market by 2026 [4, 5].

TenantBase Activity [14]

  • Demand Share: Warehouse accounted for 30.50% of total search volume [14].
  • Lease Term Preference: Demand is concentrated in mid-term leases [14]:
    • 3-5 Years: 37.50% of deals [14].
    • 1-2 Years: 21.43% of deals [14].
    • 5+ Years: 19.64% of deals [14].
  • Size Requirements: The average lower SF required for a 3-5 Years term is 9,467 SF, while the 5+ Years term average requirement jumps to 18,875 SF [14].

Retail Market

Market Overview Seattle's retail sector remains fundamentally tight compared to other property types, supported by limited new construction and steady consumer spending [6, 7].

  • Vacancy & Availability: The retail vacancy rate stood at 3.8% in Q3 2025, remaining below the 10-year historical average [6].
  • Net Absorption: The market posted negative net absorption of 246,000 SF, driven largely by national big-box closures [6].
  • Rental Rates: Asking rents have declined for five consecutive quarters due to rising availability in large-format spaces [6].
  • Construction: Construction activity remains minimal, with significant barriers to entry preventing oversupply [6, 8].

TenantBase Activity [14]

  • Demand Share: Retail/Storefront activity dominated with 63.64% of all search volume [14].
  • Lease Term Preference: Retail tenants show a strong preference for stability [14]:
    • 3-5 Years: 32.32% of deals [14].
    • 5+ Years: 29.29% of deals [14].
    • Less than one year: 14.14% of deals [14].
  • Top Locations: Tenant interest is highest in the following areas (deal counts) [14]:
    • Seattle: 29 [14].
    • Redmond: 10 [14].
    • Renton: 10 [14].

Multifamily Market

Market Overview The multifamily market is stabilizing as the wave of new supply begins to crest, with occupancy ticking upward despite soft rent growth [9, 10].

  • Vacancy & Occupancy: Stabilized occupancy held steady at 95.5%, reflecting resilient demand in the face of high deliveries [9, 10].
  • Rents: Average asking rents declined slightly by 0.3% to $2,231 per month, as owners use concessions to compete for tenants [9].
  • Construction: Developers have nearly 16,000 units underway, but starts have slowed, signaling a future tightening of supply [11].
  • Investment: Sales volume reached $2.8 billion year-to-date, with per-unit pricing rising nearly 12% [9].

2026 Outlook

Looking ahead to 2026, the Seattle market is positioned for a rebound as supply constraints emerge.

  • Industrial Recovery: With the construction pipeline thinning rapidly, vacancy is expected to peak in 2025 and tighten throughout 2026 [5].
  • AI-Driven Office Demand: The convergence of AI and tech talent in South Lake Union and Bellevue is expected to drive a "new market flywheel" for office demand [12].
  • Residential Stability: The slowing of multifamily construction starts will lead to tighter vacancy and renewed rent growth by late 2026 [13].

Sources

  1. Newmark: Seattle Office Market Overview Q3 2025
  2. CBRE: Puget Sound Office Figures Q3 2025
  3. Kidder Mathews: Seattle Office Market Report Q3 2025
  4. Kidder Mathews: Seattle Industrial Market Report Q3 2025
  5. Cushman & Wakefield: Seattle Industrial MarketBeat Q3 2025
  6. Kidder Mathews: Seattle Retail Market Report Q3 2025
  7. Cushman & Wakefield: United States Retail MarketBeat Q3 2025
  8. Marcus & Millichap: Seattle-Tacoma Retail Market Report Q3 2025
  9. Yardi Matrix: Seattle Multifamily Market Report – November 2025
  10. CBRE: Puget Sound Multifamily Figures Report Q3 2025
  11. Kidder Mathews: Seattle Multifamily Market Report Q3 2025
  12. Seattle Agent Magazine: 2026 Seattle market and sales predictions
  13. Markets Group: 2026 U.S. Commercial Real Estate Outlook
  14. TenantBase Proprietary Market Data (Seattle - Last 90 Days)

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.