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Bellevue Leads Nation in Secondary Office Market Strength

  • Rents rise sharply over last year as tight CBD fills 50 percent of its vacant space

BELLEVUE, Wash. (Aug 30, 2006)

Grubb & Ellis Company (NYSE: GBE), one of the nation’s leading providers of integrated real estate services, today released a survey of secondary office markets that highlights the strength of downtown Bellevue’s central business district.  Unless you’re a landlord, 2008 can’t come soon enough to the Bellevue office market. That’s when the first of an additional 1.85 million square feet of office inventory currently under construction is slated to come online—a welcomed relief to businesses eyeing Bellevue’s growing central business district.

Downtown Bellevue is the most dynamic submarket in the region and its turnaround in early 2004 was the first signal that the Puget Sound regional outlook was improving. Over the past 12 months Bellevue has outpaced all other markets of similar size nationally and has seen a 50 percent drop in vacant space, shriveling to 7.3 percent from the 14.8 percent of a year ago, according to a nationwide analysis of 39 secondary office markets conducted by the Seattle office of Grubb & Ellis.

The tight market gave landlords all the reason they need to do something they haven’t for the first half of the decade—raise rents. In just one year the cost of class A and B space has risen 11.6 and 24.8 percent, respectively. This historical growth has surpassed all other secondary markets across the nation, according to the Grubb & Ellis analysis.

“With the explosion of construction in its downtown, Bellevue has become a hot market for major tenants and a place where employees have all of the amenities of an urban area. In fact, its asking rates have eclipsed those of Seattle, which stand at approximately $28 and $20 per square foot for Class A and B space, respectively” said Craig Hill, Senior Vice President and Managing Director of Grubb & Ellis Seattle. “However, Bellevue’s $29 Class A asking rate is a bargain when you compare it to some markets in southern California or the eastern United States.”

Bellevue’s second quarter 2006 Class A asking rate was just under $29 a square foot, which is far off of the $39.24 Newport Beach, Calif., or $37 West Palm Beach Class A asking rates. On the other hand, Bellevue’s $24.13 Class B asking rate is slightly more than West Palm Beach, Fla., ($24.03) and in line with both Stamford, Conn., ($25.61) and Ft. Lauderdale, Fla., ($25.21).

A High Price for the Current Boon

The Bellevue CBD was hit hard by the dot.com bust. At one point its vacancy rate was the highest in the region at 27.5 percent and landlords were forced to give major concessions just to stay competitive. Symetra Financial’s 2004 move to downtown Bellevue turned that tide and got the submarket back on track.

Urban Amenities Complement Office Market Strength

What was once a sleepy Seattle suburb is in the midst of becoming a thriving urban core. At a time when transportation and housing considerations are becoming increasingly important to recruiting employees, Bellevue is in position to step away from its suburban past.

Top 5 Markets (Year-Over-Year Change, 2Q2005 to 2Q2006)

Vacancy Change

Class A Rent Change

Class B Rent Change

1)  Bellevue, Wash.

1)  Bellevue, Wash.

1)  Bellevue, Wash.

2)  Uptown/Turtle Creek (Dallas)

2)  Richmond, Va.

2)  Ft. Lauderdale, Fla.

3)  Omaha, Neb.

3)  Cincinnati

3)  Austin, Texas

4)  Stamford, Conn.

4)  Oakland, Calif.

4)  West Palm Beach, Fla.

5)  Las Vegas

5)  Ft. Lauderdale, Fla.

5)  Uptown/Turtle Creek (Dallas)

Grubb & Ellis Company

Grubb & Ellis Company is one of the world’s leading full-service commercial real estate organizations, providing a complete range of transaction, management and consulting services.  By leveraging local expertise with our global reach, Grubb & Ellis offers innovative, customized solutions and seamless service to owners, corporate occupants and investors throughout the globe.  For more information, visit the Company's Web site at www.grubb-ellis.com.

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