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Seattle here, and a real estate nerd.
This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like, ask me about it!
In Bellevue, office vacancies are low because most have long term tenants - even if the spaces aren't full of workers, the companies paying for them can continue to do so.
In Seattle, most office space is leased by smaller companies. We have diversity in availability, which is great, we have tiny office leases available as well as big ones. I believe those smaller spaces also often had shorter leases.
There are some spaces in Seattle where an anchor tenant (Indeed with 11 floors in the 2+U building at 1201 2nd Ave is a good example) shrank the footprint they use, and quickly sublet floors they aren't using. Those sublets can be priced appropriately for the market, and the main tenant keeps paying the original lease price.
However, when a space loses a tenant, the bank can't just drop the price for the owner, the same as you can't just pay less on your mortgage if you get a lower paying job. That has to go through a long, painful process, and usually the building will end up sold before pricing can change.
This is lag. It's easy to correlate it with a choice by Amazon or with new taxes, but there's quite a bit of demand for office space in Seattle, just not at the prices the owners are forced to ask with their financing instruments.
We just saw another building turn over, US Bank Center. The new owner bought it at a price where they'll be able to lease it competitively, and it won't sit empty. We'll see that continue to happen.
What are the financial "instruments" ?
The main claims from the article seem worrysome, IN particular, the 37% vacancy rate, as well as multiple buildings underwater[3], etc.
Now, lets dissect the claims that this is part of some cycle, and not the result of new city hall management. The reality is that with Jumpstart, and with the vacancy rate, enterprises are not renting. But, the owner is stuck with the asset in what is now a hostile jurisdiction. So, even if owner may not be able to change terms on their mortgage, they certainly can charge less for rent. Empty units do not contribute to cash flows to pay the building mortage. I understand there may be consequences to lowering rents, but those consequences are coming home anyway: The building will need to be sold, at a loss, by the bank to a new owner. And as you said, that process takes time. And the jurisdiction seems hellbent to make it harder.
Now, as buildings sell, this in turn lowers the appraised value, which is key to the Seattle tax base.
So, the downtown core is going to produce far less in property taxes in the foreseeable future, with fewer tenants paying (at least in short term) occupancy taxes, etc. This is going to play out in a decade.
According to this, commercial property taxes are about 26 %[1] of the Seattle budget
Let's assume appraisals go down 50% for those impaired offices. This is not crazy, there's precendent for it[2]. That means the Seattle budget must be cut by 13%. This is not even factoring other losses from job loss, sales tax lost, etc. Maybe that's not "Seattle is dying" , but sound pretty bad ?
[1] https://www.seattle.gov/documents/departments/financedepartm...
[2] Seattle/downtown office properties lost ~$10–15+ billion in assessed value since 2020 (46–48% drop) . https://cdn.downtownseattle.org/app/uploads/2026/06/New-Repo...
[3] https://www.king5.com/article/money/business/downtown-seattl...
And you have to wonder, what kind of boom in innovation could lots of reasonably priced office space support? What gov policy cold push landlords and banks to accept reality? Vacancy tax? Change to bank regulations?
I'm not sure the bank has that much to do with it.
Commercial real estate valuation is based entirely on its ability to produce income. Lower the rent, lower the value. And that's a problem because most commercial leases are long (5-20+ years) so you're locking in an asset writedown for a long period of time. So it can be better to leave it vacant and pretend the value hasn't changed.
You can still run into problems with this (eg servicing the loan). So I don't think it's quite the issue that banks have to approve lowering the rent so much as the owner might lower their asset value and have problems with the LTV and DSCR so the bank may then require you to refinance or add capital.
By the way, we've gone through this before. Up until the 1990s, law firms were by far the largest tenants of office space because they had very large law libraries. Then that went online and they downsized. This was an acpolaypse in the 2000s combined with the dot-com bust.
I think the lag you're talking about is on banks essentially foreclosing on a building and selling it off, allowing the new owners to charge less because they paid less.
> However, when a space loses a tenant, the bank can't just drop the price for the owner, the same as you can't just pay less on your mortgage if you get a lower paying job.
You can always pay less on your mortgage or any other debts if you are in a crisis and negotiate with the lenders. They prefer this immensely over not receiving anything at all. And in the long run they also receive more interest this way.
It's very common especially for businesses to enter these kind of negotiations with the banks, and not very uncommon for individuals either.
So it makes much better sense for everybody involved to sublet these spaces for market value, even if that income doesn't cover the original mortgage, because something is better than nothing. Somewhere there's a giant perverse incentive in situations like this.
This tracks with what I’ve heard around as well. What changed in the financial instruments?
My understanding is a lot of the loans have gone PIK or otherwise essentially aren’t serviceable at current prices. Do you think that’s resolvable somehow or just lagging implosion?
Your argument is that it's simply because of dropping prices. Maybe that does explain the bulk of it. But the article seems to suggest it's the WFH transition. How much of the vacancy rate would be explained by that?
Is there any more to this story than "extend and pretend" that's been going on for 6 years?
In Bellevue, office vacancies are low because most have long term tenants…
Cities don't die they just go into hibernation for a few decades only to wake up and grow stronger.
The whole office real estate thing operates on a boom bust cycle.
> The Seattle Times has always been a conservative rag
The Seattle Times is Left-Center with a high credibility rating. [1]
Such a deliberate distortion of the facts renders the rest of your screed null and void.
> This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes.
Why would this be different in Seattle than in other cities? Many downtown office towers are bought or built using a lot of debt throughout the U.S. What do you think makes Seattle special?
> We just saw another building turn over, US Bank Center. The new owner bought it at a price where they'll be able to lease it competitively, and it won't sit empty. We'll see that continue to happen.
The news story mentions the U.S. Bank Center example. What it says that you're leaving out is just HOW big that discount is:
> The new owner of the U.S. Bank Center, having paid just $280 million, or less than half of what the building went for in 2019, presumably can afford to lower rents enough to fill the place, which is now 45% vacant, according to CoStar.
A discount of more than 50% is a bubble bursting. It's great that the new owner can offer fire-sale rent, but where does that leave the old owner, if they were truly as leveraged as you suggest they were likely to be?
> The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like, ask me about it!
OK, I'll ask you about it. This "Seattle Times = Blethen family propaganda" line has been tiring for the 25 years I've been hearing it. What exactly are they not covering about Seattle's downtown today that you think they should be? Why do you think that their opinion staff influence the news coverage so much? In short, if the Seattle Times has a conservative bias in its news coverage, why does the Wall Street Journal famously have a liberal-biased newsroom?
If you haven't lived in Seattle, it's hard to understand the problem. It's multifaceted; business climate, generally poor quality of the city itself as a walking / working destination, extremely hostile to business city government, and greener pastures (literally) east across the bay, which happen to be closer to some very large headquarters.
The die was largely cast when Amazon called Seattle's bluff during COVID and relocated, but so much needs to be done to make the city itself an attractive place to live and work, and there is so little planning, zoning or effective change happening it seems likely to be decades before I could imagine a truly vibrant city core. Even when I write that, it seems unlikely. As we speak, Seattle is aiming to become the highest tax jurisdiction in the country, higher even than NYC, because ... revenues are down. It's a disappointing response to a serious urban problem.
Seattle here. The problem isn't that there's too little "planning" or "zoning". Where that's relevant, there's too much. The city has used those tools over and over to slow growth and tack on requirements for businesses.
I'm not aligned with the new mayor's business-hostile policies. But as far as making the city better for walking, things are going very well. We've been narrowing crossing distances, improving sidewalks, putting in concrete separation for bike lanes, we even finally kicked cars out of Pike Place Market. There are parks improvements in progress across the city to improve restrooms and fix dangerous spots. And the number of people in tent encampments has dropped dramatically, it's become rare and short lived in most of the city.
I suspect that we will continue to recover, despite the capital gains tax. It'll just be slower than Bellevue.
Seattle's DT business district had always been uniquely bad. Everything is for office workers and closes at 5pm. There is nothing else but offices and restaurants serving coffee for breakfast and workplace meeting suitable lunches.
It is an example of piss poor planning and urban design.
The city has a notorious open air drug market within 2 blocks of one of its main tourist attractions at Pike Place. Downtown is generally not a pleasant place to visit.
>If you haven't lived in Seattle, it's hard to understand the problem.
[...]
>greener pastures (literally) east across the bay
Well obviously you haven't lived in Seattle because if you did you would know the body of water separating Seattle and Bellevue is Lake Washington. Not a bay.
How did Amazon relocate? I think most employees are still traveling to SLU to their offices.
I've lived all over the country, both in big and small cities, and most recently in the Seattle area (across the lake in Kirkland) for 4 years.
Seattle has trappings of a city, but socially it doesn't feel like one in the way Chicago and NYC are (ok they're bigger, but hear me out -- it's not the size, it's the people). To me, Seattle feels like Cleveland but with more money.
I couldn't quite put my finger on it, but I would visit different neighborhoods from Capitol Hill to ID to Northgate to Ballard (I liked Ballard the most) almost every weekend, and everything just felt so subdued compared to a city that is truly alive. I had to take trips to Vancouver -- a similar city but more alive -- just to get my dose of city energy. Even Lynnwood WA -- a suburb -- had more energy.
The city itself has too much monoculture -- predominantly tech bros or hipsters or nature people -- but that's not enough diversity to create true energy.
The food scene was uniquely mediocre relative to its wealth and size. It had pockets of good stuff, but overall just very little risk-taking and experimentation in the restaurant industry because of the economics (min wage is $21.30 which is fair to workers but hard for small business owners) and insufficient population density to turn tables at a high rate (the land is fragmented by water and mixed elevation), and high proportion of food-as-fuel population.
Seattle attracts who it attracts because of what it is -- introverted, nature loving, affluent in a countercultural way. But this does not create a vibrant city.
Seattle's social energy resembles that of a paradoxical population who want to live in a city but are secretly suburban people.
Seattle is generally a fairly high quality city as walkability and bikeability goes. While office vacancies are up, sure, residential vacancies are not. The city is packed with people who enjoy and want to live here. The handful of blocks that makes up the business district aren’t as busy as they used to be, but that’s such a small part of the city.
Also, Amazon did not really “relocate” as much as open more offices in other cities. I know people supporting Amazon ELT and plenty of high level executives are here. They have huge amounts of money, employees, and office space in Seattle, and there’s no sign that’s changing. The areas close to Amazon’s office space are very attractive places to live, demanding high rent, and generally safe, green, and pleasant to exist in. (I lived near there for a few years.) The high rise apartments that have been opening year after year for a decade in these neighborhoods still have strong demand.
Am I selling it positively? Sure. But you’re selling it pretty negatively, in a way that doesn’t match what many people who live here really believe.
Anyways, Seattle has tax problems mostly because there is no income tax. But it is a challenge: to actually make the city safe and vibrant and even more great, we need to invest in public transit, biking, parks, and schools.
Back in 2019, I was amazed to learn just how many buildings in Seattle's downtown were Amazon offices. IIRC, it was dozens of buildings, some entirely owned by Amazon, some WeWork leases, etc. Downtown isn't very big, so that's a huge presence.
It was also fun to check out the company-city that is Redmond, not far away.
Seattle's a great city, and it's got great tech presence. I'm optimistic for its recovery.
While visiting a family member at least a decade ago, I went to a fireworks display in Redmond, and two things really stood out.
First: It doesn't get dark until practically midnight, so the fireworks show started at 10:00, but it was still pretty light.
The second: Most families there had at least one parent with a Windows phone or Surface Tablet, back when they only used ARM processors. I had seen maybe one of each in use before that, and suddenly I was surrounded by them.
The neighborhoods they built that stuff in (mostly South Lake Union and Denny Triangle) used to be so sleepy in 2010 and earlier. It was a big transformation.
Wasn't the shared-workspace business model to take advantage of these vacancies?
Despite the graph shown in the article, I have to wonder if this is really a new problem.
What's the point of the "recovery" in terms of stuffing people back to the offices when they can successfully perform their work from home?
owned by amazon ..
now where should data centers be constructed, rather than arable farmland?
>Some commentators have blamed the downtown office apocalypse on Seattle’s taxes, antibusiness rhetoric and perceptions of public safety.
That is very hand-wavy of the author, Seattle literally taxes gross receipts of every business that does over $100,000 [recently raised to $2 million], with no deduction for expenses, and on top of an employer paid payroll expense tax.
The article notes that the US overall office vacancy rate is 23%. Seattle is 37%.
Have we reached "peak office" at last?
How many people in offices does society really need, anyway?
Could be Seattle tax/revenue policy. Bellevue WA, the only nearby comparable but smaller tech hub city, has 25% vacancy and expected to drop below 20% - according to Fable.
A lot if it wants to do interesting things.
with all the new taxes the city and the state have piled on, compensation above $1m is going to be taxed (federal + state) at a marginal rate of 56% by 2030, which I believe will be the highest in the country. Not to mention the state is in budgetary deficit, the county is losing population, and the city has extremely business hostile politics. No C-level exec has any economic incentive whatsoever to contract for a large presence there over other places.
Yet rents won't drop -- the commercial mortgage covenants prevent landlords from dropping rental rates, so they'll just sit there fallow until the market recovers.
Or until more rational covenants exist. Markets are largely rational economically.
Or government pushes them to change. Regulators have tremendous power over banks.
Seattle has a few confounding factors:
- Higher taxes that are not present in surrounding cities
- A public school system that is hot garbage compared to 20 years ago (Eastside schools are still ok)
- Amazon as of almost a decade has been pushing hiring to their Eastside offices, and trying to freeze headcount in the state overall
- Lots of the engineers you want to hire live on the Eastside
Short term, Bellevue is a better place to have your office. Mid term, the big winners are Texas, Vancouver (CA) and India. A little longer term, the lower end of all those jobs are gonna anyway in a puff of tokens.
New York City: Hold my Negroni aperitivo. I have faith in the Big Apple administration's ability to become a leader on this metric.
Zoning and other regulations getting the way of it being used. The city "just" needs to incentivize it getting used, and someone's gotta come to terms with losing money.
I know that commercial and residential building codes are different, but you would think converting them to residential units would fix this..
"The bigger culprit, though, is the tech sector. Its astonishing decadelong push for office space, and equally astonishing slowdown, left downtown Seattle with a gap between supply and demand that will be very difficult to bridge."
Turn them in to housing.
As the mayor says, "Bye!"
Convert some to cheap residential. Solves both problems: affordable housing as well as rebalancing supply and demand for office space.