Seattle rents for offices soaring much faster than elsewhere

Despite the higher office rents, many big companies are actually seeking out Central Seattle locations as downtown proves to be a better option for attracting employees. “There’s good and bad” in that situation, says one CEO who just leased new offices at Sixth and Pike.

It’s not just housing prices: Seattle is not the bargain it used to be for companies, either.

Historically, the city was a cheaper place to rent office space than a lot of other cities with advanced economies. That held true through last decade’s economic upswing, and during the recession.

But the city’s recent boom driven by Amazon and other tech companies has propelled Seattle up the ranks of the nation’s most expensive places to rent an office, passing Chicago and Los Angeles just in the last three years.

During that span, Seattle office rents have surged 31 percent, or about 2½ times faster than the national average, according to an analysis by Cushman & Wakefield for The Seattle Times.

And finding office space is getting harder, despite all those cranes putting up new office high-rises.

The vacancy rate has dipped to 5.7 percent, down from a high of over 20 percent during the recession and the previous recent low of 8.8 percent a decade ago.

Seattle now has a smaller share of offices sitting empty than San Francisco or Manhattan, the two most expensive commercial real-estate markets in the country.

In fact, Central Seattle has the lowest vacancy rate among the 10 biggest downtown office markets in the country, according to Colliers International.

The resulting space crunch has given commercial real-estate landlords all the reason they need to raise rents. And more institutional investors abroad and on the East Coast are snatching up office buildings at record prices — sometimes hundreds of millions of dollars — and then raising office rents to make their investment pencil out.

There has been a surge in office construction over the last few years, but it hasn’t been enough to stave off the rent increases for office space.

It’s easy to see why: Demand from companies has grown much more quickly than construction has kept up with.

Consider Amazon, which already occupies far more Class A office space in Seattle than any company has in any other big U.S. city.

The company’s growth has been enough to just about single-handedly offset new office construction.

Seattle has added about 8.8 million square feet of office space this decade, according to the Broderick Group. Over that span, Amazon alone has taken about 8.1 million square feet as of last summer, and its footprint has only grown since then.

That leaves “no space for other tenants to move to,” said Hughes McLaughlin, senior director at Cushman & Wakefield in Seattle.

Adding to the demand, Facebook is moving into 870,000 square feet of space in South Lake Union, while Google is preparing to move into the entire 620,000-square-foot office portion of a project underway next to Lake Union Park.

Overall, tech companies now make up about 75 percent of leasing in Central Seattle, up from about 50 percent two years before, according to JLL.

Commercial real-estate prices are rising at a rate similar to the city’s housing market. But while some people are being priced out of Seattle, brokers say there has been no mass exodus of companies fleeing the city.

Among big companies, the opposite is true: In recent years, Expedia announced its move from Bellevue to Seattle; Weyerhaeuser fled Federal Way for Seattle; and F5 inked a lease to move from the cheaper Interbay area to take over an entire new downtown skyscraper. Big companies based outside Washington also have ramped up expansion in the priciest Seattle business districts, led by Google and Facebook, but also including the likes of Airbnb, Uber and Snap.

Smaller companies haven’t always been able to follow suit, however. Some businesses that don’t make headlines have moved out to cheaper, outlying neighborhoods or towns, while others have struggled to even find the space they need.

“Some folks are saying now is the time to grow” despite the higher rents, said Mark To, executive vice president of JLL in Seattle, who represents companies looking to lease office space. “And there are others that sell to a national outfit or relocate.”

No mass exodus

There are a few reasons that many companies are moving toward — not away from — the higher rents, brokers say. First, the rising economy that has contributed to the rent increases is also benefiting those businesses, helping to offset the higher operating costs with more revenue.

Also, unlike a person who can move to another, more affordable town and commute in a longer distance for work, a business that needs to be in downtown for things like client meetings and employee retention might not have that option.

Vera Whole Health, a 160-person health-care company, faced a decision on new offices recently when it outgrew its old space in the Pioneer Square area.

CEO Ryan Schmid said the firm decided to grow in the heart of downtown and, despite the higher rents there, signed a lease earlier this year for 14,500 square feet at Sixth and Pike, where 70 Vera employees work.

Many of his employees take public transit and want to be downtown, and the tight labor market is a big concern as the company tries to attract and retain employees. Plus, many of the firm’s business partners are within walking distance of the new office.

“Obviously rents are considerably higher in this market than other markets, but that’s also because we have a really strong economy,” Schmid said. “So there’s good and bad. If this were Detroit I wouldn’t feel so good about it.”

Not all companies can afford Seattle rents. But businesses with back-office functions that can operate in cheaper areas like South King County were probably already there before rents started surging recently, McLaughlin said.

Still, if rents continue to rise, more companies may find that being in the economic center is not worth the higher costs.

“We have reached a tipping point where companies downtown are really having to think long and hard as to whether the shift in Seattle is creating more opportunity and therefore worth the cost, or whether the shift is simply just adding to operating cost,” To said.

Then there are startups, which are often ill-equipped to deal with high rents. Nevertheless, the startup scene here hasn’t declined lately.

One reason: Co-working spaces like WeWork have sprouted up quickly to give very small companies and individuals the option to rent workspace by the desk on a short-term basis, which is more flexible than a traditional fixed long-term lease.

Breaking down costs

Office rents are charged by the square foot. Average annual rents citywide have surged past $40 per square foot for the first time, surpassing Chicago (about $38) and Los Angeles ($39), according to the analysis from Cushman and Wakefield. That level is still well behind San Francisco ($70) and Manhattan ($72). Boston and Washington, D.C., remain more expensive than Seattle, as well.

The nationwide average is just over $30.

Across all building types, the average rent in Seattle was $41.16 per square foot at the end of last year, up from $34.67 at the peak of the upswing last decade, and from a low of $26.44 during the recession.

Here’s what that means for companies in practical terms.

Let’s say you need to rent about 50,000 square feet of office — enough for about 250 employees.

Three years ago, that would have cost about $1.57 million a year for the average office. Now, it’ll run you about $2.06 million for new lease, or nearly an extra half a million dollars more.

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Biophilic design: How architecture can contribute to a healthier, less-stressful life

By Janet Dunn

Despite the many conveniences and advantages of modern life, well-being and contentment continue to evade many of us. The cure may be in an architectural concept that sounds new but is as old as the hills. Take a dose of biophilia and read how your home’s design can help you live a healthier, less stressful life.

The tale of a tiger

Tony the Siberian-Bengal tiger was an attraction at a truck stop in Louisiana, USA until recently, when his life – lived out in a cage outside the petrol station – was cut short due to illness. The tiger spent most of his 17 years in the fume-filled artificial habitat, but had his owner known more about the links between an animal’s surroundings and its health and happiness, Tony’s story may have ended differently.  Is there a lesson humans can take from Tony’s fate? Deprived of sensory stimuli, social bonds and connection with nature in our homes and workplaces, we may be heading down the same path. Biophilic design is being advanced as the next important focus in architecture and as a remedy, partly, for the plethora of modern-day conditions linked to fatigue and stress.

What is biophilic design?

Biophilia literally translates as ‘love of life’. In the 1980s, American biologist E. O. Wilson proposed that evolution has soft-wired us to prefer natural settings over built environments. In Wilson’s words, we have “an innate and genetically determined affinity… with the natural world”. Exponents of biophilic design are attempting to address this instinct architecturally.  Essential to biophilic theory is the idea that buildings aid our physical and mental health only when they are designed holistically. Rather than isolated elements – for example, simply putting plants in a building – benefits occur when diverse and complementary factors reinforce our experiences of nature. Wilson’s colleague Dr Steven Kellert named plants and natural lighting, and indirect influences through shapes, forms and materials that originate in the natural world, as some of the attributes of this kind of design.

Is it just another name for green architecture?

Green building principles emphasise responsibility to the environment and efficient use of sustainable resources. Although biophilic design embraces these aims, its focus is more on the wellbeing of those who use the spaces. The merging of planet-based with human-based philosophies is causing a stir in architectural circles. Brian Donovan of BVN Donovan Hillcommented that “architecture will never be the same again”.

What’s new about it?

Biophilic design is a rediscovery of an ancient practice, not a new idea. For aeons, architects have recognised the place of humans in a wider ecosystem and integrated natural elements into built forms. Athens’ Parthenon, Rome’s Pantheon, and the ancient Vietnamese city of Hoi An are examples of biophilic design at work, although the label wasn’t attached until the 1980s.

Frank Lloyd Wright was a more recent exponent of biophilia. “Study nature, love nature, stay close to nature. It will never fail you,” he advised, and many of his buildings bear this out. Notably, his groundbreaking Fallingwater (pictured above) is so integrated with nature as to be inseparable.

Why are we talking about it now?

Today, the concept of biophilia is supported by a more scientific understanding of the psychology behind building-based wellness. Exponents of biophilic design believe the large proportion of time we spend in built environments may contribute significantly to feelings of isolation, tension and lethargy.

Today, there is growing interest in designing restorative, productive and appealing buildings with sustained opportunities to engage with natural systems. Workplaces, medical and aged care facilities and, vitally, our homes are set to benefit hugely from this trend.

What are the elements of biophilic design?

  • Natural light from windows, skylights, clerestory openings; full-spectrum artificial light sources that complement daylight; dynamic light of varying intensity via facades, shades, shutters and apertures.
  • Exterior views. A distant view past a close view gives perspective and a sense of connection to a wider ecosystem.
  • Water sources such as fountains, ponds and water features, that can be seen, heard and touched.
  • Rich sensory stimuli that reference nature; scented plants, plants that change colour seasonally, plants positioned to move in breezeways, open flames, tactile materials. Minimally processed materials that reflect the local ecology; natural fibres such as leather, stone, timber and handmade objects.

Dryer Talk

I got an e-mail from my Pemco Insurer today and it seems helpful for all…

vent

It’s the heart of sweater season in the Northwest, and that means your dryer’s probably working overtime. Did you know that for all the fuzz you collect out of the lint screen, there’s another 25% that either ends up on the ground under your dryer vent or, worse, stuck in the dryer hose or trapped around the drum and motor?

That can clog airflow, cause overheating, and – since lint is flammable – even start a fire.

Safety experts recommend you get your dryer vent professionally inspected and cleaned about once a year, depending on how much laundry you do. And if you notice loads are taking longer than normal to dry or the clothes are coming out extremely hot or with a funny smell, stop using the dryer until you can get it checked out. Those warning signs may mean you’re overdue for dryer vent-hose maintenance.

To learn more, please see this month’s Perspective newsletter.

Wishing you hours of safe and toasty tumbling,

Your PEMCO Team

Home Upgrades and Your Taxes: What You Need to Know 

Vibrant Living
Home Upgrades and Your Taxes: What You Need to Know

Now that the New Year has arrived, we’re all looking for ways to make improvements in our lives, from getting fit to reexamining our finances to remodeling that horrid 1970s-style bathroom. If you’re planning to make any improvements to your home this year, here are some things you need to know about home upgrades and their tax implications.*

Vibrant Living

Repair vs. Improvement: What’s the Difference?

In order to take advantage of tax breaks associated with home renovations, it’s important to know the difference between a repair and an improvement. The IRS defines a repair as anything that’s necessary to keep your home in good condition but doesn’t necessarily add to its value. An improvement is anything that prolongs the useful life of your home and has the potential to increase its resale value. If you want to take advantage of the available tax perks, your project needs to fall under the home improvement category. You can learn more about the difference between repairs and improvements on IRS Publication 523 or by reaching out to your tax advisor.


Tax Breaks for Home Improvements

So, if your project qualifies as a home improvement, does that automatically mean it’s tax deductible? Not necessarily. In fact, home improvements are generally not tax deductible. However, there are some exceptions and other kinds of tax breaks that may apply to you, including:

When You Sell: If your home increases in value (whether through appreciation or upgrades) and you turn a profit when you sell, that profit — known as capital gains — will be taxed. However, you can reduce the amount of capital gains taxes you owe by increasing your adjusted cost basis. Your cost basis is what you paid for the home, plus costs incurred (including home improvements). A higher adjusted cost basis means a lower capital gains tax, so be sure to keep receipts and paperwork from home improvements you make to increase your adjusted cost basis when you’re ready to sell.
Solar Energy Upgrades: While the tax credits for most energy efficiency upgrades expired in 2016, you can still claim a tax credit for solar water heaters and solar panels through 2021. Currently, the tax credit is 30% of the cost, including installation. The credit decreases to 26% for tax year 2020 and drops again to 22% for tax year 2021. So, if you plan to make solar upgrades, do so sooner rather than later to claim the higher tax credit. Visit energystar.gov for requirements and more information.
Medically Necessary Modifications: Renovations that are made to accommodate a medical disability can typically be deducted on your taxes. Examples include adding a wheelchair ramp, widening doorways, adding handrails or support bars, and installing lifts. There are some limitations, and you must itemize deductions instead of claiming the standard deduction, so be sure to talk to your tax advisor first. You can also check out IRS Publication 502for further details.

Whether you’d like to increase your home’s resale value or simply want to improve your living space, home renovations can be a valuable investment. Just be sure to keep the above information in mind before starting any project in order to maximize your tax savings.

Seattle Times – Best Photo of the Year

UW cherry blossoms photo is a winner

The top 10 reader photos we received this year include a unique view of University of Washington cherry blossoms in the rain; the gentle love of a goose for its gosling and the visual poetry of autumn leaves swirling in a stream.

In many arenas, 2017 has shown there are always new ways of looking at things. Cameras prove that all the time, whether they’re pricey SLRs or run-of-the-mill smartphones.

Among top images from our readers in 2017 were this unique view of University of Washington cherry blossoms in the rain, or photos showing the gentle love of a goose for its gosling, or the visual poetry of autumn leaves swirling in a stream.

Over the past year, Seattle Times readers submitted hundreds of such images to our Reader’s Lens feature.

WHAT WE LIKE ABOUT THE GRAND-PRIZE PHOTO

This photo is so rich. I love the depth that is a result of very effective lighting. Setting up three off-camera strobes in the dark and in the rain and getting the perfect angle on all the elements was no small feat. I admire this photographer for his tenacity, thoughtfulness and creativity. Everything in this image really “pops,” with so many parts for the eye to take in. The backlit subjects, illuminated trees, shiny raindrops and reflections on the pathway create so many layers. The low angle gives the photo impact it wouldn’t have otherwise by highlighting the raindrops and umbrellas. A successful photographer must have an aptitude for detail and the ability to see how all aspects of the image fit together in an aesthetically pleasing way. Well done, Mr. Nakamura!

— Angela Gottschalk, Seattle Times photo editor

At year’s end, we’ve chosen 10 favorites to be our Seattle Times Reader Photos of the Year — a grand-prize winner and nine honorable mentions.

The grand prize, a $250 gift card to Kenmore Camera, goes to Yoshiki Nakamura, of Seattle. In his image (above) of nighttime visitors to the UW’s grove of cherry trees, streaking raindrops add texture and depth to an iconic Seattle setting we’ve not seen photographed this way before. (See related story to learn more about the photo and the photographer.)

A $25 Starbucks gift card goes to Honorable Mention winners in three categories: Northwest Flora and Fauna (see the winning photos here), Northwest Fun and Adventure (see the winning photos here), and Northwest Scenics (see the winning photos here).

Judging was by Angela Gottschalk, Seattle Times photo editor; Times photo specialist Colin Diltz, and Brian J. Cantwell, Seattle Times travel & outdoors editor. Photo specialist Katie G. Cotterill assisted in selection.

Thanks to all who sent in so many images of Northwest life and living. Please keep sharing your recent photos from the region at seattletimes.com/submit-photos.

Seattle rents now rank among top 5 most expensive in U.S.; Tacoma joins $1,000 club

If you need a reason to buy now vs. later and are tired of throwing your money down the drain in rent…. give me a call.  Read this though!

The median is the midway point. Half the renters pay more, and half the renters pay less.

It’s certainly no surprise to anyone who’s at the whim of the local rental market, and that’s a lot of people. The data show about 331,000 people living in rental units in Seattle last year, a jump of close to 60,000 since the start of this decade.

 

Back in 2014 — a mere three years ago — I wrote about Seattle making its debut among the top 10 most-expensive rental cities. It seemed like big news at the time, but as it turns out, we were just warming up.

Since then, Seattle has climbed its way past Los Angeles, Virginia Beach, Honolulu, and even New York City, which we toppled in 2015.

Then, last year, we leapfrogged Washington, D.C., into the No. 5 spot among the 50 biggest cities in the country.

As for next year? Look out, Boston, we’re right there in your rearview mirror.

The biggest rent increase — $162 — was in San Jose, Calif., which also has the highest median of any major city. Portland saw its median go up by more than $100 for the first time, ranking the Rose City fifth for rent increases last year. Even at $1,153, it’s significantly cheaper than Seattle.

 

Some of the dollar amounts for median rent in the census data might sound strangely low. For example, the median for San Francisco is less than $1,800, but good luck trying to find a place for that amount in the City by the Bay.

The reason is that census numbers are not based on the present market rate, like many rental estimates you’ll see. Rather, the Census Bureau surveys people who are renting, and asks them what they pay.

People living in market-rate apartments are counted, of course, but so are folks in older and less-expensive units, as well as those in subsidized housing who may pay little or no rent at all. Many renters who have been living in their apartment for a long time pay far less than market rate.

And in San Francisco and New York, a significant number of units are rent-controlled and rent-stabilized, further bringing down the medians in those two cities.

Census figures also includes the estimated average monthly cost of utilities, if these are paid by the renter. This is intended to eliminate differences that result from varying practices — in one apartment building, some or all utilities may be included in the rent, while at the next building, the tenants might be on the hook for everything.

As tough as things are in Seattle, consider the poor folks renting in Bellevue. The median there jumped by a whopping $153 last year, hitting $1,846.

Bellevue is the extreme, but the census data show that all cities in our metro area are getting more expensive. And for the first time, Tacoma joined the $1,000 club — the median rent now is $1,054.

Looking for an escape from Seattle’s soaring housing costs? If you want flat rents — and are OK with flat everything — the cheapest big city in the U.S., with a median rent of $762, is Wichita, Kan.

Gene Balk: gbalk@seattletimes.com On Twitter @genebalk

The city that solved homelessness

WEDNESDAY 28, JUNE 2017

by Joe Copeland – 

Construction is everywhere. The economy is booming. And yet Seattle’s homeless problem continues to grow. If we can’t even make progress in good times, the odds would seem to be against real solutions.

But there is one city that seems to have it figured out: Vienna.

European cities, in general, do much better that North America in providing housing. The Austrian capital, though, has had unusual success with housing issues that dog metro areas in the Pacific Northwest.

Vienna offers a vision of a city that doesn’t shove long-time residents to neighboring communities, accommodates a range of incomes, and actually has enough affordable housing that the homeless problem is solved.

The Austrian capital’s model has attracted attention in Asia, other parts of the U.S. and Vancouver, British Columbia, where political leaders have declared a homelessness crisis. Recently, a Museum of Vancouver exhibit, “The Vienna Model: Housing for the 21st Century City,” has provoked considerable attention.

In terms of people living on the streets, there’s just “no comparison, no comparison” at all between European cities in general and the U.S. or even Canada, says William Menking, the New York-based co-editor of a book, “The Vienna Model,” on which the exhibit is based. He’s in Berlin currently, where on a recent day in a working-class neighborhood he didn’t see a single homeless person.

Here are just a few of the many issues that Vienna has figured out: Mixing ethnic, age and income groups. Protecting open space. Aging in place. Transit-centered development. Building new train lines to the hinterlands before suburban housing developments are built.

These successes cut across the range of social, transportation and sustainability issues that Seattle knows it should tackle.

Some of Vienna’s housing uses the high-rise, easy-to-construct styles that generally flopped — often so spectacularly that whole buildings were demolished — in America’s public housing. Austria, like America, has a history of discrimination (Hitler spent considerable time there) and ethnic tensions; it approached its big housing projects with an eye toward creating a functioning society.

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Even before World War II, Vienna was working at bringing people together in attractive housing projects, not warehousing the needy and the working class. Architects sought to create a “garden city” for workers with an early low-rise complex, George-Washington-Hof. In the 1960s, a large, 11-story complex of prefabricated elements plopped in place by cranes was redeemed by individual units that were laid out to allow ample natural light, and by buildings placed in such a way that they create a park-like setting. By the mid-’70s, a complex with 20-plus story buildings — called Wohnpark (Residential Park) Alt-Erlaa — was being built for 7,000 people with spacious gardens, rooftop pools, saunas, preschools and more — a concept the exhibit organizers call “luxury for all.”

More recent innovations tend to use somewhat lower-rise buildings juxtaposed with a variety of walkways, recreational facilities, residence balconies and green space — all accomplished while creating enough density to support transit.

One recent housing project used generally low-rise construction and flexible floor plans to ensure that residents could have options as they aged to shrink their space or share their units with others — and the rooftop gardens are wheelchair accessible.

Those rooftop gardens, common in Vienna’s housing for people of all incomes, are starting to pop up in a few new developments here — for those who can afford the steep-even-for-Seattle rents.

Vienna certainly has advantages: The federal government covers more than half of the roughly $700 million a year spent there on “social housing,” the subsidized units that house about 60 percent of the city’s population. These dwellings have some sort of subsidy for construction or operation, a concept that’s very different from the public housing practices in this country that give a small percentage of people a break but come nowhere near making rents broadly affordable.

The city also owns a lot of land where it can develop the housing complexes (at least one Viennese architect advises never selling public land). And it uses its advantages smartly: Menking says that the practice of awarding housing projects to nonprofits encourages collaborations with architects, and quality counts in making awards. The result: housing that incorporates — and creates — the best of urban life.

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Sargfabrik includes a kindergarten, restaurant, library and rehearsal room. Credit: Miriam Kittel

As Sharon Lee of Seattle’s Low Income Housing Institute notes, about 100,000 households here are paying more than 30 percent of their income for housing, many of them forking out more than 50 percent. Seattle could benefit from 60,000 more affordable units, she says — not the 50,000 total new units, most at market rate, that the mayor hopes to see built.

Vienna’s tradition is vastly different than ours; it’s supported by people who are willing to pay taxes for housing, health care and transit. There’s no prospect at the moment that national politics in the United States will lead to the kind of federal support that would make a huge difference in housing affordability.

But Seattle’s voters have acted almost European in approving taxes for transit and housing. Although the city turns the Vienna model of mixing incomes upside down by allowing developers to fund affordable housing elsewhere rather than including it in their own buildings, it does have some experience in making use of the nonprofit sector along Austrian lines.

LIHI’s Lee points out that, beyond Seattle’s longstanding housing levy, there’s a new factor. Councilmembers Kshama Sawant and Lisa Herbold managed to insert $29 million in housing bonds into the city budget for this year. Lee thinks the idea could tap into the kind of spirit that energized Seattle’s campaign for a $15 per hour minimum wage.

Jonathan Rosenblum, the author of a book about that campaign called “Beyond $15,” has been writing about the need for “a massive public housing program” in Seattle. His idea for financing it would be a local version of an income tax. That likely raises issues with the state constitution, which courts have interpreted as barring any income tax unless it were a flat rate. But where there’s a will, there may be a way to tackle at least part of the need.

It’s not something that will happen overnight. But perhaps we can take some small consolation — confidence — in knowing that Vienna’s emphasis on affordable residences dates from a housing crisis a century ago.

This series is made possible with support from Comcast. The views and opinions expressed in the media, articles, or comments on this article are those of the authors and do not reflect or represent the views and opinions held by Comcast.

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