Downtown Talks Recap: Bellevue's Office Market in 2025
December 20, 2024 - by Rachel Pfalzer
Category Downtown Talks
The Background
On Tuesday, December 10, the BDA held our Downtown Talks Breakfast Series. A panel of industry experts discussed the ways Downtown can remain a top choice for office location and tenant growth.
The panel featured:
- Mary Fialko, Director of Real Estate Development at Skanska
- Gary Guenther, Executive Vice President, Managing Director, and Shareholder at Kidder Matthews
- Char Patterson, Partner and Architect at JPC Architects
- Jason Smith, Executive Vice President and Shareholder at Kidder Matthews
- Colin Tanigawa, Vice President at Broderick Group
In this exclusive discussion, the group addressed the rapidly evolving office market and how it has been affected by occupancy shifts, the shutdown of pipeline projects, and mixed return-to-office trends.
The Event Recap
Panel moderator Gary Guenther opened with a brief presentation detailing the current market tensions between employees and employers regarding return-to-office schedules. According to a 2024 Gallup study, 60% of employees want to work in a hybrid model, 33% want to work fully remote, and only 7% are interested in remaining in-office full time. Concurrently, KMPG surveyed over 400 CEOs, 83% of whom predicted a full return-to-office in the next three years. This implies a dissonance between workers and executives.
Guenther identified seven distinct submarkets on the Eastside, with the Bellevue Central Business District being the largest by a significant margin. Over 1.4 million sq. ft. of office space is currently under construction, not including the millions still in the pipeline currently on hold. Despite local concerns surrounding the curtailment of such projects, Downtown Bellevue’s office market remains one of the strongest on the West Coast. It maintains a positive net absorption of 16% direct vacancy compared to neighboring Seattle’s 30%.
Guenther then opened the conversation to the whole panel in the form of a Q&A. Fielko and Patterson expressed optimism that Bellevue will remain a top destination for office space, considering the thriving retail trends and enticing ground level offerings. These intentionally designed spaces are creating a new node, shifting the foot traffic away from the mall and toward other areas of Downtown. Cleanliness and public safety are also two ways in which Downtown Bellevue sets itself apart. Not only is the area a business-friendly environment with a competitive talent pool, it also is a unique urban environment that feels like "a small town with big city resources".
At JPC Architects, Patterson has seen strong activity among a repeat client base. She attributed much of this interest to the repositioning of existing assets. With developers investing more into delivering high quality spaces with great amenities, they draw in employers looking to bring their employees to an environment they can feel is equal to or better than working from home.
The panelists agreed that hybrid and remote work will continue to trend. By offering more flexibility for employees to enjoy a work-life balance, the opportunity to work from home is one that people are not willing to compromise; acknowledging this desire is pivotal for talent retention purposes. Because the makeup of the office market in Downtown Bellevue is very tech-heavy, it is unsurprising that there has been a slower return-to-office trajectory. Companies who have made concrete decisions on these policies are predominantly the ones signing leases, while those who have not remain unable to make long-term commitments to office space.
The Bellevue office market is not without its challenges. Patterson expressed a need for more regular and transparent dialogue between city officials and private developers regarding timelines and reviews. There is also a widespread desire for more flexibility in zoning, how spaces are used, and sustainability guidelines. By relaxing some of these regulations, the panelists estimate more cost-friendly opportunities for the younger demographic of employees who need affordable, available housing.
With Microsoft’s exit from Downtown, Tanigawa estimated an inevitable vacancy rate of nearly 20% and clearing of 1.7 million sq. ft. of office space. This is not of the highest concern, however, as it opens the doors for more diverse tenancy as opposed to a larger, single entity.
The panelists discussed the need for more public-private partnerships to sustain growth and quality of life for residents and workers. Amazon’s major presence demonstrates the positive changes that can occur through a strong relationship with the City. According to Smith, it costs more to house a company in a Downtown market than a suburban office space. This dictates where companies are choosing to house their employees. If a company has higher margins, like Amazon, it is more likely to seek out urban space with great amenities. These larger companies can benefit most from supporting the landscape of the space they inhabit.
Overall, there remains trust in Downtown Bellevue’s strength as a premier office market despite evolving work trends. Bellevue is well-positioned to remain a vibrant, business-friendly hub in the coming years.