The Puget Sound office market finished 2025 with signs of stabilization following several years of volatility.
MARKET OVERVIEW
Vacancy rates remain elevated but have begun to level off as the rate of increase has slowed during the past couple of quarters, indicating that the sharp increases seen earlier in the cycle may be behind us. Leasing activity has improved steadily over the past two years, supported by a gradual return-to-office trend and selective expansion among tenants. While annual totals have been negative for the past five years across the entire region, 4Q 2025 produced its first positive net absorption quarter since 2021 (+190,727 SF), suggesting fundamentals may be beginning to firm.
Tenant demand continues to be driven by sectors such as artificial intelligence and advanced technology, while many traditional tech firms are consolidating space but remain active in the market. Renewals account for a significant share of leasing volume, which helps sustain activity but does not translate into occupancy gains. This dynamic has contributed to persistently high vacancy levels, though the rate of increase has moderated, ending the year at 22.8%. Asking rents have softened slightly ending the quarter at $32.88 PSF, reflecting landlord flexibility in a competitive environment, yet premium assets continue to command strong interest.
A clear flight to quality remains evident, with tenants prioritizing Class A and amenity-rich buildings in prime locations. At the same time, a flight to value is emerging as properties with lower cost basis offer pricing not seen in decades. These trends underscore a bifurcated market where top-tier assets are typically outperforming the overall market while older or less differentiated properties are facing ongoing challenges.
Looking ahead, the market is expected to begin its recovery cycle in 2026. New development has slowed significantly, limiting future supply and creating conditions for vacancy to gradually decline as demand improves. Many tenants have relied on short-term renewals over the past several years, and there are indications of pent-up demand that could translate into longer-term commitments as confidence builds. For tenants, current conditions remain highly favorable, offering an opportunity to secure quality space at competitive terms.
Vacancy continued to rise in Seattle, ending 2025 at 27.6%, an increase from 27.3% last quarter. This was the highest vacancy rate in the region, up 180 bps compared to the end of last year. On a positive note, there has been a recent deceleration in vacancy rate increases compared to what the market saw between 2020 and 2023, suggesting that the market may begin to see a rebound in the near term.
Quarterly net absorption was negative once again with -20,142 SF in 4Q 2025, bringing the year-end total to -1.2M SF (a quarterly average of -295,000 SF). For comparison, the quarterly average was -585,000 SF in 2024, -800,000 SF in 2023 and -365,000 SF in 2022.
Average asking rents for all classes of office buildings decreased to $35.71 PSF, a modest quarterly decline of -1.0% and an annual decline of -4.4%. With vacancy rates remaining elevated in Seattle, asking rates are expected to remain soft for the near-term.
The Seattle CBD vacancy rate remains elevated but relatively steady at 34.0%, while the average Class A rent quote decreased slightly to $42.80 PSF from $44.39 PSF last quarter and $47.64 PSF at the same time last year.
VACANCY TRENDS
By year-end, the vacancy rate for multi-tenant office properties over 10,000 SF (excluding owner-user buildings) reached 22.8%, marking the sixteenth consecutive quarterly increase since 4Q 2021, when the vacancy rate stood at 12.1%. Among submarkets, Seattle posted the highest vacancy at 27.6%, followed by East King County at 21.5% and South King County at 20.2%.
Total sublease availability continued its downward trajectory for the second consecutive year, closing at 5.2M SF, or 12.7% of total available inventory, the lowest proportion since 2018. The continued decline signals a positive trend that underscores the trend of a slow but moderate improvement beginning to emerge in the Puget Sound office market.
RENT TRENDS
The average asking lease rate ended 2025 at $32.88 PSF, reflecting a 0.7% decline from the prior quarter and a 5.1% decrease year-over-year. While the pace of decline has moderated compared to early 2024 and 2023, downward pressure is expected to persist until market conditions stabilize.
Over the past five years, Seattle has experienced the most significant rental compression, with rates down 15% since 2020, followed by East King County at 5%. Despite these adjustments, East King County remains the region’s most expensive submarket, averaging
$41.09 PSF, followed by Seattle at $35.71 PSF.
NEW CONSTRUCTION
Development activity contracted sharply by year-end 2025 as only 63,527 SF across three projects remained under construction (excluding owner-user developments). This represents a 95% decline year-over-year and a 99% reduction from 2023, when construction peaked near 7.5M SF.
The only notable multi-tenant completion in 4Q 2025 was Four106 (485,000 SF, Bellevue CBD, 0% pre-leased). Major owner-user projects under construction not included in our statistics include Microsoft’s 3.0M SF Redmond campus expansion and Amazon’s 1.0M SF Bellevue 600 development. No significant new office projects broke ground during the quarter.
INVESTMENT MARKET
Investment activity for transactions exceeding $1M continued to surge in 2025, with 164 transactions totaling $1.58B and an average price of $364 PSF. This compares to $1.63B across 150 transactions in 2024 (average $368 PSF).
Key transactions in 4Q 2025 include Building 22 at Microsoft’s Redmond Campus, acquired by American Capital Group for $39 million ($343 PSF); King County purchased a medical office building in Capitol Hill for $27M ($238 PSF); and Peakstone Realty Trust sold West Willows Technology Center to Lincoln Property Company for $40M ($257 PSF).
Despite ongoing challenges, tight lending conditions, asset distress, looming loan maturities, and pricing volatility, buyers remain active, particularly targeting value-add opportunities. Investment volume is expected to gain further momentum in 2026.
4Q 2025 Seattle Office Market: Key Data Points
Explore our full Seattle office market review for deeper insights into leasing trends, sale activity, and
submarket performance.
- Vacancy Rate Holds High but Stabilizing: Regional office vacancy ended Q4 at 22.8%, with Seattle posting the highest at 27.6%.
- First Positive Net Absorption Since 2021: The market recorded +190,727 SF in Q4, reversing a five-year trend of negative annual totals.
- Average Asking Rent Declines: Rates fell to $32.88 PSF, down 5.1% year-over-year, with Seattle at $35.71 PSF and Eastside at $41.09 PSF.
- Construction Pipeline Nearly Halted: Only 63,527 SF remains under construction, a 95% decline year-over-year.
- Investment Activity Strong: 164 transactions totaled $1.58B, averaging $364 PSF, despite tight
lending conditions. - Sublease Availability Drops: Fell to 5.2M SF, the lowest proportion since 2018, signaling gradual improvement.
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