Vacancy Shrinks, Investor Confidence Grows Across South Puget Sound
The South Puget Sound Healthcare market is firing on all cylinders heading into the back half of 2025. Vacancy has tightened to just 2.49%, continuing to improve YOY, as tenants continue to new markets, spec suites and turnkey opportunities. This is a market where you must move quickly to transact, regardless of the side of the transaction. Landlords are quick to lease their last vacancy and tenants are quick to make decisions due to a lack of quality product available.
We’re seeing health systems and private equity groups expanding aggressively, planting flags in new locations to capture long-term growth and meet shifting demographics. That competition is driving rents up, now averaging $32.00 PSF, NNN for Class A and $26.00 PSF, NNN for Class B buildings, with projected rent growth moving forward. Investors are leaning in as well. Cap rates have compressed to 6.5% with Class A product seeing interest at 6.00% Cap rates. As we move further away from the pandemic, capital becomes more aggressive with pent up demand and improving marketing fundamentals.
With just 216,000 SF still available out of 8.67 million SF, this isn’t a market measured by absorption anymore, it’s all about activation. Landlords who can unlock the opportunity through spec suites and aggressive terms are in the driver’s seat, with institutional and private capital zeroing in on well-located assets backed by strong healthcare and service-sector demand.
South Puget Sound 2Q25 Insights
| Total SF | 8,669,244 |
| Vacancy | 2.49% |
| Vacant SF | 216,228 |
| Average Class A Asking Rent PSF NNN | $32.00 |
| Average Class B Asking Rent PSF NNN | $25.00 |
| Average Months to Lease | 3-9 Months |
| Average Market Sale Price PSF | $315.00 PSF |
| Average Market Cap Rate | 6.50% |
| Average Months to Sale | 4 – 9 Months |
The information in this update was composed by the Kidder Mathews healthcare and office brokerage team of Will Frame, Drew Frame, and Ryan Kershaw.
Data source: CoStar
About the Frame Team
As members of the Kidder Mathews Healthcare and Office groups, Will Frame, Drew Frame, and Ryan Kershaw are experts in healthcare and office services, specializing in landlord and tenant representation, as well as sales, including investment and owner/user. The team has completed over $243,000,000 in sales in the last 24 months and actively represent more than 7 million square feet of property. For more information, visit kmteamframe.com.
About Kidder Mathews
Kidder Mathews is the largest fully independent commercial real estate firm in the Western U.S., with over 900 professionals in 20 offices across Washington, Oregon, California, Idaho, Nevada, and Arizona. We offer a complete range of brokerage, appraisal, asset services, consulting, and debt & equity finance services for all property types. Kidder Mathews averages over $9 billion in transaction volume, manages more than 58 million square feet of space, and conducts 2,400 appraisal, consulting, and cost segregation assignments annually. For more information, visit kidder.com.
Read the full report at the link below.
Contact
Will Frame, Executive Vice President
Drew Frame, Senior Vice President
Ryan Kershaw, Investments Specialist
Stay in the know and subscribe to our monthly Western U.S. Market Trends report and our quarterly market research.