Since 2022, a gap in expectations between landlords and tenants—as well as sellers and buyers—has emerged due to rising interest rates and a more conservative tenant approach.
Over the past year, this gap has steadily narrowed, and with strong momentum heading into 2025, the market is poised for further alignment. Here’s what we anticipate in the coming year:
- Many tenants have been hesitant to invest in tenant improvements, however, this has resulted in a benefit to well-capitalized institutional landlords. Those offering spec suites or turnkey solutions will likely capture over 80% of lease transactions in 2025.
- Transaction volume for MOBs has been minimal over the past two years, but that is set to change. From 2018 to 2021, sellers had the upper hand, with CAP rates ranging from 4.75% to 5.25%. CAP rates spiked to 6.75%–7.50% in 2022 but showed improvement in 2024, settling between 6.00% and 6.75%. In 2025, we expect CAP rates to further compress to 5.75%–6.25%, driving increased deal flow and further closing the gap between buyers and sellers.
- With these shifts, 2025 is shaping up to be a year of renewed transaction activity and improved market dynamics.
South Puget Sound 4Q24 Insights
| Total SF | 8,753,858 |
| Vacancy | 3.17% |
| Vacant SF | 277,750 |
| Average Class A Asking Rent PSF NNN | $32.00 |
| Average Class B Asking Rent PSF NNN | $25.00 |
| Average Months to Lease | 6-9 Months |
| Average Market Sale Price PSF | $290.00 PSF |
| Average Market Cap Rate | 6.75% |
| Average Months to Sale | 3 – 6 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 19 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
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