Trends Reflect Stability, RTO Commitment, and Renewed Confidence
The South Puget Sound office market opened 2026 in its strongest position in several years. After a long stretch of right sizing and uncertainty, tenants are moving faster, vacancy has begun to flatten across most submarkets, and landlords are seeing more consistent activity. Concessions are still part of most deals, but rate stability and lease velocity have improved noticeably from where things stood twelve months ago.
Tenant demand in Q1 continued to favor buildings that simply work better. Updated spaces with modern finishes, strong amenities, and efficient layouts outperformed older product across every submarket we cover. Suburban locations with easy access, parking, and shorter commutes remained the clear winners, especially in Tacoma and Federal Way, where tenants have settled into a clearer picture of what their employees prioritize.
Return to office strategies fully took hold heading into 2026. Companies that spent the past few years cycling through hybrid policies committed to firmer schedules, and that confidence is showing up in lease terms. Five and seven year deals are again the norm rather than the exception, and tenants are planning space around how they actually operate. Healthcare, financial services, law firms, and architecture firms continue to lead activity across the market.
On the investment side, capital is back in a real way. Cap rates have stabilized for stabilized product, lender appetite is improving, and private and owner user buyers are finding pricing they can underwrite. Deals remain selective with buyers focused on location, tenant strength, and long term flexibility, but Q1 transaction velocity was the most consistent we have seen since 2022.
With supply tight, sublease space steadily declining, and tenants signing longer terms, the South Puget Sound office market enters the balance of 2026 from a far stronger position than it has held in years. The path forward looks more confident than at any point in recent memory.
South Puget Sound 1Q26 Insights
| Vacancy | 8.58% |
| Total SF | 43,634,498 |
| Vacant SF | 3,744,485 |
| Average Class A Lease Rate | $33.00 |
| Average Class B Lease Rate | $28.00 |
| Average Months to Lease | 4-8 Months |
| Average Sale Price PSF | $204.00 |
| Average Market Cap Rate | 8.50% |
| Months to Sale – Owner/User | 3-12 Months |
| Months to Sale – Stabilized | 3-9 Months |
The information in this update was composed by the Kidder Mathews healthcare and office brokerage team of Drew Frame, SIOR, and Ryan Kershaw.
Data source: CoStar
About the Frame Team
As members of the Kidder Mathews Healthcare and Office groups, Drew Frame, SIOR 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 3 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, 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 54 million square feet of space, and conducts 2,700 appraisal, consulting, and cost segregation assignments annually. For more information, visit kidder.com.
Read the full report at the link below.
Contact
Drew Frame, SIOR, Senior Vice President
Ryan Kershaw, Investments Specialist
Will Frame, Regional President of Brokerage, Pacific Northwest
Stay in the know and subscribe to our monthly Western U.S. Market Trends report and our quarterly market research.