Back in 2019, I was amazed to learn just how many buildings in Seattle's downtown were Amazon offices. IIRC, it was dozens of buildings, some entirely owned by Amazon, some WeWork leases, etc. Downtown isn't very big, so that's a huge presence.
It was also fun to check out the company-city that is Redmond, not far away.
Seattle's a great city, and it's got great tech presence. I'm optimistic for its recovery.
The neighborhoods they built that stuff in (mostly South Lake Union and Denny Triangle) used to be so sleepy in 2010 and earlier. It was a big transformation.
Earlier than that, they were actively dangerous. I spent a lot of my childhoold in Belltown, and it was not a safe place in the late 80s and early 90s.
SLU and Denny Triangle are amazing now. Those are some of the few places with restaurants open into the evenings. Amazon, like them or not, does a great job prioritizing local businesses in the retail spaces in their buildings. They can't all survive, but they've had a good track record.
I haven't lived in Seattle since 2011. I remember Belltown having one or two blocks that felt a little spotty or like you wanted your guard up, but the rest of it was thoroughly gentrified by the time I left, and it was a common choice to live for new college grads from the suburbs arriving to work in tech. I have to assume the process has continued.
The area around 3rd and Blanchard is sketchy, but in the rest of Belltown the biggest hazards are incompetent Uber/lyft/doordash/etc. drivers and drunk people on lyme scooters.
While visiting a family member at least a decade ago, I went to a fireworks display in Redmond, and two things really stood out.
First: It doesn't get dark until practically midnight, so the fireworks show started at 10:00, but it was still pretty light.
The second: Most families there had at least one parent with a Windows phone or Surface Tablet, back when they only used ARM processors. I had seen maybe one of each in use before that, and suddenly I was surrounded by them.
> The city of Seattle estimates that, with aggressive incentives, conversions could generate up to 6,000 housing units over the next seven years. At a rough approximation, that would use around a fifth of the city’s present office surplus.
> But “potential” is doing a lot of work here.
> Newer, larger office buildings, like the U.S. Bank Center, are hugely impractical for conversion, thanks to massive floor plates, centralized plumbing and other utilities and a host of other constraints.
> The preferred candidates are typically smaller, older buildings, especially those with C- or E-shaped floor layouts, which make it easier to create smaller units with adequate windows.
> But these buildings can be prohibitively costly to bring up to seismic and energy building codes, said Jen Pasquier, a Seattle developer who wants to convert the 10-story Liggett Building, at Fourth and Pike, into 93 apartments.
There have been some attempts to convert office buildings with large rectangular floors into long, narrow apartments so every apartment has a window. It's possible, but difficult.[1]
Plumbing and sewerage turns out to be a huge headache. Large office buildings often have all the plumbing and sewerage in a small vertical core. The rest of the building is just flat slabs on columns. Adding a sewer line means punching through the floor and hanging pipe in the space above the apartments below. If you're in SF and want to see what that looks like, park in the 4th and Mission garage on the lower level, where you can see the plumbing from the restaurants above hanging from the ceiling. Also, sewer lines are gravity fed, with a 2% slope typical. Long pipe runs get lower along the run, so you probably have to put them along a wall. Then you have to hide and soundproof that stuff, although you might be able to get away with leaving it exposed if you market to hipsters or sell it as low-income housing. If the original building has enough ceiling height, it's easier.
Then there's HVAC, exhaust ductwork for kitchens and bathrooms without windows, partitioning the electrical distribution for the individual units, fire breaks between units, etc. Overall, it's maybe 30% cheaper than a new building, and all custom work requiring experienced people. If botched, it can be more expensive than a new building.
One company that does such conversions admits they're building tomorrow's slums.
And then there's the fundamental problem that if jobs are leaving the downtown core, why have more housing units there?
A few years ago I was involved in purchasing a commercial building for split purposes. After viewing several spaces it became clear how critical plumbing location were to thinking about how a space could be used. We looked at a few where owners had attempted to change the layout in strange ways. In the end we decided our two goals were not well suited to a single building so we leased a production space and purchased a smaller building for other purposes.
Another issue is that a lot of those office buildings use post tensioned cables in the concrete slabs so making a hole needs to be done very carefully to avoid the cables. Not only do the cables provide a lot of structural support but breaking a cable is like cutting a stretched rubber band except with steel cables and with literally tons of force stretching the cables.
The regulatory process in Seattle is fairly painful, which raises the bar for even some of those smaller, older buildings. It'd help to change that, even though it wouldn't consume the majority of the surplus.
Apparently it's really expensive to convert to meet reasonably sane residential standards.
Add in required shrubbery, section 8 housing set-asides, rent control, etc., it becomes unattractive -- especially if the jobs have moved to business friendly suburbs
I live in a converted office building I. Downtown Chicago . But it was built in 1913. Newer office buildings are less practical to convert due to larger floor plates. Older office buildings are smaller or have light wells etc.
On top of the architectural challenges and efficacy of it, you have to contend with the terms of the bank loans that apply. Those are why the buildings "can't" lower rents to attract new business.
If they sign a lease at a new lower rent it basically triggers a re-check of "can they repay the loan based on their rental income?", which comes back as "no". That trigger _doesn't_ occur if you just leave the building empty, with _no one_ paying rent, because your last mark to market rent was high enough.
It's a shell game that eventually leads to the loan defaulting, but both the bank and the building owner are happy to pretend they can't see the train coming down the tracks at them.
> If they sign a lease at a new lower rent it basically triggers a re-check of "can they repay the loan based on their rental income?", which comes back as "no". That trigger _doesn't_ occur if you just leave the building empty, with _no one_ paying rent, because your last mark to market rent was high enough.
DSCR have long been used to monitor the current value of a property, and less income is less income.
> It's a shell game that eventually leads to the loan defaulting, but both the bank and the building owner are happy to pretend they can't see the train coming down the tracks at them.
This makes no sense. Why would a lender not want to keep tabs on their investment? What does shell game (a game where someone is intentionally deceived) even mean here?
Yep, the issue is that recalculating DSCR doesn't happen on the right timescale to incentivize reducing rents, instead incentivizing keeping vacancies open and using a pro forma DSCR.
The banks know this is a structural issue, but are likewise incentivized to keep "strong assets" on their balance sheet, rather than a bunch of troubled assets bound for default.
The claim isn't that they can keep this up forever, it just needs to last another quarter, every quarter.
The shell game is both parties knowing that the cups are all empty but still playing because it's better for them both to do so.
DSCR is calculated at least once per year. I don’t know what pro forma could mean here, it’s purely a cash flow calculation. The money came in, or it didn’t.
> The claim isn't that they can keep this up forever, it just needs to last another quarter, every quarter.
I don’t understand what this means, or what is being “played”, the lenders all have a near real time view into the business. The lack of cash flow can’t be papered over without engaging in fraud, but it’s also up to the lender to decide if they want to take action due to a failing DSCR.
It's not just codes, it's layout. A lot of these buildings are designed with large open spaces and centralized plumbing and utilities. It might be difficult and expensive to chop them up into apartments with windows.
On top of architectural issues like plumbing and access to windows, cities like NYC have programs where converting economically obsolete offices to residential exempts the building from property taxes if at least some units are for low-income renters.
Zoning and other regulations getting the way of it being used. The city "just" needs to incentivize it getting used, and someone's gotta come to terms with losing money.
No, that's the rhetoric. The reality: states like Massachusetts which have passed higher taxes on millionaires haven't seen the predicted exodus of millionaires. Mayor Wilson knows this and isn't taking dire predictions seriously. If you're gonna move, move, but it's not going to be because of that -- it's gonna be something you'd do anyhow.
Meanwhile, in the real world, Washington’s real GDP rose 1.1% to almost $730 billion between the fourth quarter of 2025 and the first quarter of 2026 -- substantially ahead of the overall pace in the US. Anthropic just signed a least for a 113,000-square-foot space in the South Lake Union neighborhood.
Yeah, when I hear about how the tax changes are going to result in a huge exodus of millionaires it's not backed by data. The data shows millionaires actually move LESS than the general population. Places that instituted high taxes didn't see an exodus. It turns out if you have a great city with great physical and social infrastructure, people want to be there. Seattle is building both. The physical infrastructure is better now then when I moved there 10 years ago. I just took a train to Bellevue from downtown Seattle for a couple bucks. Waterfront looks amazing and beautiful now. City is really clean.
The cross-lake rail is just amazing. I commuted to Bellevue up until my retirement recently and I really liked it the couple of times I took it.
I don't want to pretend Seattle's perfect. It is very difficult to build new housing here thanks to well-meaning regulatory reform; as someone else noted, you used to be able to build fairly small apartments and that's not legal now. It'd also help a ton if the liberal centrist business-oriented cohort and the progressive wing could figure out how to work together without all the finger pointing. But it's an excellent city.
If they can help figure out how to make turning office space into apartments attractive that will solve the vacancy problem and help keep housing costs at bay.
NYC appears to be at least somewhat ahead on converting older office stock to residential stock, and I don’t expect the current administration would attempt to slow that down (it has no particular political valence in the city that I can discern).
NYC's advantage is that older office buildings are more amenable to adaptive reuse.
Modern office buildings have deep floor plates and sealed windows, relying heavily on HVAC and artificial lighting to make the center of the building habitable. Bedrooms require exterior windows, so an optimal floorplan is a ring of bedrooms around the outside which leaves gobs of low value square footage in the middle.
Yes, this is a huge advantage (and one among several reasons why malaise in the commercial real estate market in other US cities doesn’t transfer easily into lessons about NYC’s market).
You’d think that, right, but even cities that welcome businesses are having a hard time. Even Dallas is at like 30% empty office space.
I’m sure the factors are different for every city but I think remote work and companies preferring to build campuses outside of major cities is a big driver.
Could be Seattle tax/revenue policy. Bellevue WA, the only nearby comparable but smaller tech hub city, has 25% vacancy and expected to drop below 20% - according to Fable.
If you haven't lived in Seattle, it's hard to understand the problem. It's multifaceted; business climate, generally poor quality of the city itself as a walking / working destination, extremely hostile to business city government, and greener pastures (literally) east across the bay, which happen to be closer to some very large headquarters.
The die was largely cast when Amazon called Seattle's bluff during COVID and relocated, but so much needs to be done to make the city itself an attractive place to live and work, and there is so little planning, zoning or effective change happening it seems likely to be decades before I could imagine a truly vibrant city core. Even when I write that, it seems unlikely. As we speak, Seattle is aiming to become the highest tax jurisdiction in the country, higher even than NYC, because ... revenues are down. It's a disappointing response to a serious urban problem.
Seattle here. The problem isn't that there's too little "planning" or "zoning". Where that's relevant, there's too much. The city has used those tools over and over to slow growth and tack on requirements for businesses.
I'm not aligned with the new mayor's business-hostile policies. But as far as making the city better for walking, things are going very well. We've been narrowing crossing distances, improving sidewalks, putting in concrete separation for bike lanes, we even finally kicked cars out of Pike Place Market. There are parks improvements in progress across the city to improve restrooms and fix dangerous spots. And the number of people in tent encampments has dropped dramatically, it's become rare and short lived in most of the city.
I suspect that we will continue to recover, despite the capital gains tax. It'll just be slower than Bellevue.
The city has a notorious open air drug market within 2 blocks of one of its main tourist attractions at Pike Place. Downtown is generally not a pleasant place to visit.
A few years back when I worked in the Seattle downtown, I used to have a walk around the office during lunchtime. I still remember seeing a drug addict baking what I assume was heroin just a block away from Pike Place Markets. It's crazy
I lived near there for several years. It’s bad but also highly localized. The extreme downtown core is such a small part of the city. Pioneer square, the waterfront, SLU, Seattle center, etc are all very nearly downtown. Area around the new convention center, the paramount, and 5th Ave theatre are totally fine.
I live near Pike Place Market currently and have for years. There is no open air drug market anywhere nearby. Some people doing drugs, and occasionally dealing to each other, but nothing like what you’re describing.
I've lived all over the country, both in big and small cities, and most recently in the Seattle area (across the lake in Kirkland) for 4 years.
Seattle has trappings of a city, but socially it doesn't feel like one in the way Chicago and NYC are (ok they're bigger, but hear me out -- it's not the size, it's the people). To me, Seattle feels like Cleveland but with more money.
I couldn't quite put my finger on it, but I would visit different neighborhoods from Capitol Hill to ID to Northgate to Ballard (I liked Ballard the most) almost every weekend, and everything just felt so subdued compared to a city that is truly alive. I had to take trips to Vancouver -- a similar city but more alive -- just to get my dose of city energy. Even Lynnwood WA -- a suburb -- had more energy.
The city itself has too much monoculture -- predominantly tech bros or hipsters or nature people -- but that's not enough diversity to create true energy.
The food scene was uniquely mediocre relative to its wealth and size. It had pockets of good stuff, but overall just very little risk-taking and experimentation in the restaurant industry because of the economics (min wage is $21.30 which is fair to workers but hard for small business owners) and insufficient population density to turn tables at a high rate (the land is fragmented by water and mixed elevation), and high proportion of food-as-fuel population.
Seattle attracts who it attracts because of what it is -- introverted, nature loving, affluent in a countercultural way. But this does not create a vibrant city.
Seattle's social energy resembles that of a paradoxical population who want to live in a city but are secretly suburban people.
Also your comment complains about the energy of the city (that it is too suburban feeling) and then you say you like Ballard the most -- which is by far the most suburban of the neighborhoods you mentioned.
Totally agree. Going to Vancouver often just highlights this for me, same climate and topology and .. amazing food scene! Shops are open until 10pm! Lots of good walking areas! It can be done!
As someone that actually lives in Seattle, this is so funny to read. It comes across as someone that pretends to live in Seattle and there sure are a lot of people that love to pretend they live here.
Seattle has far more energy than Austin does for example and it doesn't really take much digging to get involved in the various scenes we have here. The food scene here does suck though, that's universally true.
>If you haven't lived in Seattle, it's hard to understand the problem.
[...]
>greener pastures (literally) east across the bay
Well obviously you haven't lived in Seattle because if you did you would know the body of water separating Seattle and Bellevue is Lake Washington. Not a bay.
Nice attempt at recovery but your comment still doesn't make sense. You were talking about Seattle, and then suggested Bellevue was "greener pastures." Not that Seattle was "greener pastures" from Bainbridge lol.
Also you just admitted that you don't live in Seattle.
I mean mid Covid that wasn’t far off. The meth tent vibe in pioneer square was oppressive. You won’t convince me Seattle is a good walking city ever, but I agree it’s much better now and arguably the water front is the best it’s been ever. Still not good though.
It would be exceedingly strange for someone to live in Seattle (or Bellevue for that matter) for any amount of time and not learn that the eastern body of water is Lake Washington and not a bay. The geography is so ingrained into the culture here that it's just not possible.
And yet they have very strong opinions about the rest of the place? Their followup explanation did not make any sense at all. I call BS.
Seattle is generally a fairly high quality city as walkability and bikeability goes. While office vacancies are up, sure, residential vacancies are not. The city is packed with people who enjoy and want to live here. The handful of blocks that makes up the business district aren’t as busy as they used to be, but that’s such a small part of the city.
Also, Amazon did not really “relocate” as much as open more offices in other cities. I know people supporting Amazon ELT and plenty of high level executives are here. They have huge amounts of money, employees, and office space in Seattle, and there’s no sign that’s changing. The areas close to Amazon’s office space are very attractive places to live, demanding high rent, and generally safe, green, and pleasant to exist in. (I lived near there for a few years.) The high rise apartments that have been opening year after year for a decade in these neighborhoods still have strong demand.
Am I selling it positively? Sure. But you’re selling it pretty negatively, in a way that doesn’t match what many people who live here really believe.
Anyways, Seattle has tax problems mostly because there is no income tax. But it is a challenge: to actually make the city safe and vibrant and even more great, we need to invest in public transit, biking, parks, and schools.
Yet rents won't drop -- the commercial mortgage covenants prevent landlords from dropping rental rates, so they'll just sit there fallow until the market recovers.
My pet theory is that the best thing any city could do is having a strict vacancy tax in the downtown core, especially on retail space. Nothing makes a place feel dead like seeing boarded up restaurants or shops, and since the pandemic those have been lasting for years because the landlords don’t want to lower rates. There should be some grace period followed by tax rates ramping up so sharply that, say, they’d pay a food truck operator to use a storefront just to have something going on at every place on the block.
One of the things which helped the early web startup scene was that the amount of startup capital was a lot lower when you could get an old loft for an order of magnitude less than top-tier office space. Cheap money for most of the century skewed towards huge companies (or dreams of becoming one) but cities tend to benefit more from many small to medium sized businesses which aren’t trying to become Google.
This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like, ask me about it!
In Bellevue, office vacancies are low because most have long term tenants - even if the spaces aren't full of workers, the companies paying for them can continue to do so.
In Seattle, most office space is leased by smaller companies. We have diversity in availability, which is great, we have tiny office leases available as well as big ones. I believe those smaller spaces also often had shorter leases.
There are some spaces in Seattle where an anchor tenant (Indeed with 11 floors in the 2+U building at 1201 2nd Ave is a good example) shrank the footprint they use, and quickly sublet floors they aren't using. Those sublets can be priced appropriately for the market, and the main tenant keeps paying the original lease price.
However, when a space loses a tenant, the bank can't just drop the price for the owner, the same as you can't just pay less on your mortgage if you get a lower paying job. That has to go through a long, painful process, and usually the building will end up sold before pricing can change.
This is lag. It's easy to correlate it with a choice by Amazon or with new taxes, but there's quite a bit of demand for office space in Seattle, just not at the prices the owners are forced to ask with their financing instruments.
We just saw another building turn over, US Bank Center. The new owner bought it at a price where they'll be able to lease it competitively, and it won't sit empty. We'll see that continue to happen.
And you have to wonder, what kind of boom in innovation could lots of reasonably priced office space support? What gov policy cold push landlords and banks to accept reality? Vacancy tax? Change to bank regulations?
The timeframe of regulatory changes here is not worth any investment. The turnover will continue to happen, it's too complicated to try to change, and you'd probably create nasty unexpected side effects.
> This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes.
Why would this be different in Seattle than in other cities? Many downtown office towers are bought or built using a lot of debt throughout the U.S. What do you think makes Seattle special?
> We just saw another building turn over, US Bank Center. The new owner bought it at a price where they'll be able to lease it competitively, and it won't sit empty. We'll see that continue to happen.
The news story mentions the U.S. Bank Center example. What it says that you're leaving out is just HOW big that discount is:
> The new owner of the U.S. Bank Center, having paid just $280 million, or less than half of what the building went for in 2019, presumably can afford to lower rents enough to fill the place, which is now 45% vacant, according to CoStar.
A discount of more than 50% is a bubble bursting. It's great that the new owner can offer fire-sale rent, but where does that leave the old owner, if they were truly as leveraged as you suggest they were likely to be?
> The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like, ask me about it!
OK, I'll ask you about it. This "Seattle Times = Blethen family propaganda" line has been tiring for the 25 years I've been hearing it. What exactly are they not covering about Seattle's downtown today that you think they should be? Why do you think that their opinion staff influence the news coverage so much? In short, if the Seattle Times has a conservative bias in its news coverage, why does the Wall Street Journal famously have a liberal-biased newsroom?
Why is Seattle impacted worse? Because so much of our office space was tech companies that decided they didn't need as much office space and can do their work remotely.
Look up the old owner and you'll realize why it doesn't really matter that they're taking a massive loss, and why I don't really care. I left it out because it's already a long comment and that's not really relevant.
They could have written an article about how foreclosures on office buildings take a long time and that sublet offerings in Seattle are turning over at a healthy rate. And the owner of a company in media absolutely influences that coverage, why do you think everybody's worried about CBS, or for a long time Fox News?
Think it's significant that Zillow's one of the few significant tech companies to maintain full remote working? They don't leave an Amazon-sized hole in downtown, but they had quite a few floors.
They kept at least the main floor in Russell Investment Center. I don’t know if they have all ten+ floors any more. They were trying to sublease around 100K square feet right after the pandemic but I haven’t seen any news since then.
This tracks with what I’ve heard around as well. What changed in the financial instruments?
My understanding is a lot of the loans have gone PIK or otherwise essentially aren’t serviceable at current prices. Do you think that’s resolvable somehow or just lagging implosion?
Nothing changed in financial instruments - we just don't usually have a lot of office tenants decide to walk away like we have with the advent of remote work. The loans will work themselves out. We've seen a couple of buildings trade for way less than pre-Covid numbers, and we'll see more.
In another 10 years downtown Seattle will be aligned with the rest of the market again.
I'm not sure the bank has that much to do with it.
Commercial real estate valuation is based entirely on its ability to produce income. Lower the rent, lower the value. And that's a problem because most commercial leases are long (5-20+ years) so you're locking in an asset writedown for a long period of time. So it can be better to leave it vacant and pretend the value hasn't changed.
You can still run into problems with this (eg servicing the loan). So I don't think it's quite the issue that banks have to approve lowering the rent so much as the owner might lower their asset value and have problems with the LTV and DSCR so the bank may then require you to refinance or add capital.
By the way, we've gone through this before. Up until the 1990s, law firms were by far the largest tenants of office space because they had very large law libraries. Then that went online and they downsized. This was an acpolaypse in the 2000s combined with the dot-com bust.
I think the lag you're talking about is on banks essentially foreclosing on a building and selling it off, allowing the new owners to charge less because they paid less.
CRE also includes warehouses, multifamily apartments, retail, hotels, data centers, medical.
I think we kind of lucked out that we had the start of boom in 2023 instead of a recession.
The diversification has allowed the office space price to correct without a contagion.
As a general rule, any snappy memorable line like "extend and pretend" is almost always wrong and a distortion after awhile. The idea sticks around longer than it should because it is memorable, not because it has anything to do with reality.
Crime. Everyone moves from DT Seattle to the eastside when they start a family. It’s normalized at this point, where if you see a potential threat u just walk across the street and go on with your business.
Hostile business environment. Jumpstart, inflationary wage environment, etc.
Living in DT Seattle is just meh. Expensive and the food scene is terrible due to local labor policies.
Inability to get anything done from the local govt. Wilson spent her campaign promising to make it easier to build housing and just gave in to nimby interests again.
Local politics is lunacy. Constant issues with the the unhoused population but it’s ok let’s just keep pushing it to little Saigon / Chinatown! Close your eyes since it doesn’t happen if you’re in Wallingford, QA, or Ballard!
Fewer and fewer major cos investing into the area.
And then there’s 0 transit enforcement or even any attempt at it. We don’t even have fare gates on the link for gods sake.
It’s just completely absurd how mismanaged this city is, despite how much potential there is.
Nowadays more and more offices opening in Bellevue.
They passed a tax on basically just Amazon in 2018 and there were rumblings of Amazon leaving the city for Bellevue/Redmond. The city council repealed it within a month and things quieted down, but then COVID happened, they passed basically the same tax again, and this time it stuck. Since then, Amazon's been slowly leaving Seattle for the eastside by moving employees as their building leases expire: https://www.seattletimes.com/business/amazon/amazon-no-longe...
Bellevue has a few advantages over Seattle. Seattle imposes a city level payroll tax that isn't in Bellevue, and there are other tax implications. Seattle's minimum wage is higher. Seattle has a more visible drug/homeless problem.
Seattle can charge a premium for its advantages over Bellevue because they provide additional value, and the premium Seattle charges is actually less than most people make it out to be.
It's very conservative - just along certain axes that are especially locally relevant. For instance, they've opposed both our 2008 and 2016 mass transit ballot measures (both of which passed with strong support). They were supportive, until we replaced the primary owner's express onramp on Interstate 90 with a train.
Seattle Times is left leaning. Just because your pet measure of transit was opposed doesn’t make it otherwise. Calling it conservative is simply unmoored from reality. It’s also a display of what Seattle politics are like and why it has declined so much on so many facets in a short 20 years. The rampant progressive extremism is the root cause of the issues affecting Seattle. There is no balance or practical governance.
The main claims from the article seem worrysome, IN particular, the 37% vacancy rate, as well as multiple buildings underwater[3], etc.
Now, lets dissect the claims that this is part of some cycle, and not the result of new city hall management. The reality is that with Jumpstart, and with the vacancy rate, enterprises are not renting. But, the owner is stuck with the asset in what is now a hostile jurisdiction. So, even if owner may not be able to change terms on their mortgage, they certainly can charge less for rent. Empty units do not contribute to cash flows to pay the building mortage. I understand there may be consequences to lowering rents, but those consequences are coming home anyway: The building will need to be sold, at a loss, by the bank to a new owner. And as you said, that process takes time.
That in turn lowers the appraised value, which is key to the Seattle tax base.
So, the downtown core is going to produce far less in property taxes in the foreseeable future, with fewer tenants paying (at least in short term) occupancy taxes, etc. This is going to play out in a decade.
According to this, commercial property taxes are about 26 %[1] of the Seattle budget
Let's assume appraisals go down 50% for those impaired offices. This is not crazy, there's precendent for it[2]. That means the Seattle budget must be cut by 13%. This is not even factoring other losses from job loss, sales tax lost, etc. Maybe that's not "Seattle is dying" , but sound pretty bad ?
The financial instruments are commercial real estate loans.
Those loans often do not allow the borrower to charge lower rent.
Property taxes are not calculated that way. The property tax rate for a given year is backed into (a "mill rate") based on approved dollars of spending divided by total property value. If total citywide property value drops by 50%, the property tax rate doubles that year.
So no, the property value changes aren't really an issue.
I'll add a few bits. Commercial leases are typically "triple net" so taxes are passed pretty much directly through to tenants and land lords don't need to worry too much about them. A very visible part of the "dead downtown" effect is due to small businesses that have terrible margins, high fixed costs (including rent), and don't survive losing 20% of their customer base. And finally, anyone paying attention saw that Seattle core downtown is a highly concentrated bet on office rental to the exclusion of almost any other use of space or reason to go there.
A few years back I did an art installation in one of the storefronts at the 2+U building and in the process got to study up on some of the issues and talk to a few people, the general theme was that everyone had a vested interest in focusing on possible causes that were external and fixable within a short time. I don't think that's reality.
>Those loans often do not allow the borrower to charge lower rent.
I have never seen it substantiated that a promissory note in commercial real estate has a clause that dictates how the borrower can price their products or services.
There will be terms for the borrower to be in default if they lose too much revenue or their expenses go up too much, such as leaving spaces empty:
Whether a lender wants to foreclose on a borrower in default is far from guaranteed. Often times, they are loathe to take over management of a building so they simply work out a new agreement with the borrower.
No there won't be clauses about rental amounts. It's not that straightforward.
It boils down to collateral for the loan.
A building has a value based on future rents. The owner borrows from the bank based on that value. The building is collateral for the loan.
The rental rate (not occupancy) determines the current building value. (Occupancy affects cash-flow, but not building value.)
Reducing rent improves cash flow, which may help paying the loan, but loan payments here are not important.
What is important is that the collateral covers the loan. Reducing the rent triggers a re-evaluation of the building value, which in turn affects the loan. There's no discretion here, it's just math.
On the other hand, as long as the owner continues to pay the installment on the loan, and as long as the building remains the same value, the banker doesn't have to do anything.
Yes, there are ways the price can be fudged a bit (bundling services, remodeling allowances and so on) but the "list price" of the rent can't come down without (automatically) triggering loan problems.
Since property companies tend to have multiple properties, cash flow is sufficient to pay the loan. So that's a lot better than triggering a revaluation.
In short commercial real estate does not behave like residential real estate.
This is exactly the key - residential real estate is based on tons of pricing effects, and appraisals are much more "feels" than "reals", if you will (how people feel about the area, how they feel about the tower the previous owner added, how they feel about the location, etc).
Commercial real estate valuations are almost entirely a mathematical formula based on rents, current, whether they're collecting them or no. And if the rents drop (e.g., you start renting it at a lower square foot rate) the valuation drops, which can require recollateralization (e.g., unlike your house, the banks require that the loan NEVER be more than 50% LTV or something) so if the value of the property calculation makes it go above that, you have to pay down the loan or add additional property as collateral.
Residential real estate has a lot of sweetheart terms due to government subsidies, especially in the US. That is why you don’t see 30 year fixed rates anywhere else, and 0% down loans anywhere else.
The DSCR equivalent for residential real estate is debt-to-income ratio.
Residential real estate appraisals are done by under employed real estate agents. They’ll always find a way to justify the number that you paid, like during Covid when I bid $200k over asking for a $1M house, the appraiser didn’t bat an eye and got to that number. That was totally based on vibes.
I don’t know what “under employed real estate agents” means, but the appraiser that the lender cares about is in no way associated with the real estate agents. The lender picks the appraiser (a licensed professional usually working as an independent contractor) who submits a report to the lender, who then determines whether or not they want to use it.
Asking price also has nothing to do with market value, so offering $200k more over asking would be irrelevant to the appraiser. You should have received a report showing recently sold houses similar to the one you were buying and other physical features that justified the appraisal.
There is even an appraisal contingency in most purchase agreements that outline what to do if an appraisal comes in lower than what a buyer offers to pays. Typically, the buyer can exit the purchase and get their earnest money back, or they can put additional money down to cover the gap between the appraisal and the offer price.
If a house is getting so many bids that it sells for 200K over asking, then that is pretty clearly the market price as determined by auction. Of course the appraisal would sat that is the value because it is.
> Reducing the rent triggers a re-evaluation of the building value, which in turn affects the loan. There's no discretion here, it's just math
What is “the” rent? The building has multiple tenants (usually), at various prices. It makes no sense that there is a specific price that the landlord cannot rent at to any one tenant that “triggers” a re-evaluation.
If the lender wants a continuous view into the collateral’s value, which any lender with two brain cells to rub together would, then it would require a minimum DSCR, which they do.
The discourse about commercial real estate in downtowns (well-beyond this thread) has taken on a kind of “one neat trick” wishful thinking.
If only the greedy owners or banks would recognize their massive investments had lost hundreds of billions in value due to declining demand, then… the underlying causes of that decline in demand and the consequences if it persists can be waved away?
I tried to cover this in my original comment - Bellevue hasn't lost as many tenants because they're usually larger and have longer leases. They may yet have an increase in vacancy rate.
>>> Property taxes are not calculated that way. The property tax rate for a given year is backed into (a "mill rate") based on approved dollars of spending divided by total property value. If total citywide property value drops by 50%, the property tax rate doubles that year.
When the LLCs that own the commercial buildings declare themselves bankrupt, and walk away from the asset and throw the keys on the table, who pays the 50% increase ?
The banks?
I think you're starting from two flawed assumptions.
1. Most of our largest buildings are owned by large companies. For instance, Gaw Capital owns Columbia Center. Blackstone owned US Bank Center, until it was bought by Spear Street Capital.
2. You could delete downtown and citywide property value wouldn't drop by 50%. Nothing's moving that fast, I'm just using simple math to explain mill rate.
>...If total citywide property value drops by 50%, the property tax rate doubles that year.
This claim is simply not true. Even in a budget based system like Seattle, there are hard statutory limits on how much the tax could increase.
If total citywide property value drops by 50%, the tax rate would hit its legal maximum ceiling, and the city would have to make up the money somewhere else or cut spending.
One big limitation is RCW 84.52.050 (Limitation of levies) which I think implements the 1% constitutional max allowed levy. I read somewhere that Seattle is at a levy of about 9.4, so that would be a hard limit right there.
The 1% limit is a limit on the level of the property tax. If property tax values somehow fell by 50%, in theory, the property tax rate would double to ensure city operations remain funded. However, Seattle is almost at the statutory limit right now so there isn't much room to increase the rate - I this scenario the city would hit the 1% limit and be forced to get the money somewhere else or cut its budget instead. As I initially wrote:
>...If total citywide property value drops by 50%, the tax rate would hit its legal maximum ceiling, and the city would have to make up the money somewhere else or cut spending.
And the city wouldn't even get all of the increase it is allowed as there are other tax districts who would also want a higher rate. The tax increase that would be allowed would be prorated with the other tax districts.
(The 1% revenue growth cap you referred to earlier is a different statute and a different issue.)
An increase in vacancies across the board is reduction in demand, plain and simple.
That the new equilibrium price to re-tenant all the buildings is lower is evidence of that.
But the OP is correct that when enough of the building owners default on their debt, the building will be foreclosed, sold for less and asking rents will go down towards the new equilibrium price.
Thus occupancy is likely to improve again down the line.
But, yes, this is not a bullish situation for Seattle. Office generally hasn't been doing well nationally, so it's more of a question of relative performance.
Honestly, I think is a bullish situation for Seattle.
With vacancy this high we're likely a more attractive place to start a small company, as recollateralization and foreclosure put square footage on the market at competitive prices.
For those who compare to Bellevue - in 2025 we grew population at 0.8% to Bellevue's 0.2%. You'd never know that from the vacancy reporting.
If you look back at my original comment, you'll note I mentioned that sublets at appropriate pricing are filling quickly. Occupancy isn't appropriate for current demand. Occupancy is depressed by owners avoiding recollateralization.
You seem to be missing that if prices are lower, demand is lower. Price is a function of demand.
That occupancy will recover does not support your point in the way you seem to think it does.
It's a natural market function that a drop in demand will lead to a drop in prices, and eventually, a commensurate increase in consumption (at lower prices)
This happens everywhere, and out of everywhere Seattle is doing the worst.
> So, the downtown core is going to produce far less in property taxes in the foreseeable future, with fewer tenants paying (at least in short term) occupancy taxes, etc. This is going to play out in a decade.
> According to this, commercial property taxes are about 26 %[1] of the Seattle budget
In WA state, the property tax collected isn't related to the total of the assessed value. The total tax billed across all existing properties typically goes up 1% per year (the "levy lid"), unless voters have allowed a "levy lid lift". That total is apportioned amongst the properties by value.
So if everybody's property values drop in half, their property tax rate doubles (plus a little) and their tax bill stays about the same.
Of course, if commercial property assessments drop and residential assessments stay the same or go up, commercial bills will drop and residential bills will go up. But the total tax bill will still be 1% more than last year.
Your argument is that it's simply because of dropping prices. Maybe that does explain the bulk of it. But the article seems to suggest it's the WFH transition. How much of the vacancy rate would be explained by that?
Is there any reason to think WFH rates would differ between Seattle and Bellevue?
I’m not super knowledgeable in this area but GP is right the The Seattle Times is a very partisan outlet that spins confirmation bias into everything. Left-leaning politicians elected? The rain is their fault. Centrists (because this is Seattle)? They’re doing the best they can, maybe give more money to Amazon?
I can tell you specifically that Indeed dropped its footprint because of WFH. They moved into that building during covid, then shortly after introduced permanent work from home / hybrid.
The other person’s point about rents probably explains the continued emptiness but WFH definitely drove the abandonment. And that newspaper does suck.
> However, when a space loses a tenant, the bank can't just drop the price for the owner, the same as you can't just pay less on your mortgage if you get a lower paying job.
You can always pay less on your mortgage or any other debts if you are in a crisis and negotiate with the lenders. They prefer this immensely over not receiving anything at all. And in the long run they also receive more interest this way.
It's very common especially for businesses to enter these kind of negotiations with the banks, and not very uncommon for individuals either.
So it makes much better sense for everybody involved to sublet these spaces for market value, even if that income doesn't cover the original mortgage, because something is better than nothing. Somewhere there's a giant perverse incentive in situations like this.
Seattle has a few confounding factors:
- Higher taxes that are not present in surrounding cities
- A public school system that is hot garbage compared to 20 years ago (Eastside schools are still ok)
- Amazon as of almost a decade has been pushing hiring to their Eastside offices, and trying to freeze headcount in the state overall
- Lots of the engineers you want to hire live on the Eastside
Short term, Bellevue is a better place to have your office. Mid term, the big winners are Texas, Vancouver (CA) and India. A little longer term, the lower end of all those jobs are gonna anyway in a puff of tokens.
>Some commentators have blamed the downtown office apocalypse on Seattle’s taxes, antibusiness rhetoric and perceptions of public safety.
That is very hand-wavy of the author, Seattle literally taxes gross receipts of every business that does over $100,000 [recently raised to $2 million], with no deduction for expenses, and on top of an employer paid payroll expense tax.
with all the new taxes the city and the state have piled on, compensation above $1m is going to be taxed (federal + state) at a marginal rate of 56% by 2030, which I believe will be the highest in the country. Not to mention the state is in budgetary deficit and the county us losing population. No C-level exec has any economic incentive whatsoever to contract for any large presences there.
"The bigger culprit, though, is the tech sector. Its astonishing decadelong push for office space, and equally astonishing slowdown, left downtown Seattle with a gap between supply and demand that will be very difficult to bridge."
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[ 2.7 ms ] story [ 72.3 ms ] threadIt was also fun to check out the company-city that is Redmond, not far away.
Seattle's a great city, and it's got great tech presence. I'm optimistic for its recovery.
Despite the graph shown in the article, I have to wonder if this is really a new problem.
SLU and Denny Triangle are amazing now. Those are some of the few places with restaurants open into the evenings. Amazon, like them or not, does a great job prioritizing local businesses in the retail spaces in their buildings. They can't all survive, but they've had a good track record.
https://youtu.be/Lu10UUtgxoM?is=t4Q7o4FyI6HlydhL
First: It doesn't get dark until practically midnight, so the fireworks show started at 10:00, but it was still pretty light.
The second: Most families there had at least one parent with a Windows phone or Surface Tablet, back when they only used ARM processors. I had seen maybe one of each in use before that, and suddenly I was surrounded by them.
> The city of Seattle estimates that, with aggressive incentives, conversions could generate up to 6,000 housing units over the next seven years. At a rough approximation, that would use around a fifth of the city’s present office surplus.
> But “potential” is doing a lot of work here.
> Newer, larger office buildings, like the U.S. Bank Center, are hugely impractical for conversion, thanks to massive floor plates, centralized plumbing and other utilities and a host of other constraints.
> The preferred candidates are typically smaller, older buildings, especially those with C- or E-shaped floor layouts, which make it easier to create smaller units with adequate windows.
> But these buildings can be prohibitively costly to bring up to seismic and energy building codes, said Jen Pasquier, a Seattle developer who wants to convert the 10-story Liggett Building, at Fourth and Pike, into 93 apartments.
Plumbing and sewerage turns out to be a huge headache. Large office buildings often have all the plumbing and sewerage in a small vertical core. The rest of the building is just flat slabs on columns. Adding a sewer line means punching through the floor and hanging pipe in the space above the apartments below. If you're in SF and want to see what that looks like, park in the 4th and Mission garage on the lower level, where you can see the plumbing from the restaurants above hanging from the ceiling. Also, sewer lines are gravity fed, with a 2% slope typical. Long pipe runs get lower along the run, so you probably have to put them along a wall. Then you have to hide and soundproof that stuff, although you might be able to get away with leaving it exposed if you market to hipsters or sell it as low-income housing. If the original building has enough ceiling height, it's easier.
Then there's HVAC, exhaust ductwork for kitchens and bathrooms without windows, partitioning the electrical distribution for the individual units, fire breaks between units, etc. Overall, it's maybe 30% cheaper than a new building, and all custom work requiring experienced people. If botched, it can be more expensive than a new building.
One company that does such conversions admits they're building tomorrow's slums.
And then there's the fundamental problem that if jobs are leaving the downtown core, why have more housing units there?
[1] https://www.pbs.org/newshour/economy/analysis-heres-what-it-...
Add in required shrubbery, section 8 housing set-asides, rent control, etc., it becomes unattractive -- especially if the jobs have moved to business friendly suburbs
If they sign a lease at a new lower rent it basically triggers a re-check of "can they repay the loan based on their rental income?", which comes back as "no". That trigger _doesn't_ occur if you just leave the building empty, with _no one_ paying rent, because your last mark to market rent was high enough.
It's a shell game that eventually leads to the loan defaulting, but both the bank and the building owner are happy to pretend they can't see the train coming down the tracks at them.
For an example of this in Seattle that everyone was calling years ahead of the collision, see the Martin Selig sagas https://deepnewz.com/real-estate/seattle-developer-selig-war...
Giant, vacant towers locked by some asshole sitting in their second home in Nantucket, while hordes of homeless mill around the bottom.
DSCR have long been used to monitor the current value of a property, and less income is less income.
https://www.jpmorgan.com/insights/real-estate/commercial-ter...
> It's a shell game that eventually leads to the loan defaulting, but both the bank and the building owner are happy to pretend they can't see the train coming down the tracks at them.
This makes no sense. Why would a lender not want to keep tabs on their investment? What does shell game (a game where someone is intentionally deceived) even mean here?
The banks know this is a structural issue, but are likewise incentivized to keep "strong assets" on their balance sheet, rather than a bunch of troubled assets bound for default.
The claim isn't that they can keep this up forever, it just needs to last another quarter, every quarter.
The shell game is both parties knowing that the cups are all empty but still playing because it's better for them both to do so.
> The claim isn't that they can keep this up forever, it just needs to last another quarter, every quarter.
I don’t understand what this means, or what is being “played”, the lenders all have a near real time view into the business. The lack of cash flow can’t be papered over without engaging in fraud, but it’s also up to the lender to decide if they want to take action due to a failing DSCR.
Not sure the incentives will bring a useful change.
Meanwhile, in the real world, Washington’s real GDP rose 1.1% to almost $730 billion between the fourth quarter of 2025 and the first quarter of 2026 -- substantially ahead of the overall pace in the US. Anthropic just signed a least for a 113,000-square-foot space in the South Lake Union neighborhood.
I don't want to pretend Seattle's perfect. It is very difficult to build new housing here thanks to well-meaning regulatory reform; as someone else noted, you used to be able to build fairly small apartments and that's not legal now. It'd also help a ton if the liberal centrist business-oriented cohort and the progressive wing could figure out how to work together without all the finger pointing. But it's an excellent city.
Modern office buildings have deep floor plates and sealed windows, relying heavily on HVAC and artificial lighting to make the center of the building habitable. Bedrooms require exterior windows, so an optimal floorplan is a ring of bedrooms around the outside which leaves gobs of low value square footage in the middle.
I’m sure the factors are different for every city but I think remote work and companies preferring to build campuses outside of major cities is a big driver.
Have we reached "peak office" at last?
How many people in offices does society really need, anyway?
The die was largely cast when Amazon called Seattle's bluff during COVID and relocated, but so much needs to be done to make the city itself an attractive place to live and work, and there is so little planning, zoning or effective change happening it seems likely to be decades before I could imagine a truly vibrant city core. Even when I write that, it seems unlikely. As we speak, Seattle is aiming to become the highest tax jurisdiction in the country, higher even than NYC, because ... revenues are down. It's a disappointing response to a serious urban problem.
I'm not aligned with the new mayor's business-hostile policies. But as far as making the city better for walking, things are going very well. We've been narrowing crossing distances, improving sidewalks, putting in concrete separation for bike lanes, we even finally kicked cars out of Pike Place Market. There are parks improvements in progress across the city to improve restrooms and fix dangerous spots. And the number of people in tent encampments has dropped dramatically, it's become rare and short lived in most of the city.
I suspect that we will continue to recover, despite the capital gains tax. It'll just be slower than Bellevue.
Do you have any data to support this claim?
From over 700 tents in 22 to under 200 by the end of 24.
Removals, regardless of how you feel about whether this is good policy, are continuing unabated when reported: https://www.kuow.org/stories/is-seattle-sweeping-more-homele...
What you've linked to is a very different measurement than tent encampments, so it's hard to compare them. Tents are still way down.
Seattle has trappings of a city, but socially it doesn't feel like one in the way Chicago and NYC are (ok they're bigger, but hear me out -- it's not the size, it's the people). To me, Seattle feels like Cleveland but with more money.
I couldn't quite put my finger on it, but I would visit different neighborhoods from Capitol Hill to ID to Northgate to Ballard (I liked Ballard the most) almost every weekend, and everything just felt so subdued compared to a city that is truly alive. I had to take trips to Vancouver -- a similar city but more alive -- just to get my dose of city energy. Even Lynnwood WA -- a suburb -- had more energy.
The city itself has too much monoculture -- predominantly tech bros or hipsters or nature people -- but that's not enough diversity to create true energy.
The food scene was uniquely mediocre relative to its wealth and size. It had pockets of good stuff, but overall just very little risk-taking and experimentation in the restaurant industry because of the economics (min wage is $21.30 which is fair to workers but hard for small business owners) and insufficient population density to turn tables at a high rate (the land is fragmented by water and mixed elevation), and high proportion of food-as-fuel population.
Seattle attracts who it attracts because of what it is -- introverted, nature loving, affluent in a countercultural way. But this does not create a vibrant city.
Seattle's social energy resembles that of a paradoxical population who want to live in a city but are secretly suburban people.
I'm sorry but this is so beyond the pale.
Also your comment complains about the energy of the city (that it is too suburban feeling) and then you say you like Ballard the most -- which is by far the most suburban of the neighborhoods you mentioned.
As someone that actually lives in Seattle, this is so funny to read. It comes across as someone that pretends to live in Seattle and there sure are a lot of people that love to pretend they live here.
Seattle has far more energy than Austin does for example and it doesn't really take much digging to get involved in the various scenes we have here. The food scene here does suck though, that's universally true.
[...]
>greener pastures (literally) east across the bay
Well obviously you haven't lived in Seattle because if you did you would know the body of water separating Seattle and Bellevue is Lake Washington. Not a bay.
Also you just admitted that you don't live in Seattle.
"Downtown seattle is a war zone, if you don't live there you can't understand!"
Then it turns out they live in Enumclaw.
And yet they have very strong opinions about the rest of the place? Their followup explanation did not make any sense at all. I call BS.
Also, Amazon did not really “relocate” as much as open more offices in other cities. I know people supporting Amazon ELT and plenty of high level executives are here. They have huge amounts of money, employees, and office space in Seattle, and there’s no sign that’s changing. The areas close to Amazon’s office space are very attractive places to live, demanding high rent, and generally safe, green, and pleasant to exist in. (I lived near there for a few years.) The high rise apartments that have been opening year after year for a decade in these neighborhoods still have strong demand.
Am I selling it positively? Sure. But you’re selling it pretty negatively, in a way that doesn’t match what many people who live here really believe.
Anyways, Seattle has tax problems mostly because there is no income tax. But it is a challenge: to actually make the city safe and vibrant and even more great, we need to invest in public transit, biking, parks, and schools.
One of the things which helped the early web startup scene was that the amount of startup capital was a lot lower when you could get an old loft for an order of magnitude less than top-tier office space. Cheap money for most of the century skewed towards huge companies (or dreams of becoming one) but cities tend to benefit more from many small to medium sized businesses which aren’t trying to become Google.
This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like, ask me about it!
In Bellevue, office vacancies are low because most have long term tenants - even if the spaces aren't full of workers, the companies paying for them can continue to do so.
In Seattle, most office space is leased by smaller companies. We have diversity in availability, which is great, we have tiny office leases available as well as big ones. I believe those smaller spaces also often had shorter leases.
There are some spaces in Seattle where an anchor tenant (Indeed with 11 floors in the 2+U building at 1201 2nd Ave is a good example) shrank the footprint they use, and quickly sublet floors they aren't using. Those sublets can be priced appropriately for the market, and the main tenant keeps paying the original lease price.
However, when a space loses a tenant, the bank can't just drop the price for the owner, the same as you can't just pay less on your mortgage if you get a lower paying job. That has to go through a long, painful process, and usually the building will end up sold before pricing can change.
This is lag. It's easy to correlate it with a choice by Amazon or with new taxes, but there's quite a bit of demand for office space in Seattle, just not at the prices the owners are forced to ask with their financing instruments.
We just saw another building turn over, US Bank Center. The new owner bought it at a price where they'll be able to lease it competitively, and it won't sit empty. We'll see that continue to happen.
(I mean the classical definition not the watered down modern one)
Why would this be different in Seattle than in other cities? Many downtown office towers are bought or built using a lot of debt throughout the U.S. What do you think makes Seattle special?
> We just saw another building turn over, US Bank Center. The new owner bought it at a price where they'll be able to lease it competitively, and it won't sit empty. We'll see that continue to happen.
The news story mentions the U.S. Bank Center example. What it says that you're leaving out is just HOW big that discount is:
> The new owner of the U.S. Bank Center, having paid just $280 million, or less than half of what the building went for in 2019, presumably can afford to lower rents enough to fill the place, which is now 45% vacant, according to CoStar.
A discount of more than 50% is a bubble bursting. It's great that the new owner can offer fire-sale rent, but where does that leave the old owner, if they were truly as leveraged as you suggest they were likely to be?
> The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like, ask me about it!
OK, I'll ask you about it. This "Seattle Times = Blethen family propaganda" line has been tiring for the 25 years I've been hearing it. What exactly are they not covering about Seattle's downtown today that you think they should be? Why do you think that their opinion staff influence the news coverage so much? In short, if the Seattle Times has a conservative bias in its news coverage, why does the Wall Street Journal famously have a liberal-biased newsroom?
Look up the old owner and you'll realize why it doesn't really matter that they're taking a massive loss, and why I don't really care. I left it out because it's already a long comment and that's not really relevant.
They could have written an article about how foreclosures on office buildings take a long time and that sublet offerings in Seattle are turning over at a healthy rate. And the owner of a company in media absolutely influences that coverage, why do you think everybody's worried about CBS, or for a long time Fox News?
Is this serious? I can't tell anymore.
My understanding is a lot of the loans have gone PIK or otherwise essentially aren’t serviceable at current prices. Do you think that’s resolvable somehow or just lagging implosion?
In another 10 years downtown Seattle will be aligned with the rest of the market again.
Commercial real estate valuation is based entirely on its ability to produce income. Lower the rent, lower the value. And that's a problem because most commercial leases are long (5-20+ years) so you're locking in an asset writedown for a long period of time. So it can be better to leave it vacant and pretend the value hasn't changed.
You can still run into problems with this (eg servicing the loan). So I don't think it's quite the issue that banks have to approve lowering the rent so much as the owner might lower their asset value and have problems with the LTV and DSCR so the bank may then require you to refinance or add capital.
By the way, we've gone through this before. Up until the 1990s, law firms were by far the largest tenants of office space because they had very large law libraries. Then that went online and they downsized. This was an acpolaypse in the 2000s combined with the dot-com bust.
I think the lag you're talking about is on banks essentially foreclosing on a building and selling it off, allowing the new owners to charge less because they paid less.
I think we kind of lucked out that we had the start of boom in 2023 instead of a recession.
The diversification has allowed the office space price to correct without a contagion.
As a general rule, any snappy memorable line like "extend and pretend" is almost always wrong and a distortion after awhile. The idea sticks around longer than it should because it is memorable, not because it has anything to do with reality.
Hostile business environment. Jumpstart, inflationary wage environment, etc.
Living in DT Seattle is just meh. Expensive and the food scene is terrible due to local labor policies.
Inability to get anything done from the local govt. Wilson spent her campaign promising to make it easier to build housing and just gave in to nimby interests again.
Local politics is lunacy. Constant issues with the the unhoused population but it’s ok let’s just keep pushing it to little Saigon / Chinatown! Close your eyes since it doesn’t happen if you’re in Wallingford, QA, or Ballard!
Fewer and fewer major cos investing into the area.
And then there’s 0 transit enforcement or even any attempt at it. We don’t even have fare gates on the link for gods sake.
It’s just completely absurd how mismanaged this city is, despite how much potential there is.
Nowadays more and more offices opening in Bellevue.
Seattle can charge a premium for its advantages over Bellevue because they provide additional value, and the premium Seattle charges is actually less than most people make it out to be.
The Seattle Times is Left-Center with a high credibility rating. [1]
Such a deliberate distortion of the facts renders the rest of your screed null and void.
[1] https://mediabiasfactcheck.com/seattle-times/
The main claims from the article seem worrysome, IN particular, the 37% vacancy rate, as well as multiple buildings underwater[3], etc.
Now, lets dissect the claims that this is part of some cycle, and not the result of new city hall management. The reality is that with Jumpstart, and with the vacancy rate, enterprises are not renting. But, the owner is stuck with the asset in what is now a hostile jurisdiction. So, even if owner may not be able to change terms on their mortgage, they certainly can charge less for rent. Empty units do not contribute to cash flows to pay the building mortage. I understand there may be consequences to lowering rents, but those consequences are coming home anyway: The building will need to be sold, at a loss, by the bank to a new owner. And as you said, that process takes time.
That in turn lowers the appraised value, which is key to the Seattle tax base.
So, the downtown core is going to produce far less in property taxes in the foreseeable future, with fewer tenants paying (at least in short term) occupancy taxes, etc. This is going to play out in a decade.
According to this, commercial property taxes are about 26 %[1] of the Seattle budget
Let's assume appraisals go down 50% for those impaired offices. This is not crazy, there's precendent for it[2]. That means the Seattle budget must be cut by 13%. This is not even factoring other losses from job loss, sales tax lost, etc. Maybe that's not "Seattle is dying" , but sound pretty bad ?
[1] https://www.seattle.gov/documents/departments/financedepartm...
[2] Seattle/downtown office properties lost ~$10–15+ billion in assessed value since 2020 (46–48% drop) . https://cdn.downtownseattle.org/app/uploads/2026/06/New-Repo...
[3] https://www.king5.com/article/money/business/downtown-seattl...
Those loans often do not allow the borrower to charge lower rent.
Property taxes are not calculated that way. The property tax rate for a given year is backed into (a "mill rate") based on approved dollars of spending divided by total property value. If total citywide property value drops by 50%, the property tax rate doubles that year.
So no, the property value changes aren't really an issue.
A few years back I did an art installation in one of the storefronts at the 2+U building and in the process got to study up on some of the issues and talk to a few people, the general theme was that everyone had a vested interest in focusing on possible causes that were external and fixable within a short time. I don't think that's reality.
I have never seen it substantiated that a promissory note in commercial real estate has a clause that dictates how the borrower can price their products or services.
There will be terms for the borrower to be in default if they lose too much revenue or their expenses go up too much, such as leaving spaces empty:
https://www.investopedia.com/terms/d/dscr.asp
Whether a lender wants to foreclose on a borrower in default is far from guaranteed. Often times, they are loathe to take over management of a building so they simply work out a new agreement with the borrower.
It boils down to collateral for the loan.
A building has a value based on future rents. The owner borrows from the bank based on that value. The building is collateral for the loan.
The rental rate (not occupancy) determines the current building value. (Occupancy affects cash-flow, but not building value.)
Reducing rent improves cash flow, which may help paying the loan, but loan payments here are not important.
What is important is that the collateral covers the loan. Reducing the rent triggers a re-evaluation of the building value, which in turn affects the loan. There's no discretion here, it's just math.
On the other hand, as long as the owner continues to pay the installment on the loan, and as long as the building remains the same value, the banker doesn't have to do anything.
Yes, there are ways the price can be fudged a bit (bundling services, remodeling allowances and so on) but the "list price" of the rent can't come down without (automatically) triggering loan problems.
Since property companies tend to have multiple properties, cash flow is sufficient to pay the loan. So that's a lot better than triggering a revaluation.
In short commercial real estate does not behave like residential real estate.
Commercial real estate valuations are almost entirely a mathematical formula based on rents, current, whether they're collecting them or no. And if the rents drop (e.g., you start renting it at a lower square foot rate) the valuation drops, which can require recollateralization (e.g., unlike your house, the banks require that the loan NEVER be more than 50% LTV or something) so if the value of the property calculation makes it go above that, you have to pay down the loan or add additional property as collateral.
The DSCR equivalent for residential real estate is debt-to-income ratio.
Asking price also has nothing to do with market value, so offering $200k more over asking would be irrelevant to the appraiser. You should have received a report showing recently sold houses similar to the one you were buying and other physical features that justified the appraisal.
There is even an appraisal contingency in most purchase agreements that outline what to do if an appraisal comes in lower than what a buyer offers to pays. Typically, the buyer can exit the purchase and get their earnest money back, or they can put additional money down to cover the gap between the appraisal and the offer price.
What is “the” rent? The building has multiple tenants (usually), at various prices. It makes no sense that there is a specific price that the landlord cannot rent at to any one tenant that “triggers” a re-evaluation.
If the lender wants a continuous view into the collateral’s value, which any lender with two brain cells to rub together would, then it would require a minimum DSCR, which they do.
https://www.investopedia.com/terms/d/dscr.asp
If only the greedy owners or banks would recognize their massive investments had lost hundreds of billions in value due to declining demand, then… the underlying causes of that decline in demand and the consequences if it persists can be waved away?
"No lowering rent" rules are making downturn worse, but the trigger is something else.
When the LLCs that own the commercial buildings declare themselves bankrupt, and walk away from the asset and throw the keys on the table, who pays the 50% increase ? The banks?
Will banks own a 50% increase in property taxes ?
What about residents ? Renters ?
1. Most of our largest buildings are owned by large companies. For instance, Gaw Capital owns Columbia Center. Blackstone owned US Bank Center, until it was bought by Spear Street Capital.
2. You could delete downtown and citywide property value wouldn't drop by 50%. Nothing's moving that fast, I'm just using simple math to explain mill rate.
This claim is simply not true. Even in a budget based system like Seattle, there are hard statutory limits on how much the tax could increase.
If total citywide property value drops by 50%, the tax rate would hit its legal maximum ceiling, and the city would have to make up the money somewhere else or cut spending.
>...If total citywide property value drops by 50%, the tax rate would hit its legal maximum ceiling, and the city would have to make up the money somewhere else or cut spending.
And the city wouldn't even get all of the increase it is allowed as there are other tax districts who would also want a higher rate. The tax increase that would be allowed would be prorated with the other tax districts.
(The 1% revenue growth cap you referred to earlier is a different statute and a different issue.)
That the new equilibrium price to re-tenant all the buildings is lower is evidence of that.
But the OP is correct that when enough of the building owners default on their debt, the building will be foreclosed, sold for less and asking rents will go down towards the new equilibrium price.
Thus occupancy is likely to improve again down the line.
But, yes, this is not a bullish situation for Seattle. Office generally hasn't been doing well nationally, so it's more of a question of relative performance.
With vacancy this high we're likely a more attractive place to start a small company, as recollateralization and foreclosure put square footage on the market at competitive prices.
For those who compare to Bellevue - in 2025 we grew population at 0.8% to Bellevue's 0.2%. You'd never know that from the vacancy reporting.
Fewer businesses want to invest and move into Seattle at the price it used to cost.
It's true that if occupancy is poor, then a recovery in occupancy will bring more activity.
It's bullish in the same way that cheaper housing due to increased crime and decline in quality of life draws in new residents.
Again, office is doing poorly nationally, but it does seem particularly worse in Seattle than other hubs.
That occupancy will recover does not support your point in the way you seem to think it does.
It's a natural market function that a drop in demand will lead to a drop in prices, and eventually, a commensurate increase in consumption (at lower prices)
This happens everywhere, and out of everywhere Seattle is doing the worst.
> According to this, commercial property taxes are about 26 %[1] of the Seattle budget
In WA state, the property tax collected isn't related to the total of the assessed value. The total tax billed across all existing properties typically goes up 1% per year (the "levy lid"), unless voters have allowed a "levy lid lift". That total is apportioned amongst the properties by value.
So if everybody's property values drop in half, their property tax rate doubles (plus a little) and their tax bill stays about the same.
Of course, if commercial property assessments drop and residential assessments stay the same or go up, commercial bills will drop and residential bills will go up. But the total tax bill will still be 1% more than last year.
I’m not super knowledgeable in this area but GP is right the The Seattle Times is a very partisan outlet that spins confirmation bias into everything. Left-leaning politicians elected? The rain is their fault. Centrists (because this is Seattle)? They’re doing the best they can, maybe give more money to Amazon?
The other person’s point about rents probably explains the continued emptiness but WFH definitely drove the abandonment. And that newspaper does suck.
The whole office real estate thing operates on a boom bust cycle.
You can always pay less on your mortgage or any other debts if you are in a crisis and negotiate with the lenders. They prefer this immensely over not receiving anything at all. And in the long run they also receive more interest this way.
It's very common especially for businesses to enter these kind of negotiations with the banks, and not very uncommon for individuals either.
So it makes much better sense for everybody involved to sublet these spaces for market value, even if that income doesn't cover the original mortgage, because something is better than nothing. Somewhere there's a giant perverse incentive in situations like this.
Short term, Bellevue is a better place to have your office. Mid term, the big winners are Texas, Vancouver (CA) and India. A little longer term, the lower end of all those jobs are gonna anyway in a puff of tokens.
That is very hand-wavy of the author, Seattle literally taxes gross receipts of every business that does over $100,000 [recently raised to $2 million], with no deduction for expenses, and on top of an employer paid payroll expense tax.