Washington’s 2025 commercial real estate (CRE) saw high office vacancies but a cooling industrial market, with major tech-driven projects continuing, while new regulations (rent control, clean buildings) and workforce/cost pressures shaped development, leading to mixed results but a gradual market rebalancing with more inventory and cautious investor sentiment across sectors.
Office Market
- High Vacancy: Puget Sound office vacancy hit multi-decade highs (over 16%) in early 2025, with Class B/C spaces struggling despite Class A seeing slight positive absorption.
- Slower Construction: New multi-tenant office construction significantly dropped in 2025, though major owner-user projects (Microsoft, Amazon) finished.
- Rent Subdued: Landlord concessions kept rent growth low.
Industrial Market
- Cooling Down: The industrial sector cooled from previous highs, with slowing rent gains and rising vacancies (7.5% by mid-year) due to oversupply.
Retail & Multifamily
- Retail Shows Life: Some positive signs emerged in retail with low unemployment, though overall performance varied.
- Multifamily Stable but Specific: Demand remained strong, but market conditions were market-specific.
Key Trends & Challenges
- Regulatory Impact: New state laws on rent control (capping increases) and the Clean Buildings Performance Standard (energy efficiency) are impacting development and compliance.
- Cost & Labor Issues: Tariffs, material costs, and labor shortages continue to challenge developers.
- Mixed-Use Growth: A clear trend toward integrated residential, commercial, and recreational developments.
- Tech Influence: Microsoft and Amazon’s campus expansions drove some development, while tech layoffs impacted Eastside residential listings.
Overall Sentiment
- Cautious optimism for increased transaction activity in late 2025/2026, with a move towards a more balanced market, away from the extreme conditions of 2020-2022.
