Vacant office space in region impacting Tacoma
A glut of office space in the region is having a considerable impact on Tacoma, according to Ryan Petty, director of the city’s Community and Economic Development Department. He discussed the situation during the June 8 meeting of Tacoma City Council’s Economic Development Committee.
There is 6.5 million square feet of vacant office space in Seattle, 1.5 million square feet in Bellevue and 850,000 square feet in Federal Way. Much of this is being leased at deeply discounted rates, Petty said. Building owners would rather lease space and lose some money than have it empty and lose even more, he observed.
One company Petty’s staff was courting to locate in Tacoma opted instead for a suburban location in the Puget Sound region, where it was able to lease space for $10 a square foot with free parking in an office park setting.
Downtown Tacoma, in contrast, has 30,000 square feet of vacant office space. This does not include the building occupied by Russell Investments, which will soon relocate to Seattle. “In downtown Tacoma we have not overbuilt,” Petty said. “Everything else is on sale except for us. There is a lot of angst in the market and will be for some time.”
Councilmember David Boe said 25 years ago space was available for $12 a square foot and still is today. That gives developers little incentive to plan office buildings here, he observed.
Petty covered several barriers to attracting businesses to Tacoma. These include difficulty qualifying for capital, lingering image problems, the complexities of city government policies and quality of workforce, which Petty said is under-educated relative to the region.
Recruiting is a problem for Tacoma companies trying to hire workers who live in King County. Petty said Tacoma employers have better luck getting someone in North Carolina to work here than someone living in Seattle. “We hear that sort of thing from employers all the time.”
While some of these factors apply to cities around the nation, some are more specific to Tacoma.
Petty held a similar job in Rockford, Ill. from 1990 to 2002. Located about an hour’s drive from Chicago, Rockford suffered during Petty’s time there when Chicago became overbuilt and office lease rates there dropped significantly. He said the situation Tacoma faces now in relation to its neighbors to the north is much worse.
The quality of workforce and image problems are issues many cities do not face, he added.
“Imbedded in those are education and crime,” Mayor Marilyn Strickland observed.
Boe said the image problem is worse among Tacomans than people living elsewhere in the region. He still encounters many residents who will not go downtown. One young woman who works for his architectural firm is looking to buy a house in the suburbs. When Boe suggested some Tacoma neighborhoods, she replied that her husband grew up in the city and the couple refuses to buy a home in Tacoma.
“Until you solve that, no matter how much branding you do, Tacoma will have problems,” Boe observed.
Petty’s department recently hosted a tour of developers from King County. His staff discussed Tacoma’s problems right up front, then pointed out unique features in Tacoma they will not find in Bellevue or an office park in Kent.
These included opportunities related to two hospitals on Hilltop, a new hotel planned for Thea Foss Waterway, the McMenamin’s entertainment complex coming to the old Elks building and the LeMay Museum.
“We focused on things that are not transferable geographically,” he remarked.
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