The Seattle-area office market is showing signs of health as AI companies bring new stability

For the first time in several years, there are signs that the worst may be over in the Seattle-area office market — and artificial intelligence companies appear to be playing a leading role.

The regional office market (which includes Seattle, Bellevue and the surrounding Eastside) posted a healthy amount of absorption during the second quarter, meaning companies moved into more office space than they exited, according to a new report from real estate firm JLL. It’s a significant change after years of downsizing driven by remote working, layoffs and business cost cutting.

Technology companies accounted for 42.5% of all leasing activity during the quarter, easily outpacing all other industries. JLL said AI-related leasing is on track for a strong year as companies set up engineering centers in the Seattle region to tap into its deep talent pool while taking advantage of lower office costs in San Francisco and New York.

The quarter’s biggest deals reflected that trend.

• Databricks signed a 142,000-square-foot lease at Four106 in downtown Bellevue, the quarter’s largest office project.
• DocuSign has dedicated 116,000 square feet in Seattle’s JPMorgan Chase Center.
• Pokémon has moved into The Eight office tower in Bellevue, occupying 369,800 square feet.

The Pokémon deal helped push the region to 372,000 square feet of net absorption for the quarter — a return to housing where tenants are giving back more space than they took.

The numbers offer an encouraging change after years of dismal office market reports, but they hardly indicate a full recovery. Regional vacancies remain high at 23.9%, while overall availability stands at 25%.

Companies continue to consolidate, landlords are still giving out permits, and asking rents remain under pressure as tenants gain more bargaining power, JLL said in a report.

Still, there are indications that market fundamentals are improving.

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Availability has now fallen for two consecutive quarters and is down from 26.5% last year. At the same time, JLL reports that at the moment there is no new construction of new speculative offices – buildings started without the commitment of tenants – which means that even a moderate increase in demand can have a greater impact on occupancy than in previous years.

Rather than signaling the return of the sprawling office space, the latest leasing data suggests a changing story: AI and other fast-growing technology companies are helping to stabilize a market that has spent years moving in the opposite direction.

The report reinforces a trend GeekWire has been tracking over the past year as AI companies expand their presence in the Seattle region. Alongside Microsoft and Amazon, companies including OpenAI, Anthropic, xAI, Armada and Anduril have been building engineering teams in the region, drawn by the country’s deep concentration of AI and cloud computing talent.

Whether that momentum continues will depend on how fast AI hiring grows and how many companies decide they need more room for a new generation of engineers. But after several years defined by shrinking footprints and empty offices, the second quarter provided the first reasonable indication that Seattle’s office market may be finding its footing.