While other markets are enjoying a comeback story in 2026, Seattle had the largest drop in ranking—from 22 to 38—since the Emerging Trends survey began. What is possibly behind this, and more importantly, what is the outlook for Seattle’s commercial property markets?
Worsening sentiment towards the Emerald City is likely a function of its beleaguered office sector, which has seen no abatement to the slow and steady increase in vacancy. Now at 32.6 percent, vacancy is up from the 7.7 percent boasted on the eve of the pandemic. No other market has recorded negative demand for 25 of the 26 quarters since March 2020, although some have come close (Portland, Denver, Boston, Los Angeles CBD). Some of the region’s key players have headed to Bellevue or the Eastside. While many markets are reinventing pockets of the market through redevelopment, thus reducing office stock, Seattle’s stock remains near an all-time high of 69 million square feet, well over the 61-million-square-foot size from 4Q 2019.
It is not all bad news. In the past six months, Seattle’s nonfarm payrolls have grown by over 15,000 jobs—positive news relative to the 12-month period before then when the labor market pulled back by 5,000 jobs. Though 8th for year-to-date VC funding at $5.8 billion, this far exceeds the amounts recorded for other top markets to watch (e.g., Miami, Phoenix).
In property, new office leasing is recording its best year since 2019, reaching 2.6 million square feet of new deals inked in the first nine months of 2026. AI-related leasing is now 615,000 square feet, up from only 68,000 square feet in 2025, and is benefiting both the office and industrial markets. There are other green shoots: sublease vacancy is down by 300,000 square feet in the past year, and the downtown core was responsible for 82 percent of all 3Q new leases and 72 percent of all 2026 new leases in Seattle. Despite overall vacancy, top tier product is 8.6 percent vacant, a delta of 2,400 basis points to the market.
The next phase of Seattle’s recovery is increasingly tied to residential growth. Local policymakers have made office-to-housing conversions a core component of downtown revitalization efforts, and the region now has nearly 2,650 housing units tied to completed or proposed conversions of obsolete office inventory. While only select buildings are viable candidates, the trend reflects a broader effort to create a more balanced live/work/play downtown environment. Since 2020, roughly 777,000 square feet of office inventory has already been removed, with another 868,000 square feet expected to follow. The multifamily market’s vacancy rate just ticked below 7 percent for the first time in three years.
Though Seattle fell in the survey rankings, it remains 7th for investment sales since 2025, an improvement in rank from 2023–2024 when it was 13th. The best years ever for the Seattle capital markets were in 2019 and 2021 when totals surpassed $24 billion. An average “strong year” (pre-pandemic) would have been about $20 billion. In 2026, already $12.6 billion has transacted, a roughly $19 billion pace. For all of the negative talk, it appears that Seattle is maintaining its share of capital deployment. Industrial deals are on track for their best year since 2022 and multifamily could reach a record if the 2026 pace continues.
The takeaway is that Seattle increasingly resembles San Francisco in one respect: today’s market is less about cyclical office demand and more about the long-term value of talent concentration. The office market will take time to fully recover, but the region’s competitive advantages remain difficult to replicate elsewhere. Look where San Francisco fell in the rankings a few years ago, versus where it is now. A similar story lies ahead for Seattle.
—Cushman & Wakefield
