Downtown Seattle office values are dropping like overripe plums. That's not all bad

The market price for a place to attempt to concentrate on your work while colleagues talk loudly near your desk is dropping significantly.

It's especially bad in downtown Seattle, but honestly, it's bad everywhere. That means office tenants can ask for a lot from their landlords. The King County Assessor says: They'll probably get it.

King County Assessor John Wilson's job is to estimate how much buildings are worth, for property tax purposes. Right now, he's going through that valuation process for tax year 2025. You could call what he found this year an economic version of long Covid. He's put out a warning, so that nobody's surprised by how far things have fallen.

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Wilson says the rise of remote work has caused the value of office properties to drop across the region. He said offices on the east side of Lake Washington will decrease by an average of 30%. Through the I-90 area, they'll drop 35%.

Nowhere is this trend stronger than in downtown Seattle, specifically the Central Business District, Pioneer Square, and South Lake Union neighborhood, home to Amazon. The value of office towers in those places are dropping 35-40%.

The sound of prices dropping like overripe plums from a tree is giving office tenants the edge in negotiations when their leases come up for renewal.

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"Landlords right now are scared to death of letting somebody out of a lease because they figure, 'I'm not going to be able to get that amount from the next tenant,'" Wilson says.

And so, he says big downtown law firms and tech companies are telling their landlords, for example: "I don't need as much space, I don't need as long a lease, and I'm sure not going to pay $45-50 a square foot. So here's what I want: I want to pay $30 a square foot. I don't want a seven-year lease. I want a three-year lease and I want X million dollars’ worth of tenant improvements and I want it now. And you give it to me now, or I go elsewhere."

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Assessor Wilson says in this market, landlords are generally giving in to those demands.

Office v. Residential

In contrast, Wilson says residential property values are rising. The drop in commercial property values puts more pressure on residential properties to make up the funding difference.

The assessor forecasts only single-digit increases in residential property valuations in Seattle, but 20% increases on the east side, or even 50% increases in limited areas.

Just because a homeowner's home valuation goes up 50% doesn't mean they'll automatically have to pay 50% more taxes though. Actual taxes are determined by a more complex formula.

On the one hand, there's a 1% cap on how much property taxes overall can increase in any single year, according to state law.

Special voter-approved property tax levies, which differ from city to city and pay for everything from schools to ambulances, have a bigger effect on homeowners' property taxes.

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Since inflation has been rising faster than 1% per year, the gap between government funding needs and incoming property taxes have forced local jurisdictions to rely more heavily on levies, added Al Dams, a spokesperson for the King County Assessor's office.

Correction 7/16 11:15AM:

An earlier version of the story said there was a 1% cap on annual residential property tax increases, by state law, excluding voter approved levies.

A more precise description would be that all property taxes, in aggregate, are capped at a 1% annual increase, excluding voter-approved levies. That aggregate includes both residential and commercial properties. Therefore, if office values drop, residences must make up more of the aggregate.