Office space for lease in Bellingham is getting a little harder to find but — at the same time — it’s getting a little cheaper.
That’s the upshot of a quarterly commercial real estate report released by Ryan Martin, broker and co-owner of Pacific Continental Realty, for the first quarter of 2024.
The analysis pegs the overall vacancy rate for office space in Bellingham in the first quarter at 4.5%, the fourth straight quarter of decline.
“The decrease in vacancy did come at a cost as the average asking rate for office space dropped for the fifth consecutive quarter to $17.98 per square foot, the first time it has been below $18 since the pandemic,” Martin said in a statement accompanying the report.
The report indicated demand was a mixed geographical bag, however, with Marine Drive and the Meridian corridor showing increases in office inventory and vacancy, while Squalicum Harbor and downtown Bellingham had improvements in the first quarter.
Downtown’s vacancy rate was at 6.6%, down from 7.6% in the fourth quarter of 2023 and reversing several quarters of increasing office space vacancy.
“Downtown typically has a higher vacancy rate and lower asking rate than the overall city,” Martin said in an email. “The asking rate for office space in downtown Bellingham has declined for five straight quarters.”
Office space quality varies
If demand is going up, why are prices going down?
“All office space within a market is not equal. When a market is in the low vacancy range such as 5% there is not a lot of overall space available,” Martin said. “As the better space is leased and vacancy rate decreases the remaining space is often lower quality and thus generates a lower asking rate.”
Martin said generally, vacancy rates are declining because Bellingham hasn’t seen much new office construction since 2020. Yet businesses need offices, so occupancy increases.
“According to my data, there has been a modest 3.7% uptick in overall office space within the city over the past four years,” Martin said.
Martin said some of the larger office vacancies over recent years have been in the Barkley Village and Cordata neighborhoods, with downtown Bellingham consistently accounting for about 30–40% of the city’s total office vacancy rate.
He cited three prominent buildings, not fully occupied with space for multiple tenants, that have contributed to a “significant portion” of downtown office vacancy: Crown Plaza at 114 W. Magnolia St., the Herald Building at 1155 N. State St. and the Bellingham National Bank Building at 103 E. Holly St. Each, he said, has about 60,000 square feet of space and had vacancy rates around 25% three years ago, in the first quarter of 2021.
“Presently, the Bellingham Herald and Bellingham National Bank Building have rebounded, while Crown Plaza’s recovery has been delayed due to an ongoing elevator replacement project,” Martin said.
The report, for the quarter ending March 31, 2024, also noted an increase in Bellingham’s retail vacancy rate, up 0.2% to 3.3%, following the closure of pop-up and seasonal retail stores. Bellis Fair vacancy rose slightly to 6.7% quarter to quarter, and downtown Bellingham retail vacancy also showed a slight increase, to 6.5%.
Frank Catalano writes about business and related topics for CDN; reach him at frankcatalano@cascadiadaily.com.
