The Walt Disney Co. is jumping on the renew-but-shrink bandwagon with its latest decision to downsize its downtown Seattle office.
The media and entertainment conglomerate dumped about 50,000 square feet, or nearly 30%, of its footprint in the Fourth & Madison tower as part of a renewal it signed to extend its tenancy at the 925 Fourth Ave. property. The deal, finalized last month, is the latest in a lengthening string of high-profile downsizings rippling across the Seattle area that have weighed down the market's ability to recover from the pandemic.
For Disney, the deal means it will downshift from the original 170,000-square-foot deal it signed more than a decade ago to its revised 121,600-square-foot one, freeing up even more space at a building already facing a vacancy rate of about 40%, according to CoStar data.
The media giant has anchored the roughly 845,500-square-foot downtown high-rise for a majority of the time since the building's opening in the early 2000s. However, the latest downsizing move means fellow tenant K&L Gates, a global law firm that occupies about 145,000 square feet in the building, has leapfrogged it to become Fourth & Madison's largest tenant, according to CoStar data.
The tower has long housed powerful companies such as financial services firms Baird and UBS Wealth Management, a status that fueled a record-high price tag when current owners Clarion Partners and Nuveen acquired it for just shy of $296.5 million in the months before the pandemic's 2020 outbreak. Yet in the years since, tenants such as accounting giant Deloitte and law firm Knobbe Martens have emptied their spaces there, helping to push the property's vacancy rate far beyond the 5% reported at the time of the joint venture's purchase.
Disney uses the Seattle hub to house some of its tech-focused operations. The company did not immediately respond to CoStar News' requests for comment.
Downshifted commitments
The renew-but-shrink move rippling across the country is a bittersweet trend for the national office market, as companies prove themselves willing to commit to space but at far smaller amounts compared to their pre-pandemic levels.
Across the United States, tenants are still grappling with pandemic-induced changes in how they work and how much space they need. Tenants collectively handed back upward of 65 million square feet last year, boosting the total to more than 180 million square feet of move-outs since the start of 2020, according to CoStar data.
What's more, the leases that are being signed these days have shrunk considerably, averaging about 20% smaller than their pre-pandemic averages.
The Seattle area's dependency on tech companies has made it especially vulnerable to recent changes tenants have made to their previously vast real estate footprints. Meta earlier this month listed for sublease the second of two buildings it had preleased in the city's South Lake Union area, and Google released plans to consolidate its presence in the region by shutting down one of its campuses and relocating workers elsewhere.
The shift toward a more prudent approach to real estate growth has loaded up the national real estate market with millions of square feet of available office space, especially in tech-concentrated hubs such as Silicon Valley and Seattle.
Even with those cuts, reemerging demand among tech companies for space in the Pacific Northwest meant Seattle marked its best annual performance last year since 2021, according to CoStar analysis. The region landed several blockbuster deals among tech companies that committed to more than 100,000 square feet, and the Seattle market's vacancy rate is expected to peak at about 17% before rising demand and a lack of new construction collide to help bring it back down.