Downtown Seattle’s Condos Soar While Offices Stand Empty

Picture this: sleek downtown Seattle condos selling for $400,000, $600,000, even $800,000—all while the soaring office towers just blocks away sit eerily vacant. In Q2 2025, downtown office vacancy rose sharply to 34.6 percent, up from 30.6 percent a year earlier. Meanwhile, the median condo sale price downtown hit $628,000 in July—up from $529,250 in June and $595,000 a year ago. It’s a striking paradox: residential units thriving at record-high valuations, even as their commercial neighbors stand hollow.

Seattle’s Housing Market: Tight Inventory Meets Tech-Fueled Demand

• Prices climbing sharply
  The downtown condo market has been aggressive—median prices jumped 5.5 % year-over-year to reach $628,000 in July. In prime areas like Downtown and Belltown, prices surged around 34 % year-on-year to a median of $539,000.

• Inventory remains tight
  New condo listings in July totaled just 56, down from 81 the month before—though that’s still 6 % higher than in July 2023.

• Why demand persists
  Seattle’s booming tech hub—with giants like Amazon, Microsoft, and others—continues to attract buyers. Remote and hybrid work models favor living in dense, amenity-rich walkable neighborhoods, boosting downtown condo demand even as office usage slips.

Rental Market vs. Condo Boom

• Rents climbing more modestly
  Rental rates climbed around 2 % year-over-year in Q2 2025, even with a slight bump in vacancy—though strong absorption kept things balanced. The average rent landed around $2,236 per month, up 1.4 % from Q1. Seattle remains one of the priciest rental markets nationwide, at about $2,118 per unit.

A Struggling Office Landscape—What’s Going On?

• Vacancy rates at record highs
  Q2 2025 saw downtown office vacancy hit 34.6 %, with Class A at 34.4 % and trophy space at 34.5 %.

• Negative absorption deepens
  Q2 posted –941,000 sq ft in net absorption, taking the year-to-date total to –1.6 million sq ft.

• Lease rates holding—but just barely
  Average asking rents held near $46.85 per square foot, showing only marginal year-over-year gains.

Downtown Life: Flickers of a Comeback

There is a sliver of hope. In March 2025, daily downtown office worker counts hit 101,000—the highest since March 2020, and up 12 % year-over-year. Activity and tourism are stirring, but despite the uptick, vacancy levels remain among the highest of U.S. urban cores.

What’s Driving the Split?

1. Limited housing supply vs. insatiable demand
   Condo development lags due to high costs and regulatory barriers—so demand keeps outpacing inventory.

2. Remote work reshaping real estate demand
   Hybrid models slash corporate footprint, while residential remains highly desirable for lifestyle reasons.

3. Investors preferring residential
   Condos yield stronger returns—offices feel riskier. Conversions to housing or more flexible uses are on the rise.

Office-to-Residential Conversions: A Bold Reimagining

Seattle is tackling empty offices head-on through the Office-to-Residential Conversion Program, part of the Downtown Activation Plan. It offers key incentives—including sales and use tax deferrals—for owners converting underused commercial buildings into multifamily housing (including affordable units).

Council Bill 120937, passed in February 2025, further empowers these conversions with financial nudges for developers. A real example: Queen Anne Plaza, a four-story office building, was acquired with the aim of converting it to apartments.

Adding to creativity in reuse, a study by Pew and Gensler explored a co-living model—smaller units with shared kitchens and social spaces—that could reduce conversion costs to about $190,000 per sleeping unit, and create housing tailored to renters under financial duress. It’s a new twist on affordable urban living—with roots in Seattle’s historic SROs.

Policy Pressures & Pipeline Dry-Up: A Turning Point for Renters

Affordability pressures are mounting. A new rent-control law, enacted in May 2025, caps rent increases at 7% plus inflation or 10%, whichever is lower, offering protection to about 40% of Washington renters. This aims to provide stability amid rising costs.

Yet, the apartment-building pipeline is shrinking—market-rate construction has dropped below 15,000 units, down from around 30,000 in 2023. Coupled with a dramatic disappearance of rental units under $1,000 monthly, which fell by more than half over the past decade, affordability concerns are deepening.

These pressures underscore why condo ownership remains so attractive—despite high prices, it may represent more control and long-term value.

Final Takeaways: Who Wins, Who Waits, Who Watches

• Buyers: If you can act fast and smart, downtown condos still offer value—tight inventory keeps momentum strong.

• Sellers: You've likely accrued equity—now weigh timing and replacement cost if you’re considering a move.

• Renters: Rent caps offer relief, but scarcity and rising costs remain. Watch the policy landscape closely.

• Investors/Developers: Residential real estate—particularly condo and co-living—offers resilience. Creative reuse of offices is smart strategy in today’s climate.

Two Markets, One City

Seattle’s neighborhoods are living dual realities: a thriving condo and rental market, and a downtown office core begging for transformation. The future now hinges on adaptive policy, conversion innovation, and how quickly urban energy can be rebalanced.

Yet the outcome will not be shaped by real estate alone. How effectively the city invests in public transit, cultural spaces, and safety initiatives will play just as big a role in determining whether downtown becomes a vibrant, mixed-use hub or continues to lag behind the housing market. For Seattle, the crossroads is not just about property values—it’s about reimagining the very character of its urban core for the next generation.