What's Happening With Commercial Office Space in Thurston County?

Greene
Greene January 18, 2023

Olympia is home to more than 40,000 government employees, and before the pandemic, multiple public agencies built large office buildings to accommodate their workforces. As the last two years have brought massive upheaval to the way we view work, a new challenge has arisen…what to do with all this newly emptied office space?

To find out more about office space investment in an ever-changing professional and retail world, agents Quint Newell and Max Stottlemeyer sat down to discuss the future of our office buildings here in Olympia.

 

Q: What are some good examples of repurposed office space in Thurston County?

A: Some of the office space in town that we see vacated by some of the large state agencies, and local governments can be somewhat difficult to backfill from the private sector. We don't quite have the private sector businesses in the Thurston County area that have the same kind of employee rosters that a state agency might have. One of the examples that I think is a great one, that we weren't involved with, is the redevelopment of the Hub in Lacey.

The Hub in Lacey was an area of large office buildings. I think it was about 400,000 square feet in total office space that was vacated by various state agencies and sat for quite a while.

What ended up happening was that a group, I believe they're out of Kent or up north called MJR, came and invested in the area. They've since, through this experience, I think not only doubled down but triple and quadrupled down because now they're working on other projects over here on the west side that we can discuss as well.

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Working with the city of Lacey, they just invested money hand over fist. And now, it did get to 100% occupancy. I don't know if that's the case now, but they were able to basically fill up over 400,000 square feet of office space through various smaller local businesses like mortgage lenders or insurance agents, and then larger occupants like some medical engineering firms and things like that that took larger floor plates and things like that.

It's a great success story. The buildings look terrific. There are a few restaurants that have gone in there, and in fact, they've continued to acquire property in and around the Hub, not just for office space, but they just finished a, I think it's a hundred-plus unit apartment complex as well just on the outside of it. It's kind of a taproom below. So really it just doesn't stop at the office revitalization, but kind of really enhancing the area in and around these projects, creating housing.

Q: What are some areas to look out for in Olympia?

A: It'd be interesting to see what happens with the courthouse. I know that there's debate on doing a new spot downtown, and that's kind of still in limbo, but that would obviously be another large area of the building complex that would need to figure out some kind of second use if they did decide to move the courthouse. The 101 office buildings, which you can see from highway 101, look like different buildings, cleared out some trees, and really did a great job of enhancing these things and attracting new businesses to move down.

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Q: How does the new “work from home” model affect office development?

A: It's still shaking out, I think. It's interesting like you said, there's been this tectonic shift over the last few years. Initially, it was introduced as a way of the future. Most of the repurposed office space we just discussed had been filled up prior to the pandemic. There wasn't a lot of contraction, but what I think of is the Amazons and the Microsofts of the world, these folks that have hundreds of thousands of square feet of office space in places like South Lake Union, and what that's going to look like moving forward. I don't have a finger on the pulse of really what those markets are going to look like.

I can speak to the market here where, and I didn't personally see a whole lot of tenants requesting to break leases or saying, "Hey, nobody's coming back to the office. We don't need this office space anymore.”

What I have seen as we've come out of the pandemic, and some of this stuff has started to shake out is, the work-from-home thing, I think, while it may be available and something that some people do or try to take advantage of moving forward, I don't think it's going to be this complete change of the landscape and now you're going to have like 70% of the workforce moving forward just working remotely.

I think that what I am seeing as we come out of this is maybe a little bit of consolidation. Maybe someone had 5,000 square feet corporate office needing 15 to 20 employees, and now got 10 to 12 that are there pretty much every day of the week, maybe another four or five that are there just a couple of days a week, and maybe a handful that just doesn't come in anymore. So, they just don't have the need for all of the office space, but they still need a place for people to come, and so maybe they're downsizing by a couple of thousand square feet or into a thousand square feet. So, I don't see them moving away from having a physical location because they’ll have to have something that they get back to.

Q: How do you feel about the office space investment market moving forward?

A: I'm still very bullish on Thurston County just in general. And it's more of a macro lens, I guess, that I look at that through. I just feel some of the points we made about the I-5 corridor, amount of land, and cost of living, I just think there are a lot of ingredients that make Thurston County really attractive.

What kind of population growth will Thurston County really experience over the next 10 to 15 years and will we be able to adapt or at least work public, and privately with the municipalities on some of these land use issues, some of the changes in zoning that we discussed with allowing people to go higher in certain areas as far as building vertically?

I don't want to see urban sprawl or Yelm and Tenino, or Rainier eventually connected. I just think that there are ways that we can work smarter and not harder to prepare for what I do think eventually will be a population boom for Thurston County.

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Only Time Will Tell

The pandemic brought with it many questions. Will employees accept the past structures of the 9-to5 work week, or will the “work from home” model become the norm? If it does, what will happen to all our office space? The answers to these questions will play out in the months and years to come. But this is certain…there is a massive opportunity for professional development in Thurston County with structures that already exist. It will just take imagination.

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Written by: Greene