What are the financial "instruments" ?

The main claims from the article seem worrysome, IN particular, the 37% vacancy rate, as well as multiple buildings underwater[3], etc.

Now, lets dissect the claims that this is part of some cycle, and not the result of new city hall management. The reality is that with Jumpstart, and with the vacancy rate, enterprises are not renting. But, the owner is stuck with the asset in what is now a hostile jurisdiction. So, even if owner may not be able to change terms on their mortgage, they certainly can charge less for rent. Empty units do not contribute to cash flows to pay the building mortage. I understand there may be consequences to lowering rents, but those consequences are coming home anyway: The building will need to be sold, at a loss, by the bank to a new owner. And as you said, that process takes time. And the jurisdiction seems hellbent to make it harder.

Now, as buildings sell, this in turn lowers the appraised value, which is key to the Seattle tax base.

So, the downtown core is going to produce far less in property taxes in the foreseeable future, with fewer tenants paying (at least in short term) occupancy taxes, etc. This is going to play out in a decade.

According to this, commercial property taxes are about 26 %[1] of the Seattle budget

Let's assume appraisals go down 50% for those impaired offices. This is not crazy, there's precendent for it[2]. That means the Seattle budget must be cut by 13%. This is not even factoring other losses from job loss, sales tax lost, etc. Maybe that's not "Seattle is dying" , but sound pretty bad ?

[1] https://www.seattle.gov/documents/departments/financedepartm...

[2] Seattle/downtown office properties lost ~$10–15+ billion in assessed value since 2020 (46–48% drop) . https://cdn.downtownseattle.org/app/uploads/2026/06/New-Repo...

[3] https://www.king5.com/article/money/business/downtown-seattl...

Your argument is that it's simply because of dropping prices. Maybe that does explain the bulk of it. But the article seems to suggest it's the WFH transition. How much of the vacancy rate would be explained by that?

And you have to wonder, what kind of boom in innovation could lots of reasonably priced office space support? What gov policy cold push landlords and banks to accept reality? Vacancy tax? Change to bank regulations?

This tracks with what I’ve heard around as well. What changed in the financial instruments?

My understanding is a lot of the loans have gone PIK or otherwise essentially aren’t serviceable at current prices. Do you think that’s resolvable somehow or just lagging implosion?

Is there any more to this story than "extend and pretend" that's been going on for 6 years?

I'm not sure the bank has that much to do with it.

Commercial real estate valuation is based entirely on its ability to produce income. Lower the rent, lower the value. And that's a problem because most commercial leases are long (5-20+ years) so you're locking in an asset writedown for a long period of time. So it can be better to leave it vacant and pretend the value hasn't changed.

You can still run into problems with this (eg servicing the loan). So I don't think it's quite the issue that banks have to approve lowering the rent so much as the owner might lower their asset value and have problems with the LTV and DSCR so the bank may then require you to refinance or add capital.

By the way, we've gone through this before. Up until the 1990s, law firms were by far the largest tenants of office space because they had very large law libraries. Then that went online and they downsized. This was an acpolaypse in the 2000s combined with the dot-com bust.

I think the lag you're talking about is on banks essentially foreclosing on a building and selling it off, allowing the new owners to charge less because they paid less.

> This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes.

Why would this be different in Seattle than in other cities? Many downtown office towers are bought or built using a lot of debt throughout the U.S. What do you think makes Seattle special?

> We just saw another building turn over, US Bank Center. The new owner bought it at a price where they'll be able to lease it competitively, and it won't sit empty. We'll see that continue to happen.

The news story mentions the U.S. Bank Center example. What it says that you're leaving out is just HOW big that discount is:

> The new owner of the U.S. Bank Center, having paid just $280 million, or less than half of what the building went for in 2019, presumably can afford to lower rents enough to fill the place, which is now 45% vacant, according to CoStar.

A discount of more than 50% is a bubble bursting. It's great that the new owner can offer fire-sale rent, but where does that leave the old owner, if they were truly as leveraged as you suggest they were likely to be?

> The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like, ask me about it!

OK, I'll ask you about it. This "Seattle Times = Blethen family propaganda" line has been tiring for the 25 years I've been hearing it. What exactly are they not covering about Seattle's downtown today that you think they should be? Why do you think that their opinion staff influence the news coverage so much? In short, if the Seattle Times has a conservative bias in its news coverage, why does the Wall Street Journal famously have a liberal-biased newsroom?

> The Seattle Times has always been a conservative rag

The Seattle Times is Left-Center with a high credibility rating. [1]

Such a deliberate distortion of the facts renders the rest of your screed null and void.

[1] https://mediabiasfactcheck.com/seattle-times/

    In Bellevue, office vacancies are low because most have long term tenants…

While visiting a family member at least a decade ago, I went to a fireworks display in Redmond, and two things really stood out.

First: It doesn't get dark until practically midnight, so the fireworks show started at 10:00, but it was still pretty light.

The second: Most families there had at least one parent with a Windows phone or Surface Tablet, back when they only used ARM processors. I had seen maybe one of each in use before that, and suddenly I was surrounded by them.

The neighborhoods they built that stuff in (mostly South Lake Union and Denny Triangle) used to be so sleepy in 2010 and earlier. It was a big transformation.

owned by amazon ..

now where should data centers be constructed, rather than arable farmland?

What's the point of the "recovery" in terms of stuffing people back to the offices when they can successfully perform their work from home?

Wasn't the shared-workspace business model to take advantage of these vacancies?

Despite the graph shown in the article, I have to wonder if this is really a new problem.

Could be Seattle tax/revenue policy. Bellevue WA, the only nearby comparable but smaller tech hub city, has 25% vacancy and expected to drop below 20% - according to Fable.

A lot if it wants to do interesting things.

Seattle here. The problem isn't that there's too little "planning" or "zoning". Where that's relevant, there's too much. The city has used those tools over and over to slow growth and tack on requirements for businesses.

I'm not aligned with the new mayor's business-hostile policies. But as far as making the city better for walking, things are going very well. We've been narrowing crossing distances, improving sidewalks, putting in concrete separation for bike lanes, we even finally kicked cars out of Pike Place Market. There are parks improvements in progress across the city to improve restrooms and fix dangerous spots. And the number of people in tent encampments has dropped dramatically, it's become rare and short lived in most of the city.

I suspect that we will continue to recover, despite the capital gains tax. It'll just be slower than Bellevue.

Seattle's DT business district had always been uniquely bad. Everything is for office workers and closes at 5pm. There is nothing else but offices and restaurants serving coffee for breakfast and workplace meeting suitable lunches.

It is an example of piss poor planning and urban design.

The city has a notorious open air drug market within 2 blocks of one of its main tourist attractions at Pike Place. Downtown is generally not a pleasant place to visit.

How did Amazon relocate? I think most employees are still traveling to SLU to their offices.

>If you haven't lived in Seattle, it's hard to understand the problem.

[...]

>greener pastures (literally) east across the bay

Well obviously you haven't lived in Seattle because if you did you would know the body of water separating Seattle and Bellevue is Lake Washington. Not a bay.

I've lived all over the country, both in big and small cities, and most recently in the Seattle area (across the lake in Kirkland) for 4 years.

Seattle has trappings of a city, but socially it doesn't feel like one in the way Chicago and NYC are (ok they're bigger, but hear me out -- it's not the size, it's the people). To me, Seattle feels like Cleveland but with more money.

I couldn't quite put my finger on it, but I would visit different neighborhoods from Capitol Hill to ID to Northgate to Ballard (I liked Ballard the most) almost every weekend, and everything just felt so subdued compared to a city that is truly alive. I had to take trips to Vancouver -- a similar city but more alive -- just to get my dose of city energy. Even Lynnwood WA -- a suburb -- had more energy.

The city itself has too much monoculture -- predominantly tech bros or hipsters or nature people -- but that's not enough diversity to create true energy.

The food scene was uniquely mediocre relative to its wealth and size. It had pockets of good stuff, but overall just very little risk-taking and experimentation in the restaurant industry because of the economics (min wage is $21.30 which is fair to workers but hard for small business owners) and insufficient population density to turn tables at a high rate (the land is fragmented by water and mixed elevation), and high proportion of food-as-fuel population.

Seattle attracts who it attracts because of what it is -- introverted, nature loving, affluent in a countercultural way. But this does not create a vibrant city.

Seattle's social energy resembles that of a paradoxical population who want to live in a city but are secretly suburban people.

Seattle is generally a fairly high quality city as walkability and bikeability goes. While office vacancies are up, sure, residential vacancies are not. The city is packed with people who enjoy and want to live here. The handful of blocks that makes up the business district aren’t as busy as they used to be, but that’s such a small part of the city.

Also, Amazon did not really “relocate” as much as open more offices in other cities. I know people supporting Amazon ELT and plenty of high level executives are here. They have huge amounts of money, employees, and office space in Seattle, and there’s no sign that’s changing. The areas close to Amazon’s office space are very attractive places to live, demanding high rent, and generally safe, green, and pleasant to exist in. (I lived near there for a few years.) The high rise apartments that have been opening year after year for a decade in these neighborhoods still have strong demand.

Am I selling it positively? Sure. But you’re selling it pretty negatively, in a way that doesn’t match what many people who live here really believe.

Anyways, Seattle has tax problems mostly because there is no income tax. But it is a challenge: to actually make the city safe and vibrant and even more great, we need to invest in public transit, biking, parks, and schools.

Or government pushes them to change. Regulators have tremendous power over banks.

Or until more rational covenants exist. Markets are largely rational economically.

NYC appears to be at least somewhat ahead on converting older office stock to residential stock, and I don’t expect the current administration would attempt to slow that down (it has no particular political valence in the city that I can discern).

According to the graph in the article, NYC is doing about average, and LA/SF are the other front-runners.

The article goes into this:

> The city of Seattle estimates that, with aggressive incentives, conversions could generate up to 6,000 housing units over the next seven years. At a rough approximation, that would use around a fifth of the city’s present office surplus.

> But “potential” is doing a lot of work here.

> Newer, larger office buildings, like the U.S. Bank Center, are hugely impractical for conversion, thanks to massive floor plates, centralized plumbing and other utilities and a host of other constraints.

> The preferred candidates are typically smaller, older buildings, especially those with C- or E-shaped floor layouts, which make it easier to create smaller units with adequate windows.

> But these buildings can be prohibitively costly to bring up to seismic and energy building codes, said Jen Pasquier, a Seattle developer who wants to convert the 10-story Liggett Building, at Fourth and Pike, into 93 apartments.

On top of the architectural challenges and efficacy of it, you have to contend with the terms of the bank loans that apply. Those are why the buildings "can't" lower rents to attract new business.

If they sign a lease at a new lower rent it basically triggers a re-check of "can they repay the loan based on their rental income?", which comes back as "no". That trigger _doesn't_ occur if you just leave the building empty, with _no one_ paying rent, because your last mark to market rent was high enough.

Fundamentally changing the type of tenant in the building would presumably trigger that check as well.

It's a shell game that eventually leads to the loan defaulting, but both the bank and the building owner are happy to pretend they can't see the train coming down the tracks at them.

For an example of this in Seattle that everyone was calling years ahead of the collision, see the Martin Selig sagas https://deepnewz.com/real-estate/seattle-developer-selig-war...

It's not easy, but some people are trying it! https://www.npr.org/2026/02/21/g-s1-110595/from-cubicles-to-...

On top of architectural issues like plumbing and access to windows, cities like NYC have programs where converting economically obsolete offices to residential exempts the building from property taxes if at least some units are for low-income renters.

I live in a converted office building I. Downtown Chicago . But it was built in 1913. Newer office buildings are less practical to convert due to larger floor plates. Older office buildings are smaller or have light wells etc.

might depend how different the codes are. could be a really expensive retrofit. Residential and office put different stresses on infrastructure.

Apparently it's really expensive to convert to meet reasonably sane residential standards.

Add in required shrubbery, section 8 housing set-asides, rent control, etc., it becomes unattractive -- especially if the jobs have moved to business friendly suburbs

The bipartisan housing bill that Trump has refused to sign included provisions for encouraging this.

You’d think that, right, but even cities that welcome businesses are having a hard time. Even Dallas is at like 30% empty office space.

I’m sure the factors are different for every city but I think remote work and companies preferring to build campuses outside of major cities is a big driver.

I believe the quote was:

"the ones that leave, like, bye"