Meta's sublease stack sets the Seattle office rent comp

Meta put another 135,000 square feet of Seattle-area offices on the sublease market this week—72,000 at the Home Plate Center in Sodo and 63,000 at the Willow Ridge Tech Center in Redmond, per the Puget Sound Business Journal—bringing its regional sublease book to roughly 347,000 square feet once the 212,000-square-foot Block 13 in Bellevue, listed in June, is counted. The space will price below direct landlords.

The listings follow a payroll that shrank from 8,800 in 2022 to roughly 5,600 today, with more than 1,500 state jobs cut this year. Willow Ridge was largely dedicated to the Reality Labs virtual reality division, which lost 168 workers earlier this year. Meta leased the entire 200,000-square-foot building in 2022, subleased 145,000 square feet of it to aircraft electrical systems manufacturer Astronics Advanced Electronic Systems two years later, and now wants to hand back another 63,000.

The two newest listings continue a retreat already visible in the footprint. Meta has vacated 1101 Westlake Avenue North and the Arbor Blocks complex at 300 and 333 Eighth Avenue North, the latter since occupied by Apple, while its 1501 First Avenue South office is already on the sublease market and 1531 Utah Avenue South no longer lists Meta as a tenant. It remains the fifth-largest tech employer in Greater Seattle behind Amazon, Microsoft, Google and T-Mobile, holding that rank while needing fewer desks.

Sublease space is shadow supply, and it prices below the direct market. Every square foot a tenant takes at Meta's asking rent is a square foot that does not sign a direct lease, so what lands on Sodo and Redmond is a deferral of direct demand more than a repricing of it, and the deferral runs as long as the sublease term. That should worry office lenders more than the headline square footage does, because it pushes the direct-market recovery further out even as the space gets absorbed.

As this publication has argued, office clearing remains split: trophy towers refinance above prior loans, while distressed Class A and B stock clears only when a sponsor balance sheet sets the first bid. Meta's space sits on the commodity side of that line, a different asset from the two fully leased Bellevue towers behind Grandbridge's first CMBS servicing deal, and the discounted inventory that direct landlords in these submarkets will eventually be marked against.

The number to watch is the spread between Meta's sublease asking rents and direct asking rents in Sodo and Redmond. If the sublet space clears at or near direct pricing, the shadow supply is a rounding error; if it clears at a discount, every landlord in those submarkets has a new comp to mark against, and the clearing price for the commodity end of Seattle office moves a rung further down the quality curve.