An increase in vacancies across the board is reduction in demand, plain and simple.
That the new equilibrium price to re-tenant all the buildings is lower is evidence of that.
But the OP is correct that when enough of the building owners default on their debt, the building will be foreclosed, sold for less and asking rents will go down towards the new equilibrium price.
Thus occupancy is likely to improve again down the line.
But, yes, this is not a bullish situation for Seattle. Office generally hasn't been doing well nationally, so it's more of a question of relative performance.
Honestly, I think is a bullish situation for Seattle.
With vacancy this high we're likely a more attractive place to start a small company, as recollateralization and foreclosure put square footage on the market at competitive prices.
For those who compare to Bellevue - in 2025 we grew population at 0.8% to Bellevue's 0.2%. You'd never know that from the vacancy reporting.
If you look back at my original comment, you'll note I mentioned that sublets at appropriate pricing are filling quickly. Occupancy isn't appropriate for current demand. Occupancy is depressed by owners avoiding recollateralization.
You seem to be missing that if prices are lower, demand is lower. Price is a function of demand.
If rents go from 10000/month at 100% occupancy to 5000/month at 100% occupancy, demand has been materially reduced.
That occupancy will recover does not support your point in the way you seem to think it does.
It's a natural market function that a drop in demand will lead to a drop in prices, and eventually, a commensurate increase in consumption (at lower prices)
This happens everywhere, and out of everywhere Seattle is doing the worst.
That the new equilibrium price to re-tenant all the buildings is lower is evidence of that.
But the OP is correct that when enough of the building owners default on their debt, the building will be foreclosed, sold for less and asking rents will go down towards the new equilibrium price.
Thus occupancy is likely to improve again down the line.
But, yes, this is not a bullish situation for Seattle. Office generally hasn't been doing well nationally, so it's more of a question of relative performance.