Seattle real estate developer embodies city’s office downturn

The octogenarian real estate developer who for decades has served as Seattle’s talisman of office market success is now on the forefront of the city’s recent struggles.

Martin Selig, 86, who is known for his resilience in previous downturns, is facing unprecedented challenges in the city’s current office market slump caused by the pandemic, the Seattle Times reported.

Despite his reputation as a deal-maker, Selig’s office portfolio has an uncomfortable 19 percent vacancy rate, significantly higher than the single-digit rates seen in 2019.

Some of his newer properties, such as the Federal Reserve building and 400 Westlake tower, are struggling to find tenants.

Selig remains optimistic, claiming that many downtown office workers are already returning three days a week, and he expects a full return to five days a week by next year. However, industry insiders question whether this rebound will happen quickly enough to prevent potential financial difficulties. 

“My guess is he’s hustling,” Stephen Buschbom, research director at commercial real estate data firm Trepp, told the outlet. “We’ll see some movement here, one way or another, over the next six months.”

Selig has substantial debt to refinance, including $238 million in loans maturing next spring and another $379 million maturing in 2025. Fitch, a national credit rating agency, has already classified one of Selig’s loans as a “loan of concern” due to falling occupancy and income.

While Selig denies rumors of selling buildings, including the eco-friendly 400 Westlake project championed by his daughter Jordan Selig, insiders are monitoring how he is navigating choppy waters. 

His office empire, once representing 37 percent of Seattle’s office space, is now around 8 percent of the larger Seattle market, but remains significant enough to serve as an industry bellwether.

The pandemic has caused a significant drop in leasing volume across downtown Seattle, and remote work has led to subleasing unwanted office space, resulting in a surplus of available office space. As a result, advertised office rents have fallen by 6 percent in the first half of 2023 compared to the previous year. Many landlords, including Selig, are offering incentives to attract tenants, but that negatively impacts rental income.

Despite the challenges, has vast equity in his portfolio, thanks to his practice of not borrowing more than 60 percent of a building’s value, giving him room to maneuver, the Times reported. However, many expect the office market to take years to absorb the surplus space.

In response to the soft office market, Selig is also focusing on housing development. He has ventured into building apartments, with plans to convert some mixed-use projects primarily into residential developments. While Selig remains committed to offices, he acknowledges that interest rates will play a significant role in determining when new projects can move forward. 

For now, Selig is patient, according to the outlet, waiting for the right time to resume building.

— Ted Glanzer