The Puget Sound region's commercial real estate market is hotter than the sun, with experts declaring it second only to New York City and predicting continued growth over the next several years. "Seattle is developing into an exciting 24-hour city smackdab on key Asian shipping routes," and its "brainpower economy" is diversifying, says a report produced by the Urban Land Institute and PricewaterhouseCoopers. The region ranks second only to New York in overall prospects for commercial and multifamily investment and development. The region placed first in industrial, office, rental apartment and for-sale home development, and second in retail and hotel development.

Meanwhile, Jeff Lyon, CEO of Seattle-based commercial real estate firm GVA Kidder Mathews, says the region's office market, which was robust in 2007 and saw the vacancy rate drop to 8.8 percent, will continue to flourish. "That vacancy rate has a very good chance of continuing to drop because the majority of the space is already committed," he says. "We'll continue to see tremendous upward pressure on rents because most of the buildings are spoken for."

The central business districts of Seattle and Bellevue are leading the way, with the high-tech sector driving the appetite for office space. Microsoft alone "has taken 2 million square feet and the buildings aren't done yet. Those are going to come online in 2009," says Lyon.

Joining Microsoft in gobbling up office space are prominent companies such as Google, Yahoo! and Amazon. These are companies with solid reputations and credible long-term growth plans, Lyon says, unlike the failed dot-com era companies that bought up office space and recruited workers but didn't have the growth to back it up.

Outlying suburban markets are seeing an increased interest as some tenants are unable to find appropriate space or have been priced out of the city centers, according to GVA Kidder Mathews. Cities such as Tacoma and Everett will see more interest from companies looking to build regional office hubs. The problem is that those outlying markets currently "don't have the Class A product for them to go to," Lyon says, although that could change as these cities and suburban areas reinvest in their downtowns and as companies show more interest in branching out.