A decade ago, Seattle stood as a symbol of U.S. technology-driven prosperity. Amazon and Microsoft helped turn the mid-sized Pacific Northwest city into a destination for engineers, executives, and capital, with the region adding roughly 40,000 jobs a year at the peak of the expansion, according to the Puget Sound Regional Council.

The picture has changed sharply. More than one-third of downtown Seattle’s office space is now vacant, job postings in the metro area have fallen faster than in almost any other major U.S. market, and Starbucks—the coffee company founded in Seattle in 1971—is shifting jobs south to Nashville. The company has committed to a $100 million, 2,000-person corporate office footprint in Tennessee, a move also reported by Axios.

Seattle’s reversal has developed across three connected fronts: a downtown office market under severe strain, a labor market that has moved from rapid expansion to contraction, and a policy environment that has added pressure for small businesses already contending with weaker downtown activity. The combination matters because office demand, hiring, and street-level commerce are closely linked in central business districts: fewer leased desks can mean fewer daily workers downtown, which in turn affects restaurants, retailers, and services that depend on weekday foot traffic.

Downtown office vacancies rise

Seattle’s downtown office vacancy rate reached 35.6% in the fourth quarter of 2025, up from 32.3% a year earlier, according to Cushman & Wakefield data cited in local reporting. The shift represents a major break from the pre-pandemic period. By early 2025, the central business district’s availability rate—covering offices with pending departures—and its vacancy rate were already at all-time highs, based on CoStar data going back to 1982, according to Axios Seattle.

Some commercial real estate brokers have reported even higher figures. Colliers said downtown Seattle office vacancy reached 39.1% in late 2024, as remote work, technology-sector layoffs, and cautious leasing decisions weighed on demand, according to the Puget Sound Business Journal. Office building values in the district have dropped sharply as landlords attempt to fill space left behind by large tenants. In practical terms, elevated vacancy can also delay lease renewals, refinancing, and building investment decisions, keeping pressure on a market that once benefited from steady technology-sector expansion.

Hiring slows after years of expansion

The office-market downturn is closely tied to a broader weakening in hiring. Seattle metro job postings declined 35% between February 2020 and October 2025, according to Axios’s analysis of Indeed data. That was the second-steepest drop among major U.S. metro areas, behind only San Francisco, where postings fell 37%.

Technology companies in the region have announced tens of thousands of job cuts since 2023, with reductions primarily driven by Microsoft, Amazon, and Blue Origin. In 2025, the region recorded a net loss of 13,000 jobs, marking its first annual employment decline since the pandemic and contrasting sharply with the roughly 40,000 jobs added each year during the boom period. For workers, the drop in postings means the slowdown is visible not only in headline layoffs but also in fewer new openings to absorb job seekers or support career moves.

Minimum wage policy adds pressure for small businesses

The downturn has coincided with a higher wage floor that applies broadly across employers. Since January 2025, Seattle’s minimum wage has been $20.76 an hour and has applied uniformly regardless of employer size. That change has increased cost pressure for small businesses trying to remain open as downtown foot traffic and office occupancy remain depressed.

A peer-reviewed study published in Labour Economics found that the announcement effect of Seattle’s wage ordinance deterred new business formation within city limits while generating positive “spillover” openings in nearby suburbs. The findings suggested that some firms redirected growth rather than uniformly closing. Earlier University of Washington research found that wage increases reduced hours for low-wage workers by about 9% while hourly pay rose roughly 3%, according to Ballotpedia’s fact-check compilation.

The distinctive feature of Seattle’s slowdown is the way these trends reinforce one another. Downtown office vacancies, reduced hiring, and added cost pressures have combined into a difficult operating environment for employers and small businesses. CoStar estimates that Seattle will not fully emerge from the vacancy cycle before 2027, a timeline that depends on the feedback loop easing rather than continuing to tighten. Until then, the key measures to watch are not only vacancy rates, but also job postings, large-employer hiring plans, and whether downtown businesses see enough daytime activity to stabilize.

Fortune said its journalists used generative AI as a research tool for the original story and that an editor verified the information before publication. The original story appeared on Fortune.com.