Seattle Office Space News – August 2018

7/ September 2018

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of August 2018.

OFFICE DEVELOPMENTS

The biggest development news in August was that of Google’s planned 5th building, a 12 story office tower, near their current four building campus in South Lake Union. Developer Vulcan, Inc. is set to begin construction on this fifth building at the end of 2019, with the shell and core of the structure scheduled to be done in July 2021. The new tower will have 607,000 square feet, ground floor retail and below-grade parking. The site is on the east side of Westlake Ave N between Mercer and Republican.

Developer Martin Selig has filed plans with architect Perkins + Will to build an 18-19 story mixed-use tower on the site of the Commuter Building at 815 Western Avenue on the Seattle Waterfront. Selig plans to partner with the Jacobi Family, who founded Windermere Real Estate and owns the property.   However, as a short-term plan Selig may completely raze the Commuter Building and provide it as a space for viaduct deconstruction parking and storage. Current Commuter Building tenants include Windermere Real Estate, MoxiWorks and the Forge Lounge. They plan to lease it to Kiewit contractors for construction staging.

Evolution Projects’ latest development – called the Cedar Speedster – will house Revel restaurant and the headquarters of retailer evo and Evolution Projects. The 39,831 square foot wood plank building will have room for Revel on the bottom retail floor and two upper floors of office space (mostly occupied by EP and evo). Cedar Speedster is located at N 36th Street and Phinney Avenue, which was the original location of Revel restaurant. The architect is Weber Thompson, and the building seeks to integrate seamlessly with the feel of the Fremont neighborhood while also maintaining a unique identity.

Seattle is chock-full of development these days, and the once-neglected Yesler Terrace area is no exception. New housing projects overseen by the Seattle Housing Authority are estimated to add about 2,000 units, and 600 have already been completed. SHA’s ultimate goal is to replace the old buildings with 5,000 new apartments, plenty of which will remain affordable housing indefinitely. In addition, potential other developments include up to 900,000 square feet of office space, a hotel, and over 80,000 square feet of retail. For a full list of what’s in the pipeline at Yesler Terrace, click here.

The re-development of the Old Spaghetti Factory site by Meriwether Partners will be a study in either success or failure on the new Seattle Waterfront. The full-block renovation, which includes a new 6-story apartment building next to the renovated Old Spaghetti Factory (now the A&D Building), is expected to be complete in 2019. The project could set some early benchmark rent numbers for the new neighborhood, with rent projections at about $50/RSF for the office portions and $4/RSF in the residential apartments.

BUILDING SALES

LBA Realty sold 501 Eastlake Avenue E in august for just over $58.7 million to an LLC associated with Columbia Industrial Properties of Chicago and Lincoln Property Co. of Dallas. The deal was worth approximately $565 per square foot and the building is home to UW Medical Clinic, Pro Sports Club and WeWork. The five-story South Lake Union building has 103,746 square feet and 175 underground parking spaces.

A small office building in Interbay also sold this month for $6.5 million. The four-story building located at 4019 21st Avenue has 22,141 square feet, and the deal worked out to be $293 per square foot. The seller was Alaska Star Inc, and the buyer was associated with Cooke Aquaculture.

OFFICE LEASES

PitchBook Data Inc. expanded its Seattle presence in August by taking another floor at the 901 Fifth Avenue in downtown Seattle. PitchBook now occupies the 7th, 12th and 24th floors for a total of 44,158 square feet. This expansion allows the company to accommodate internal growth, adding 43 employees this year with plans to add about 100 more by the year’s end (with 50 of those hires coming from Seattle).

WeWork continues its massive expansion throughout Seattle, inking major leases at several locations in the area. The coworking giant has taken 120,000 square feet at Metropolitan Park East in the Denny triangle, 115,000 square feet at 1201 Third in downtown Seattle, and is currently developing a 36-story live-work tower in Belltown.

WeWork has no plans to slow down its growth, with future plans that will more than double its current presence in the area. They already occupy 900,000 square feet in the region, soon to be 1.5 million square feet (which is the size of the Columbia Tower). Offices set to open in Bellevue, Downtown Seattle, and SoDo will swell WeWork’s desk count to 13,301 by early next year. This expansion will make WeWork one of the top office space occupiers in the entire region, eclipsing giants like Facebook and Google.

Alexandria Real Estate found their first tenant for the Atrium Building at 1818 Fairview. Bluebird Bio leased around 25,000 square feet in the brand new life sciences building. The Cambridge-based company is a competitor to Juno Therapeutics, a local immunotherapy developer. Two other leases are pending in the building, and not just life sciences tenants are interested. Tech tenants are also trying to get into the building, which is expected to open in the first quarter of 2019.

ECONOMY

After almost two years, Seattle has finally been dethroned as the nation’s hottest housing market. That honor now goes to Las Vegas, with home prices in Sin City rising 13% in June as opposed to 12.8% in Seattle. Seattle remains in second place, with price increases at double the national average. Despite Vegas’s steep rise in price increases, it’s still infinitely cheaper to buy a home there, with the median home prices set at $290,000 compared to Seattle’s $805,000.

Seattle is now the third most-expensive city to buy a home in the country – just behind San Francisco and San Jose. Only four years ago in 2014, Seattle was tenth on that list. Seattle is far from affordable unless you’re fleeing the Bay Area.

However, new data gives credence to the sign that the Puget Sound housing market is cooling off at last. Realtor.com revealed a “quiet inventory turnaround” in the Seattle-Tacoma-Bellevue market, with active listings rising to 29% year-over-year this July. The average listing period for a house on the market is now 30 days, and the median home price in the Seattle was $569,000.

Asking prices dropped on 12% of the homes for sale in the Seattle region in June according to a report by Zillow.  There have been more price cuts now than a year ago in over 2/3 of the nation’s largest metro areas. Zillow says that the boost in price reduction is a sign that the market may be starting to shift in the favor of buyers. Home prices are still rising, and the market is still hot – but signs are pointing towards a cooling trend.

As housing price increases slow down, some people are wondering if Seattle’s tech boom is finally winding down. While it’s far from a buyer’s market, the winds seem to be shifting as inventory begins to catch up with demand (and as buyers finally opt out of the competitive market). Some have speculated that Amazon’s decline in headcount growth might also be heralding a tech slow-down, especially as they look for their HQ2.

The International Union of Operating Engineers Local 302 instituted a strike in August, with their members walking off the job on August 21. Despite meetings with the Associated General Contractors of Washington, there was slow movement or improvement on the issue. The walkout slowed or completely shut down many projects throughout Seattle and the surrounding area.

The ongoing strike has impacted several of Amazon’s current developments, including their 37-story tower at Westlake and Lenora and the Rainier Tower development in Downtown Seattle. While most of the city’s jackhammers, cranes, and diggers were silent, work continued on Skanska’s 2+U project, which the Union said is exempt from the strike.

STADIUM

When the Mariners pitched their retractable roof 20 years ago, they cited it would be used to shield games from the rain and avoid cancellations. Now, the Mariners use their retractable roof about 400 times per year – and mostly for field maintenance or non-game events. The roof is used to protect actual games about 20 times per season. Due to initial construction flaws and the wear-and-tear of two decades, the Mariners are asking for public funds to repair the roof, to the tune of $180 million in taxes from King County. While some support the initiative, others feel that if the Mariners want to protect their grass, they can do it on their own dime.

TRANSIT

Linea Laird has been named interim leader of the Seattle Department of Transportation. Laird was the leading administrator of the Highway 99 tunnel project, and she’s been hand-picked to guide Seattle through the period of chaos that will follow the new waterfront construction. Laird’s style is “calm and attentive to detail,” which will surely come in handy as the old Viaduct is demolished and the new transit tunnel begins its use. Meanwhile, the search for a permanent SDOT leader is ongoing.

Finally, in more bad news for car commuters, Third Avenue is officially a bus-only transit route from 6am to 7pm. The changes were planned for the fall, but the schedule has been bumped to help the city deal with the closure of the Viaduct. This bus-only restriction includes weekends, and even when you can drive a car down Third, all left turns are prohibited. The penalty for driving down Third Avenue during restricted hours? A $136 ticket – though you’ll likely get off with a warning in the first few weeks of adjustment.

Written by // flinn

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