Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of December 2017.
Wright Runstad broke ground on the massive Rainier Square development at 4th & Union in downtown Seattle in December 2017. Rhine Demolition is using four excavators to tear out the old retail below the pedestal of Rainier Tower. The shops will be replaced by the 58 story building that will have 722,000 square feet of office space leased by Amazon on the lower floors, and 200 luxury apartments on floors 41-58. While the current retail space at 1301 5th Avenue is gone, the first two levels of the new Rainier Square tower will have 79,000 square feet of retail, amenity and fitness center space including an organic food market. Wright Runstad expects the tower to be finished in the summer of 2020.
8th + Olive sold for $185.9 million in December, passing from 720 Olive Way Venture LLC (an entity of Talon Private Capitol) to PPF OFF 720 Olive Way LLC (associated with Morgan Stanley). The building, located at 720 Olive Way in Downtown Seattle, just underwent a $12 million renovation in 2015 after Talon acquired the property in 2014. Talon purchased the 20-story building for $101 million in 2014 when it was four-fifths occupied with CHP of Washington who was set to move. After a massive renovation complete with all new elevators and a beautiful lobby, the building is now fully leased to online legal services company Avvo, along with Airbnb and Coupang, a Korean online retailer.
Off Center LLC has sold the Shilshole West office building in Ballard for $7.1 million, after paying $6.2 million for the property in 2014.The buyer was Shilshole West LLC, associated with a private investor in Kirkland. The six-story building is just under 40,000 square feet and was built in 1997, and is reportedly fully leased.
Internet retailer Coupang, the “Amazon of Korea,” leased 47,000 square feet at 8th + Olive in December. The company leased three floors with space for up to 350 employees. Coupang already employs over 100 people here in Seattle, and is looking to hire more. The company was founded in 2010 and has raised more than $1.4 billion.
Also, Cascadian Therapeutics has subleased a large portion of space from CTI BioPharma Corp at 3101 Western Avenue. The 52-month lease starts January 1, 2018 and gives Cascadian 44,000 square feet on two floors of the Belltown building.
With Amazon pursuing it’s “HQ2”, there has been much hand-wringing and worrying about the potential economic effects of Amazon turning its gaze elsewhere. But, two top experts dampened the fires of panic by weighing in on some of the potential upsides of an Amazon power vacuum. Heather Redman, Co-founder of Flying Fish Partners and chair of the Seattle Metropolitan Chamber of Commerce insists that diversity of business is helpful. By seeing that Seattle is “open for business,” new tech firms could fill any gaps created by Amazon’s potentially decreased presence. Matthew Gardner, chief economist at Windermere Real Estate, agrees. He states that without Amazon immediately grabbing every new square foot of office construction, a desirable slowdown in rent increases could occur. And with less of a footprint, housing demand may slacken a little as well – something he would “not be unhappy about…whatsoever.”
Despite these calming opinions, the Seattle City Council has reached out to Amazon in December seeking to “hit the refresh button” on its relationship with the tech giant. Amazon responded, seeking to schedule a round table discussion in January. The issues of “mixed messages” sent to Amazon about the community of Seattle – and how welcome Amazon is in the city – will likely be addressed.
In another interesting indicator, Amazon ended the year with 3,500 job openings posted in Seattle, and that has some people worried. While the number sounds astronomical, it is down more than half from June 2017, where 9,000 jobs were listed for Seattle HQ alone. Amazon’s current listings are the lowest since 2014, petering out after a massive hiring binge that has lasted several years. While it may seem that Amazon’s appetite for employees is endless, it isn’t. With their new HQ2 search in the works, Amazon will likely seek to hire and fill needs in their chosen second home. Also, the internal news of hiring freezes/postponements, reorganizations to reduce redundancy, and cuts in travel fees speak to the need for Amazon to come to terms with how all their new hires will fit into the company. Whether these are simply normal fluctuations or the beginnings of a new trend for the company remains to be seen.
Despite the wintry weather and holiday season, home sales didn’t slow down in Seattle in December, which is sending housing prices through the roof. Sales of single-family homes went up 3.3%, and in King County, the median home price jumped 15.6% to $575,000 (including condos). Still, winter is the best time to buy, with less competition and sellers motivated to close out the year with a sale. The tax bill moving through Congress could also be a factor in the increase of home sales during the holiday season. Some real estate professionals have expressed concern that the tax bill would reduce or eliminate home owning incentives, which in turn could decrease the desire to own vs rent.
The single-family housing market may be hot, but the condo market is even hotter. Seattle faces a severe condo shortage compared to other large metropolitan areas, and this decrease is shooting the average condo price through the roof. In Seattle, the median condo price is now $453,000. Only 350 condos are available for sale throughout the entirety of King County, and it doesn’t seem likely to change any time soon. In Seattle, 94% of the housing units coming down the pipeline are apartments for rent.
Seattle’s endless climb in housing costs has landed it in the top five most expensive cities for renters. The median rent reached $1,448 in 2016, and all trends point towards further increases. Across Lake Washington in Bellevue, the median rent is a staggering $1,846 per month. And for the first time ever, Tacoma has hit the “$1000 Club,” with the median rent now $1,045.
With rental rates reaching all-time highs, the issue of rent control – long banned in Washington State since 1981 – is starting to become a viable possibility. State Representative Nicole Matri, D-Seattle, plans to introduce a bill in the upcoming session to repeal this ban on rent control. This bill will be the first attempt to overrule the ban since 1999. Despite most bills of the sort being deemed as doomed on arrival in Olympia, the housing crisis is worsening not just in Seattle, but across the state. For the first time in years, Democrats will control the Legislature during the 60 day session starting in January. Some see it as an opportunity to push for rent control, while others warn that it will do more harm than good in the long run.
Finally, President Trump’s desire to curb immigration stems from a desire to help the America people and boost the economy. But KoKo Huang, an attorney at Jackson Lewis P.C. in Seattle, argues that it could actually weaken our region. It is no secret that Seattle has become a top destination for tech talent and startup growth, and plenty of those founders and entrepreneurs have been immigrants. In the Seattle area alone, immigrant residents total around 614,000 and paid $6.5 billion in taxes in 2014. Some of the most iconic startup companies in Seattle have been founded by immigrant entrepreneurs, such as Stripe, eBay and SpaceX. Under Trump’s immigration changes, Huang argues that immigrant entrepreneurs will leave or avoid Seattle, hurting our overall economic growth and significantly reducing our workforce.
Seattle’s KeyArena, former home to the Seattle Supersonics, is officially getting a facelift. Early in December, the Seattle City Council approved a plan to let Oak View Group spend $600 million to renovate the aging event venue. The development will nearly double the size of KeyArena to 680,000 square feet and will create capacity to seat 17,000 for hockey games, 18,350 for basketball games and as many as 19,100 for concerts. Oak View group has been focused on acquiring an NHL franchise and turning KeyArena into a world class NHL and concert facility in the hopes of eventually also attracting an NBA team back to Seattle.
Tim Leiwicke, head of Oak View Group, addressed various topics revolving around the KeyArena renovation at the GeekWire Sports Tech Summit this past summer. Some of his plans include streamlining transportation around the new arena, engaging with companies like Activision Blizzard, and improving spectator security through the use of technology like facial recognition and drones.
Oak View Group will fund the entire project, and their 39 year lease comes with two 8 year renewal options, totaling 55 years. The agreement between Oak View Group and the city includes many benefits to the city, from relocations of Seattle Center tenants (and their reintegration post-construction) to a $20 million Community Fund, with $10 million dedicated to YouthCare.
Finally, it seems like the agreement between Oak View Group and the city of Seattle couldn’t come at a better time, because National Hokey League Commissioner Gary Bettman has reported that the NHL Board of Governors is willing to accept and consider an expansion team application from Seattle. The application fee is $650 million, but Oak View Group is already planning to conduct a season ticket drive and collect deposits to show Seattle’s eagerness to have the NHL return to the Emerald City. There is already rampant speculation over the potential new team’s name, and NHL fans through the Puget Sound are excited about this new prospect.