Seattle Office Space News – February 2019

5/ March 2019

Below are
comments and links to news articles and other topics relevant to the Seattle
office space market from the month of February 2019.

OFFICE DEVELOPMENTS

Expedia’s 40-acre Seattle waterfront campus on Elliott Bay with room for 5,000 people and several acres of outdoor space is still under way. CEO Mark Okerstrom told investors the total cost of the project will be $900 million which includes renovating existing lab buildings and building new structures. In 2015, Expedia announced its move from Bellevue to Seattle in which it paid Amgen $229 million for the site. In 2017, Expedia was granted a Major Phase Development permit which entitles the land for 15 years and allows for 1.9 million square feet of office.  A new 600,000 square-foot building will begin construction this year and plans to open in 2020. When Expedia moves out of its Bellevue high rise- Expedia Tower building, Amazon will begin a 16 year lease for more than 400,000 square feet.

In 2012, an LLC associated with Perday, a local real estate investor, brought former Watermark Credit Union Building (800 Stewart St) for $13.4million. Lincoln Property Co West told the DJC that a preliminary plan has been filed for a 54-story mixed-use tower that will include 477 residential units and 54,000 square feet of office space. LPC West is developing the site which is upzoned for construction up to 550 feet on behalf of the owner, Perday. Once reviewed, construction will begin in 18 months. Perday owns office buildings and apartment buildings throughout the state, but has no track record as a developer.

 Trammel Crow applied for a permit to demolish a building and then build a new 10-story office building at (1930 Boren Ave) in the Denny triangle submarket. Crow developed a 21-story tower a block away which sold for $330.2 million in 2017. Howard S. Wright has been hired to build 1930 Boren, according to an email sent by Mike Nelson, managing director of Crow’s Seattle office but it was not yet stated when the construction might start. The current plan on file with the city states the project will be 115,000 square feet of office space, some retail and have 97 underground parking spots.

As speculated, Amazon decided to sublease all 30 floors of office space in the Rainier Square. JLL is listing the space on behalf of Amazon. However, Amazon is leasing over 1 million square feet of office space in Bellevue and supposedly on the lookout for more space.

OFFICE LEASES

According to the SEC, Sana Biotechnology Inc leased 32,000 square feet of office space in the Atrium building, located at 188 E Blaine Street in South Lake Union.  The 198,000sf building, which is currently under construction, is now 49 percent leased. Other tenants in the building include Bluebird Bio with 25,000 square feet and Seattle Cancer Care Alliance with 40,000 square feet. All three companies have offices near the Atrium building currently.

Rauxa the largest independent, woman-owned advertising company in the United States leased all 11,000 square feet of the 37th floor in Martin Selig’s 1000 2nd Ave tower in the Central Business District, according to Colliers. The lease terms are not available, but the average asking rate for Seattle’s central business district Class A office space is $50.40 a square foot.  Most of the demand in Seattle’s office market is dominated by technology and co-working companies.

Buchalter a California-based law firm is expanding in Seattle. They hired three more attorneys with now a total of 12 attorneys and 6 staff and moved into an 11,000 square foot office in U.S. Bank Center (1420 5th Ave). Buchalter first opened a Seattle office in 2018 with existing firm attorneys and three recruits from Seattle-based Foster Pepper.

ECONOMY

An Amazon spokesman stated, Amazon’s growth in Seattle will not be effected by the decision to cancel a new headquarters in New York and that there will be “nothing further than the growth already planned.” There are more than 45,000 employees located at Amazon’s Seattle campus and Amazon plans to add 10,000 more workers by the end of 2020 with the completion of 2.6 millions square feet of additional Seattle office space.

Amazon’s footprint in Seattle is massive and on track to exceed 13 million square feet in the next few years. The office buildings are only a small part of Amazon’s real estate holdings. According to the SEC filing, Amazon has over 288 million square feet of commercial real estate world wide. More than two-thirds of Amazon’s footprint is in North America.  Amazon’s fulfillment center network accounts for roughly 75 percent of their overall footprint.

The CEO of Downtown Seattle Association states the technology industry has been unfairly blamed for the housing crisis. According to a report from the Downtown Seattle Association since 2010 there have been 85,000 jobs added and most have been technology related. With the increased amount of jobs the lagging housing development has created a crisis with only 32,000 units added from 2010 to 2016. To read more about the Downtown Seattle Association findings click here.

Housing developer Scott Shapiro stated in an interview, that upzoning will help Seattle’s housing crunch. Shapiro suggests upzoning much of the city near light-rail stations and making the review process less challenging to promote more development. Areas of Seattle have been upzoned as part of the Mandatory Housing Affordability (MHA) program however it is overly complicated and taking several years to implement.  Shapiro stated, “Seattle could make a dent by allowing housing in parts of some industrial zones like Interbay and Sodo.”

The annual median house price in King County dropped 2.9% over the last year to $610,000, which marks the first time since 2012 we have seen a year over year decrease in pricing.

Seattle is the 10th highest ranked city in the nation for household net worth with a median of $399,000 according to marketing-analytics firm Acxiom.  However, Seattle’s distribution of wealth is far from even.  The median net worth for a household that owns a home is $900,000 in the Seattle area in contrast the median net worth for a renter household is $36,000. Additionally, there is a massive wealth gap among racial and ethnic lines in Seattle. Acxiom’s report suggests white or Asian households median net worth is around $450,000, Latino household’s median net worth is around $90,000 and black households is around $36,000.

Construction in Seattle continues as 66 development projects are currently underway and roughly 32 new projects starting soon with an additional 129 projects planned for the future. There is a growing shortage of developable areas left and about two-thirds of the land in the city is for single-family houses. The majority of buildings under construction are residential. There was only a half million square feet of office construction completed last year. However, in 2019 4.5 million square feet of office is set to open although most is pre-leased.

TRANSIT

In the beginning of February the long anticipated Highway 99 tunnel opened! Current and former officials stated that the cost overruns were not excessive. The project grew to a $3.3 billion project up from $3.1 billion mostly from the breakdown of the tunnel-boring machine Bertha causing a two-year delay. However, other claims are pending against the state so the overruns total cost is unclear.

The removal of the viaduct started in mid-February with the help of a giant processing claw. According to WSDOT, there are three parts of the project: the removal of Alaskan Way Viaduct, filling and sealing the Battery Street Tunnel and building north surface street connections.  The crews will start removal of the viaduct at First Avenue and then work towards the Puget Sound. The demolition of the viaduct will cost $93.7million. You can watch the action in real-time on the camera construction page.

Post Avenue at Columbia Street has been reopened after the demolition of the Columbia on-ramp to Alaskan Way Viaduct and the view is back after 65 years. After the Columbia Street on ramp is taken down the street a two-way bus corridor will be executed.

ARENA

The Seattle arena team spoke at the PacSci giving the public its first look at the $850 million renovation underway. To learn more about the joint production of the Pacific Science Center, NHL Seattle and Oak View Group click here

OTHER NEWS

The city of Seattle chooses WSP a global engineering firm to conduct a study on lidding more of the Interstate 5. The study will cost $1.2 million and explore building one or more new lids across the I-5 between Denny Way and Madison Street. The goal is to create new lids that reconnect neighborhoods, reduce air and noise pollution impacts and create new opportunities for public space.

Written by // flinn

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