Below are comments and links to news articles and other
topics relevant to the Seattle office space market from the month of January
The year started off with three new noteworthy office developments. Hess Callahan Partners’ “super green” Watershed Building in Fremont at 900 North 34th Street broke ground in late 2018 and will be finished by early 2020. The site is being cleared of two small buildings and a rooftop parking lot, and after that is done, true construction on the building will begin. The seven-story office building designed by Weber Thompson will have 60,000 square feet of office space, and is estimated to treat over 300,000 gallons of stormwater each year that will pour off the Aurora Bridge and Troll Avenue. While WeWork has indicated interest in the entire building no leases have been signed.
Martin Selig has unveiled plans for his newest office project at 401 Queen Anne Avenue North. The building will be six stories tall and will be designed by Perkins + Will. The total size of the building is estimated to be around 240,000 square feet, and the designs indicate a rooftop deck and penthouse. Underground parking is planned for over 150 vehicles. The project has no start date yet, and has not entered design review.
The City of Seattle has officially approved the “S” Campus, a large five-building campus located in SoDo east of CenturyLink Field. The campus will have 1.2 million square feet of office space spread out over five buildings, which will be arranged in a loose “S” shape – hence the name. Seattle-based Urban Visions acquired the parcel of land in 2004, and their new campus may help alleviate the intense space crunch that is currently being felt in the Seattle office market. Construction on the project could start as early as the beginning of next year.
Building sales were sparse in January, with only one property trading hands. Pacific Eagle Holdings has sold the Dexter Horton Building (701 Second Avenue) for $151 million. Buyer CIM Group of Los Angeles paid around $449 per square foot for the 336,371 square foot historic building, which is located near Pioneer Square. The building was built in 1924, and is currently 90% leased.
Office leasing saw quite a bit of activity in January with several deals signed this month. Coworking firm Spaces has leased the entirety of the Ainsworth & Dunn Building, which was the former location of the Old Spaghetti Factory. Spaces will move into the renovated building at the end of this year. Combined with their new lease at 2+U and another location in Pioneer Square, Spaces will have expanded its size to 180,000 square feet in Seattle. The A&D building was chosen due to its proximity to the new Seattle waterfront, and the neighborhood’s promising accessibility, amenities and character were driving factors for the lease. The historic nature of the building, built in 1902, only added to its desirability.
Swiss food and beverage company Nestle is expanding into Seattle, with one of its new offices dedicated entirely to managing the needs of Amazon HQ. Nestle has leased 2,500 square feet of space at the First and Cedar Building in Belltown, less than a mile from the Amazon Spheres. Nestle has not released numbers on how many employees will be specifically dedicated to Amazon, but it is estimated that around 17 people will call this small satellite office home.
Nestle has more on its plate in Seattle than just working with Amazon. After landing a deal to sell Starbucks products earlier in 2018, Nestle has leased 47,500 square feet at 450 Alaskan. The waterfront building will become Nestle’s new US coffee headquarters, and will have room for around 316 employees. Nestle currently has 220 employees in Seattle, but plans to expand those numbers.
Digital marketing startup New Engen has leased two floors at Fourth & Battery, opening the doors to their new headquarters. New Engen is helmed by several ex-Zulily employees, and is a rising star on the startup scene in Seattle. They currently have 120 employees in the city, and their new space, which totals 35,000 square feet, can accommodate around 300. New Engen anticipates heavy growth in the near future, and so this extra space will be quickly filled.
Whole Foods Market has leased 33,000 square feet of office space at 6th & Wall, located diagonally from Amazon, their parent company. Amazon plans to add more Whole Foods stores into the two-hour delivery window, and has considered taking over empty big-box locations like Kmart or Sears. The chain recently opened locations in both Kirkland and First Hill.
As the Viaduct goes down, the new Seattle Waterfront is prepped to become one of the hottest new markets on the West Coast. While there are still several years until the dream becomes a true reality, the real estate market is already changing. Larger companies like Big Fish Games are beginning to jump on the opportunities presented in this new neighborhood before the rest of the world gains access to the waterfront. While the waterfront market has 6.3 million square feet of office space, only 4.5% of it is vacant, and competition is already tight for remaining space.
While the median home price continues to climb in the Puget Sound, the market appears to be balancing itself after its meteoric rise in past years. Buyers are capitalizing on the changing market, which has seen sellers become more receptive and inventory increase greatly, though the market is far from balanced. There are less than 2 months of inventory on the market, and a balanced market would have 4-6. However, these are good signs. Rising interest rates are also keeping buyers from bidding higher and higher in price to snag their dream home.
Seattle continues to top the US “crane count” with 59 cranes in the city. The second-largest number of cranes is parked in Los Angeles (44) and Portland is not far behind with 30. Seattle has kept the lead in cranes since January 2016. However, Seattle lags far behind the North American leader Toronto, who has a staggering 104 cranes working on various developments across the city.
On January 11th, history was made as the Alaskan Way Viaduct officially closed forever. After the waterfront tunnel opens in February, the northbound off-ramp will take another two weeks to connect to downtown. The tunnel will be free for the first few months, encouraging use. Traffic will likely be heavily impacted for weeks or months even after the tunnel opens.
Everyone is feeling the squeeze after the Viaduct closure, and Seattle is now officially in the “period of maximum constraint” when it comes to traffic. Due to all the extra traffic hitting the streets of downtown, food trucks will likely be particularly hard-hit. Since these vehicles often park on the sides of busy streets, and the City has since revoked many of their permits to work in street lanes, food truck owners are scrambling to find other options. However, it’s not just food trucks. Construction companies that park their development vehicles in the right of way are also impacted, with many companies being forced to move construction to the evenings when traffic is lower.
A main reason for the Viaduct’s removal was its terrible vulnerability in an earthquake. The new SR 99 tunnel, by comparison, may actually be the safest spot in the city to ride out a big quake. For more information from experts, on the topic, watch this video.
Wondering just how long it will take to tear down the Viaduct? Demolition company Kiewit estimates six months, during which the Viaduct will be hammered, chewed up and deposited into the Battery Street Tunnel or otherwise disposed of. Kiewit also plans to raise Aurora Avenue North to grade between Harrison Street and Denny way, connecting it to Thomas and John Streets for full through access. This work will begin after the tunnel opens.
The new tunnel will open in early February, and while it is an exciting (and long-awaited) development in city transportation, it will take some getting used to. The two-level tunnel has a planned offramp onto Alaskan Way before the tunnel begins, but this ramp will open two weeks after the tunnel. Buses that used to travel on the viaduct will continue to re-route until the ramp opens. While the tunnel will be free for the first half of this year, tolls will begin this summer, ranging from $1-$2.25 with a Good To Go pass.
Seattle’s new waterfront comes with a steep price, and plenty of local owners will be paying it. The owners of downtown properties have finally reached a consensus with the City of Seattle and have agreed not to block the Local Improvement District (LID) proposed to fund part of the new waterfront project. While the plan was originally to have the LID fun $200 million of the project, it has now been lowered to $160 million. There is now enough property owners who have agreed to the number that would make blocking the LID impossible – 60% of the property owners would have been needed to block the proposal. The rest of the money will be pulled from philanthropic ventures, the state, and the city.
Due to the Local Improvement District, local building owners will need to pick up the slack for $160 million of the $712 million project. Amazon could pay at least $995,000, and Nordstrom could pay almost $1.5 million for their downtown flagship location. Cost estimates for owners of 25 prominent properties can be found here.