Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of July 2014.
July marked one of the busier months in recent memory as it relates to news about the Seattle office market. The biggest news in the regional investment market came late in the month as Walton Street Capital put a portfolio of 9 office buildings on the market for sale. The two Seattle buildings involved in the offering are 1111 3rd Avenue (322,826 square feet in 34 floors) and 1100 2nd Ave (134,545 square feet in 5 floors).
Office buildings that closed included the 19 story, 279,000 square foot office building at 720 Olive. Prudential Real Estate bought the building from Hines for $101 Million or $362 per square foot and the building will be renovated and renamed 8th & Olive.
Also, Seattle based Lake Union Partners purchased the historic building at 1012 First Avenue for $4.3 Million. The 33,000 square foot building traded for $130 per square foot, but will require substantial renovation including a full seismic retrofit. The seller was a family partnership led by Hans Wehl.
Other buildings that hit the market included the headquarters for Pemco at 325 Eastlake in Seattle’s South Lake Union neighborhood. The two adjacent office buildings owned by Pemco include 168,250 square feet of space and are being offered as a sale-lease-back until Pemco can determine where to relocate.
After stabilizing the Smith Tower to 75% occupancy, CBRE investors have decided to sell the building at 506 2nd Avenue (which happened to be completed in July of 1914 marking the 100 year anniversary). The iconic Seattle building was the first high-rise in the city with 256,481 square feet in 42 stories.
Finally the 3 story building, which is home to the famous J & M Café at 201 First Avenue South, hit the market for sale in July. The asking price for the Pioneer Square building originally built in 1889 is $3.9 Million.
There was lots of leasing activity in Seattle in July. It seems like every month there is new news of a large office lease by Amazon. In July it was reported that the online retailer leased 251,000 square feet at 1915 Terry Avenue. The building, owned by Seattle Children’s Institute, is near Amazon’s South Lake Union campus. The deal improbably came together after a lot of research on feasibility for how to save the structure rather than tear it down. Amazon has tripled their employment base over the past 3 years and now has 132,000 people.
Seattle’s tallest building, Columbia Center, has 76 stories and over 1.5 Million square feet. In July the building owned by Beacon Capital landed another tenant. The Seattle City Attorney’s office leased 63,563 square feet on floors 18-20. This article notes that the building has gone from 40% vacant to 20% vacant since the low of the recession in 2008 and is expected to be put on the market by Beacon Capital soon. Other new major tenants include Rhapsody, NBC News, Envestnet, U.S. Health & Human Services and UW Physicians.
Other significant leases included biotech company Acucela subleasing two floors at Russell Investments Center at 1301 2nd Avenue from Boeing. The 38,725 square foot space on floors 41 & 42 was lavishly built out by Boeing in 2011 and then surprisingly the commercial airplane builder decided to relocate the employees enjoying the views there.
Also, Groupon, the Chicago based daily deals site, added another floor at 505 5th Avenue South. This is yet another example of a technology company based elsewhere having success hiring talent in Seattle as Groupon plans to bring their total headcount to 270 people with the new space.
UW Medicine leased 30,000 square feet at 1455 N.W. Leary in Ballard for a medical clinic.
Finally, McGraw-Hill Education leased 24,000 square feet at 83 S King Street providing room for up to 150 people in the Pioneer Square building.
It seems more Seattle developers, who have been itching to develop office product but waiting for an anchor tenant, have been hinting that going spec may be a possibility. In July Touchstone Corp made news that they are getting ready to go on the 210,000 square foot NorthEdge project at North 34th Street & Densmore Avenue North in Seattle’s Fremont neighborhood. It remains to be seen if Touchstone will actually begin construction or if they are just moving dirt around in the hopes of expressing seriousness to potential tenants.
American Life, known for using the EB-5 foreign investor financing program, revealed plans in July to add to their Seattle portfolio with a 23 story hotel and 9 story office building near Century Link field.
Unfortunately Bertha, the machine who is supposed to be digging the tunnel that will replace the Alaskan Way Viaduct, has been delayed another month. Seattle Tunnel Partners say that Bertha will return to action in March of 2015. A new 3,500 square foot showroom next to Pike Place market will exhibit some of the visions for Seattle’s waterfront once the viaduct is finally torn down.
There are many different indicators that continue to provide warm and fuzzy feelings for the Seattle economy today and in the future. The unemployment rate in Washington State dropped to 5.8%, which is the lowest in 6 years. Residential real estate prices in Seattle continue to outperform the majority of the rest of the country as we are getting close to pre-recession levels. The median sale price for homes in Seattle is up 10% above this time last year. In Q2 venture capital investments were up 73% above the same time the previous year with $410 million invested in 40 deals. Finally, Forbes reported that Seattle is the ninth best city in the country for business and careers based on 12 factors including: availability of jobs, costs of business and living, growth potential, education, quality of life and quality of workforce.
However, in a significant blow to Seattle’s biotech community, Amgen announced that they will be closing their operations in the Seattle region, which include a 40 acre campus along Seattle’s waterfront. About 660 people will be cut and it is still unknown what the Thousand Oaks, California company will do with the real estate here.
In July this article provided an interesting comparison between this cycle and previous boom times for the region. To summarize, while sectors like technology, construction, aerospace and real estate seem to be back to bubble times, there are more players taking a long term view that should provide better insulation against the next shock.
Mayfield Cos out of Palo Alto successfully refinanced 4th & Pike achieving a loan for $29.5 Million for the 10 story 132,000 square foot building that is 95% occupied.