Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of July 2018.
The 4/C skyscraper, Crescent Heights’ long-planned “tallest tower in Seattle,” at the corner of Fourth & Columbia in downtown Seattle likely won’t be built any time soon. In 2015, Crescent Heights appeared eager to move quickly through the process of approval and construction, applying for a master use permit in April 2016. However, the planned 101-story, 1.2 million square foot tower hasn’t made any progress. At 1,029 feet high, 4/C would be the tallest tower in the Northwest. It is unclear why the the plans have stalled but it may be attributed to high construction cost and a slight cooling in office market demand.
Developer Martin Selig changed plans for the Commuter Building on the Seattle Waterfront at 815 Western Avenue by proposing to add nine floors of office space to his planned mixed-use tower. In addition to the office space, there will be ground floor retail, eight floors of residential units, and 3 stories of underground parking. The new building will be about 18 floors total rather than the original plan of 14. The addition of office space makes sense, as large companies have begun to move their headquarters to the new waterfront in anticipation of the demolition of the Alaskan Way Viaduct (scheduled to begin early 2019).
Seattle developers now have another incentive to go green. In early July, Mayor Jenny Durkan signed legislation to launch the 2030 Challenge Pilot Program, which will allow developers to add height and bulk to their projects if they meet the goals of the 2030 Challenge. The program aims to cut carbon dioxide emissions, and is the first of its kind in the country. It will allow building owners to add up to two floors and 25-30% more floor area, if the renovations meet the criteria. Developers like Sabey Corp., Vulcan and Unico Properties are already on board, having worked with the city to pass this new measure.
July brought some big sales of office product in Seattle. Skanska USA and TIAA have sold the 400 Fairview building in South Lake Union for $338.4 million ($1,004/RSF). The buyer was 400 Fairview Avenue LLC, which is affiliated with Pembroke Real Estate out of Boston. The building, which was designed by SkB Architects and built by Skanska, has 337,000 square feet and is fully leased.
The entire 1111 Third block – comprising 1111 3rd Ave and the associated Second & Spring buildings and totaling 705,868 square feet, was sold to Unico Properties in mid-July. Unico’s financial partner on the sale was AEW Capital Management. Unico paid about $359 million for the block, with the deal turning out to be about $508 per square foot. The sellers were LLCs associated with Ivanhoe Cambridge and Callahan Capital Properties. The combined buildings are about 95% leased.
In addition to this massive purchase, Unico sold its 701 Dexter Ave in South Lake Union in July to Alexandria Real Estate for $34.5 million. The sale was surprising as Unico had recent plans to renovate the development. However, according to Scott Brucker of Unico, the “demand for development opportunities” in South Lake Union allowed Unico to reap a greater reward by selling 701 Dexter instead of renovating it.
Alexandria Real Estate also purchased two historic Pioneer Square buildings this month for $20.5 million ($455/RSF). The Furuya and Corgiat buildings at the corner of 2nd Avenue and main street in Pioneer Square – both recently renovated – are now called the Pacific Commercial Building and have about 45,000 square feet. The seller was 240 Second LLC, associated with developer Rob Brewster.
Finally, the Central Building at 810 Third Avenue in downtown Seattle also sold this month for $67.5 million, trading hands from KBS Strategic Opportunity REIT to an unnamed venture between Brickman and GreenOak (both companies out of New York). KBS previously acquired the building in 2013 for $34.5 million. The eight-story landmark building has 192,176 square feet and is 81% leased.
Business messaging platform LivePerson is setting up shop in South Lake Union, announcing that it plans to expand to Seattle and create a 40,000 square foot center in the Alley 24 office building at 221 Yale Avenue North. The Seattle office will collaborate with teams located across the globe and its two current US locations (New York and California). Employees started moving into the space at the end of the month.
Fast-growing Seattle startup Skilljar just landed a new headquarters downtown, subleasing the 7th floor of the 8th + Olive Building from “Korean Amazon” equivalent Coupang. The 16,000 square foot floor will allow Skilljar to triple its current team of 55 people. Skilljar raised $16.4 million in Series A funding in March, and is used by many tech companies in the region including Tableau, Smartsheet, Avalara, and others. The educational software company plans to occupy their new headquarters early in September.
Good news for prospective home-buyers in the Puget Sound from July: for the second month in a row, housing prices are cooling down. With inventory rising and demand dropping, the King County median home price actually dropped from May to June, which hasn’t happened since prior to the recession. Usually, prices rise in the spring and summer months. Seattle’s booming economy and the slow pace of construction will likely keep prices from dropping too much, but the market seems to be cooling and moving towards a more beneficial environment for buyers.
Conversely, Seattle’s crane count is back up after a lull early in the year. We now have 65 tower cranes dotting the skyline, proving that Seattle’s construction boom is nowhere near complete. Seattle has twice as many cranes as any other city in the US aside from Chicago (40) and Los Angeles (36). Construction in South Lake Union and downtown dominate the crane concentration, though Bellevue’s crane count continues to go up as more and more development projects start up in its central business district. While 65 cranes seems like a lot, it’s still far behind North America’s leader, Toronto, which has 97 cranes.
With large tech companies moving into Seattle’s urban core, it’s become more and more in vogue to live at the “heart of it all.” However, a new analysis by Zillow and mapping data company HERE Technologies has revealed that it pays to move away from the urban core in Seattle. Homeowners will save the most money if they move 15 minutes away from downtown, with the typical home becoming 11.3% less expensive when located 15 minutes out. Rent becomes 6.2% less expensive. Of course, the commute factors heavily into weighing pros and cons of living outside the urban core. In Seattle, the choice is between a longer commute (which dramatically affects life satisfaction) and a significantly higher cost of living.
Seattle ranks 10th in the nation for income-inequality, according to a recent report made by the Economic Opportunity Institute. The top 1% of Washington state earners made 24.2 times more than their neighbors in the region. Unsurprisingly, the Puget Sound displays this income inequality in a glaring fashion with men like Jeff Bezos living a few miles from about 12,000 homeless people, many who live in tents on the sides of freeways.
Amazon’s worldwide headcount has jumped to 575,700 people, but that number is not rising as fast as it has in recent years. The year-to-date headcount is only up about 2%, with Amazon favoring internal transferring and restructuring over external hires. Amazon still has 18,268 job openings listed, but internal restructures are creating “operating efficiencies” for the company in the short-term.
Oak View Group has announced that the contractors for the new Seattle Center Arena project are Skanska-Hunt, a joint effort between Skanska and AECOM Hunt. In addition to this news, they have also announced that the budget has increased from $564 million to $700 million. OVG CEO Tim Leiweke has reassured people that this does not indicate that the project has spiraled out of control. Rather, the building project has expanded by 50,000 square feet, and the team has created a way to reduce impact of the massive excavation on the neighborhood. For more details and images of this revised plan, click here:
The new Highway 99 tunnel finally has a revealed tolling system. Fares will vary based on the time of day, with peak hours on weekday afternoons reaching $2.25, and minimums of $1 on weekends and overnight. Drivers will be able to use the tunnel for free during the first few months after opening.
Amazon is opening another one of its Amazon Go convenience centers at the newly-opened Madison Centre tower in downtown Seattle. The news came just after announcements that stores will also open in Chicago and San Francisco. The new Madison Centre location will be almost twice as large as its SLU location, topping out at 3,000 square feet. The store will open this fall, and hopes to cater to the busy, tech-savvy employee base in the Central Business District.