Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of October 2018.
Google’s newest South Lake Union building has begun to take shape, with the design team finally revealing plans for the 12 story building in October. The building will have a total of 322,000 square feet, and will be ready for Google in 2021. This newest addition to Google’s campus will bring the tech giant’s Seattle footprint to almost 930,000 square feet, mostly situated in South Lake Union’s bustling tech-focused neighborhood.
Also, in October Martin Selig began construction on his new office tower at 400 Westlake Avenue North in South Lake Union (the old Firestone Tire building), taking steps to develop the project under the Living Building Pilot Program. The 15-story building is the largest of the five proposed buildings in the program, in which buildings ideally produce more energy than they use. To offset the electricity used by the building, Selig has bought 100,000 square feet of solar panels to be installed in Eastern Washington. These panels will not fuel the building, but will make up for the energy used in the tower. The building will have approximately 200,000 square feet of office, and is set to deliver in early 2020.
Selig’s development of 400 Westlake, in addition to his renovation and addition to the Former Federal Reserve Building, buck the trend of waning speculative development. Despite not having preleased any space in either building, Selig is confident that the buildings will fill up in no time. Selig has cited the total lack of space in the Downtown Seattle market as a point in his favor, insisting the space crunch will lead people to his buildings whether he has preleased them or not. While rumors have circulated that WeWork is looking to take all of the Federal Reserve Building, located at 1015 2nd Ave in the central business district, Selig has asserted that neither building has been leased yet.
Seattle-based Unico Properties sold the historic Smith Tower at 506 2nd Ave in Pioneer Square to Goldman Sachs. The Smith Tower is only one of a large portfolio of properties in both Seattle and Denver that were sold off to Goldman Sachs for nearly $750 million total. Unico bought Smith Tower in 2015 for just over $73.7 million and poured millions into its renovation, turning the top floor into an observatory and bar.
Laird Norton sold its stake in the Stone34 Building to global investment manager Partners Group for $79.2 million ($596 per square foot). The Stone34 building at 3400 Stone Way N in Fremont is now co-owned by Unico Properties and Partners Group. The 132,923 square foot building is the headquarters of Brooks, who occupies some ground floor retail alongside several other retail tenants. The building is LEED Platinum Certified, and is part of the city’s Living Building Pilot Program. Laird Norton and Unico co-purchased the building from original developer Skanska in 2014 for just over $70 million.
In October information was made public that Facebook leased at least 62,000 square feet at Home Place Center at 1521 1st Ave S in Sodo. While the official word is that Facebook only leased one floor last year, building permits show that Facebook’s virtual reality branch Oculus has registered for tenant improvements to floors 4, 6 and 7, totaling about $7.5 million. Floor 4 was built for data center usage, while floors 6 and 7 are more traditional office floors with 360 degree views, outdoor decks, and open plans.
It was also reported in October that Uber signed a lease for 115,000 square feet at the Second and Seneca Building located at 1191 2nd Ave in the central business district. Uber has plans to spend $9 million to build out their new Seattle headquarters and hopes to complete the project by June 2019 – the start of their lease term. The space can accommodate up to 750 employees and once the project is complete Uber will relocate all of their current employees from 1000 Second just across the street.
The Seattle Cancer Care Alliance (SCCA) is now the second tenant to lease space in Alexandria Real Estate’s new building at 188 E Blaine Street in Eastlake. The building, called the Atrium, is still under construction and already has one tenant: Bluebird Bio. SCCA leased about 40,000 square feet in the building. The building has 198,000 square feet and is now 33% leased, with 64% under negotiation.
Coworking titan WeWork continues to increase its Seattle location count with a lease of four full floors at Madison Centre at 505 Madison Street in the central business district. The new tower is filling up fast thanks to large multi-floor leases by companies like Davis Wright Tremaine, WeWork and Stripe. WeWork has confirmed the lease, and will take about 91,100 square feet.
Eager to capitalize on the new Seattle Waterfront, WeWork also expanded into the third and fifth floors of the World Trade Center North building at 2401 Elliott Avenue. WeWork will have about 39,800 square feet, including a rooftop garden, at WTC North, which is now 85% leased. Coworking spaces remain an increasingly alluring option to tenants seeking ultra short-term leases or stop-gap solutions in office space. WeWork is now the 7th largest occupier of office space in the Puget Sound with over 900,000 square feet of office space.
EA Games, parent company of popular Seattle-based gaming company PopCap Games, moved spaces in Seattle. EA leased space on the fifth floor of 800 Fifth Avenue in the central business district and currently houses 200 employees, with hopes to grow to 300 in the next year. EA’s plan is to lure top tech talent away from popular giants like Amazon and Microsoft, offering them a chance to be part of an exciting and joy-focused mission: making people happy through gaming.
Despite being under three years old, JND Legal Administration has already outgrown their office space. The legal company is now moving to the Second and Spring Building at 1000 Second Ave in downtown Seattle, where it will occupy over 35,000 square feet. This new space allows JND room to grow their current headcount by 100 people. JND signed a four year lease and plans to move before November’s end. Their former office at the Western Building (2727 Western Ave) is currently being marketing for sublease.
Last year, the Emerging Trends in Real Estate study ranked Seattle as the number one investment prospect in the nation. This year, Seattle ranks 16th. While last year, investors flocked to Seattle because of all the tech talent and tech job creation, this year investors are seeking out cities that are more affordable for residents and businesses. The cost of doing business in Seattle is 115% the national average, and investors are seeking cities that aren’t monopolized by one industry or another.
Just in time for the turn in the weather, the Puget Sound housing market is also continuing to cool down. Mike Grady, president and COO at Coldwell Banker Bain, says that increased supply and decreased demand have helped to slow the frenzied pace of home-buying in the region. The Northwest Multiple Listing Service report shows that the median price of single-family homes in King County increased for the first time since June, but just slightly – 2.8% to $688,000.
Expert J. Lennox Scott at the Puget Sound Business Journal expands on this cooling trend, describing the current market as a “strong surge market” instead of the previous “extreme frenzy” of recent years. Buyers now have more to choose from, and prices are dipping or staying constant due to this factor. While the market is still “above what would be considered healthy,” 2019 is predicted to continue as a strong-surge market with periods of frenzied activity, as opposed to the wild constant frenzy of past months.
Additionally, for the first time in four years homes in Seattle now sell below the listing price. In May , houses were selling for 6.3% higher than the listing price. Now, they are selling for 0.6% below the listing price, according to Redfin. Homes are now selling in about 17 days, as opposed to 10 just a year ago. Seattle isn’t the only city feeling some relief – houses across the region from Tacoma to Everett are now selling for below the listing price and remaining on the market for longer.
While the housing market has finally begun to cool off, Seattle is still the nation’s fastest-growing tech hub. Seattle has added more tech jobs in the last two years than any other city in the country, as companies from the Bay Area continue to move here seeking top talent. The Seattle area supports 42% of all the office jobs in the region – and those jobs are in the high tech software and service industries. This cluster of activity has rocketed office rents through the roof, and currently there is quite a space shortage for any tenant seeking large blocks of space.
It is all but guaranteed that the NHL is coming to Seattle – quite possibly for the 2020 season. It was reported in October that the long list of possible disasters associated with renovating Key Arena, getting NHL approval, and funding the projects has been systematically dealt with. And while it may seem a bit too soon to start drawing conclusions, the prospect of an NBA team in Seattle is more real than it has ever been in the last ten years due to Oak View Group’s massive sports connections.
Mayor Jenny Durkan also deserves some credit for bringing a hockey team to Seattle. Her meeting with the NHL executive committee has been cited as a large reason why the expansion bid has been unanimously forwarded for a December vote. This forwarding is an excellent sign, because despite needing a 75% approval by the board, they have never rejected an approval expansion recommendation by the executive committee.
WSDOT is taking some of its final steps before the start of the Alaskan Way Viaduct demolition, and has moved the lanes below the Viaduct to its new alignment along the waterfront. While more detours may sound ominous, there are actually more lanes on this new route: two in each direction, instead of one. The Viaduct is scheduled to close permanently on January 11, 2019.
In what is described as a planned “sprint” to demolish the entirety of the Viaduct in four months, as many as five demolition crews will be working on the Viaduct’s deconstruction at one time. The crews will be working six days a week until 10pm at night, with quieter work like trucking debris continuing throughout the night hours. Claw-shaped “munching” devises will break columns and decks starting in early February, operating at decibels of up to 85, but all this activity hopes to accomplish the demolition before the summer months.
Seattle’s new waterfront promises to be a great boon to the city, but property owners in the immediate vicinity are pushing back against the proposed $200 million tax imposed on them to construct and maintain the area. The legal talks could result in the city reducing the assessment by tens of millions, and are happening due to Mayor Durkan’s proposed Local Improvement District (LID) that would tax property owners in the waterfront area to help fund the projects. This massive expense could cause owners to pass that tax on to tenants, and includes over 1,000 properties all the way from Belltown to the Stadiums.
In sorrowful news, Microsoft co-founder and local billionaire Paul Allen passed in October after a long battle with cancer at age 65. Paul Allen’s holding company Vulcan Inc. announced the death on behalf of his family, and stated that there are no imminent changes planned for Vulcan or any of Allen’s other teams and interests.
Allen is remembered as a man who was not content to help found just one company, or champion just one cause. His purchase of land in Lake Union, and its subsequent sale to Amazon, kicked off the South Lake Union development revolution that has transformed Seattle forever. His passion for conservation and humanitarian work has changed not only his hometown, but the greater world for the better.
Among Paul Allen’s many pet projects and causes was real estate, as is evidenced by the real estate arm of his holding company, Vulcan. Allen was always adamant that while a new development had to make business sense, it also had to benefit the community. Vulcan’s projects range from mighty blocks to smaller, but no less impactful, buildings like his new planned seven-story center for homeless families with children. Allen was always eager to re-invest his gains from real estate investment into other humanitarian and philanthropic ventures.
Paul’s sister, Jody Allen, will take over the vast task of managing his estate now that he has passed. Jody has long been an integral part of Paul’s interests and ventures, and plans to continue her brother’s legacy and memory by committing his vast resources to projects that benefit the world around them.
Beyond the sorrow of Paul Allen’s death is the monumental task of managing his estate, which is likely the largest in the history of Washington State. His immense array of both for-profit and charitable institutions will create a host of taxation, inheritance, and succession questions that will need to be answered in order for Allen’s empire to live on.