comments and links to news articles and other topics relevant to the Seattle
office space market from the month of October 2019.
We learned new information about two new developments in
October. NBBJ was
selected by Alexandria to design a South Lake Union office tower located at 601
Dexter Ave N. The lot which contains an old warehouse was purchased for $28.5
million in June. The current plan removes the old warehouse and add an 11-story
office tower with 186,264 square feet and parking for 187 vehicles.
Also, construction began in the Denny Triangle neighborhood that will bring more housing and office space to the area. There will be a total 1,510 residential units and 310,000 square feet of office space added to the neighborhood between two projects. Onni group announced the start of construction at 2301 Seventh Ave which includes 610 apartments and retail space. A 900-unit condominium project known as the Seattle House will break ground next month. To read about the projects click here.
WeWork has endured financial challenges these past few months and the WeWork-WeLive project in the Puget Sound region was called off in October. Martin Selig Real Estate and WeWork announced, “As part of WeWork’s commitment to refocus on its core business, WeWork and Martin Selig Real Estate have mutually agreed to not move forward with the planned WeWork-WeLive Belltown Seattle project at Third and Lenora.” However, the two companies will continue to work together on 15th and Market, a mixed-use office project in Ballard that is set to open in December.
Even though some of WeWork’s projects have been called off, according to sources WeWork still intends to lease space at Rainier Square Tower, albeit half the space they had previously planned to lease. The company occupies 16 locations and about 1.9 million square feet in the Puget Sound region.
OFFICE BUILDING SALES
Unico Properties bought the 365,674 square foot office portion of Westlake Center located at 1601 5th Ave for $236 million in October. Office building sales are speculated to increase towards the end of this year because next year the state real estate excise sales tax will be increasing. Currently there is a flat 1.28 percent tax, but next year sales over $7 million will be taxed at 3 percent. Westlake Tower is known for its excellent location at the heart of the Sound transit’s expanding light rail system.
Rubicon Point Partners of San Francisco brought the commercial portion of the historic Colonial Grand Pacific for $10 million. Urban Visions led by Greg Smith sold the property located at First and Seneca Street in Pioneer Square. The removal of the viaduct attracted the buyer.
The cost of commercial construction in the Puget Sound region continues to increase according to Mortenson Construction’s cost index. The company recommends owners in the region to plan on a 4 to 5 percent price increase compared to a year ago. Mortensen sites an indirect effect of tariffs as manufactures shifted away from suppliers in China and other manufacturers and suppliers have priced upward. Alternatively, according to Dodge Data & Analytics report, non-residential construction starts in the Puget Sound region fell 54 percent compared to last year which may indicate the building boom is ending.
Even though the building boom may be slowing down in the Puget Sound region, a new report shows that Seattle is the sixth fastest growing tech market in overall office rent growth. Between Q2 2017 and Q2 2019 rents jumps 12.4 percent. Between 2017 and 2018 Seattle added 34,000 new tech jobs—the most out of the top Tech-30 cities. In the past year, major technology companies have leased around 2.8 million square feet of office space.
The Puget Sound residential real estate market saw a decrease in inventory compared to September 2018 with 2,500 less homes on the market. Throughout the region new single-family listing fell 11.6 percent, but on the contrary pending and closed sales increased. Overall, real estate agents suggest first-time buyers are starting to look outside of King and Snohomish counties.
A study released by the nonprofit American Public Transit Association and the National Association of Realtors, stated that the median residential home sales prices increased 43 percent for Seattle homes within a half-mile radius of transit stations which was greater than the 30 percent increase for homes further from the transit stations. The greatest price increases were seen along the Link light rail and First hill street car. Overall, the study showed that areas with better access to transit were more desirable due to better accessibility, lower cost of living, and more amenities.
Seattle’s unprecedented growth can be seen in the results of a new Zillow study. Seattle was ranked as having the 10th smallest typical $1 million dollar home in the country. According to Zillow Group, the national average is 2,200 square feet four with four bedrooms for $1 million dollars and Seattle’s typical million-dollar home is 2,090 square feet with three bedrooms.
For the first time in four years Seattle’s apartment rent growth is stable compared to vacancy with rents growing by 2.28 percent in the past six months withthe vacancy rate at 2.75 percent. According to Brian O’Connor of O’Connor Consulting Group, “the marker is fundamentally in equilibrium. I haven’t seen that since the crash.” There are 15,500 apartment units under construction and most of the units are in King and Snohomish counties with Canadian companies Onni Group and Westbank constructing 2,300 units.
A recent study analyzed the 75 largest cities in the U.S for cost of living and Seattle was near the bottom of the list in terms of affordability. The ratings took into account rent for a one-bedroom apartment, utilities, internet, gasoline and food. The range of total cost of living ranged from $1,182.96 to $4,210.60. The most affordable city was El Paso, Texas and the least affordable city was San Francisco, California. Seattle was ranked ninth for highest cost of living with an average cost of $2,786.38.
In October, Seattle City Councilmembers, candidates, democratic organizers and social activists protested outside of Amazon Spheres after Amazon contributed a total of $1.45 million dollars in attempt to upend the City Council in the November election. Civic Alliance for a Sound Economy (CASE) Executive Director Markham McIntyre issued a statement during the press conference calling it “another example of the toxic, divisive tactics of the current Seattle City Council”. Seattle City Councilmember Kshama Sawant countered, claiming the business community is only willing to get behind programs that raise revenue by taxing citizens, rather than corporations. To read more about the opposing views click here.
On another note, first photos of Google’s new 929,000 square foot South Lake Union campus were shared with the public this month. The building located at 620 Boren Ave N will house mostly cloud engineers and the entire campus will cater to engineering teams for various Google products. Google has up to 4,500 employees in Washington State and throughout the nation Google plans to invest $13 billion dollars in offices and datacenters.
This month Skanska showed the Puget Sound Business Journal a sneak-peak of the 38-story 2+U mixed-use office tower. The project included one of the world largest “geowalls” and the 686,000 square foot office has been named after Qualtrics which leased 40 percent of the tower; other occupiers include Dropbox, Indeed and Spaces. To learn more about the project and see photos click here.
The University of Washington was named the world’s most innovative public university and among public and private universities it ranked fifth. The ranking was conducted by Reuters and Clarivate Analytics and considered factors including a patent filings and research paper citations. The Paul G Allen School of Computer Science and Bill and Melinda Gates Center has had huge impact on the university’s success.
Sonos based out of California opened its first Seattle office in 2015 to tap into the talent pool. In October, Sonos opened a 40,000 square foot downtown Seattle office with room for up to 220 employees. The newly renovated space is located at 800 5th Ave and included hallmarks of contemporary tech offices as well as several musical elements and tributes to musical legends and conference rooms named after Seattle bands and music venues.