Seattle Office Space News – September 2017

3/ October 2017

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of September 2017.

OFFICE DEVELOPMENTS

September brought news of Amazon continuing the expansion of their high-rise campus in downtown Seattle after it received a permit to begin excavating the site for its fourth tower block. The planned development includes a 24-story building at Eighth and Bell and an 8-story building at Seventh and Blanchard, connected by an elevated walkway. Graphite Design Group will take over architectural design for Block Four, which at completion will contain 835,000 square feet of office space and 26,000 square feet of ground level retail. While not unexpected, Amazon’s continued expansion in Seattle brings calm to initial worries after the tech titan announced its search for a second U.S. headquarters location this month.

Skanska USA submitted a proposal to put a new office building at 318 Fairview Avenue North in South Lake Union – a site which currently houses the SLU Streetcar barn. The development proposes that Skanska quickly build a new streetcar barn and parking structure beneath an 11-story office building at the site, leasing the barn to the city for $10 per year. Since the project must be finished before the new streetcar line arrives at the barn (2020 as current estimates go), Skanska hopes to streamline the project by skipping parts of the normal review process. However, Skanska’s proposed deal also includes the acquisition of two independently owned parcels directly south of the barn, which could slow the process significantly.

Trinity Real Estate and a private Seattle family paid $15.8 million for 6 of the 11 floors at the Seaboard Building this summer, and are planning an upgrade and renovation to both the retail and office portions of the building. The space, which totals nearly 58,200 square feet, will be brought into the 21st century with modern finishes and expects rental rates to be $41.00 per square foot, fully serviced.

Martin Selig’s new project at 3rd and Lenora begun shoring and excavation work in Belltown. The 36-story building will feature 365 residential units in addition to 176,000 square feet of office space and 5,500 of retail, both operated by WeWork. In addition, five levels of garage parking beneath the building will provide 221 stalls to tenants and residents. The tower is scheduled to open in the spring of 2020.

The Ainsworth and Dunn Building, long known as The Old Spaghetti Factory, is ready to begin its redevelopment project. The historic 1902 site will now be turned into 32,377 square feet of office space by Meriwether Partners, adding a third story and a roof terrace, with a pedestrian walkway between the A&D building and a new apartment building directly south. Construction is set to be completed in 2019.

BUILDING SALES

Two more floors in the Macy’s Building at 300 Pine Street have sold. The deal was announced in June, but the buyer has now been released as an LLC related to Starwood Capital, who already owns floors 5-8. The two new floors, 3 and 4, add another 160,000 square feet to the available space, bringing the total availability at 300 Pine to 460,000 square feet.

A Blackstone Group entity has purchased the Exchange Building from Beacon Capital Partners for $156 million ($523 per square foot). The 299,000 square foot Art Deco landmark building was recently renovated prior to the sale, earning a LEED platinum certification and new amenity facilities. At the time of its last sale in 2013, the building was about 77% vacant. Now, it has only 37,011 square feet available, a mere 12% total vacancy.

OFFICE LEASES

An outside source has reported to GeekWire that Amazon is set to sign leases at four new locations, totaling more than 1.5 million square feet. 300 Pine, the new Rainier Square development, 9th & Thomas and the former Pemco headquarters will all house the online retailer, who shows no sign of slowing down in Seattle despite recent “HQ2” news.

Co-working giant WeWork continues to grow, opening another Seattle location at 1099 Stewart Street, or Hill7, in the Denny Triangle. This new office is WeWork’s fifth location in Seattle, with plans to move into two other locations throughout the city in the next several years. The company recently raised $4.4 billion from SoftBank, and has 160 locations in 16 countries.

ECONOMY

In the biggest news of the month, Amazon shocked Seattle by announcing that they are looking to open a second headquarters in the US that would house over 40,000 employees. Dubbed “HQ2,” this new headquarters search has sparked a huge bidding frenzy throughout the country as cities court the tech giant.  Some wonder whether or not Amazon’s new headquarters could slow or stop Seattle’s rapid housing and development boom, which has largely been driven by Amazon’s epic appetite for office space.  However, despite hand-wringing over the fate of the market, Amazon board member and venture capitalist Tom Alberg insists that Amazon will continue to grow in Seattle.  This sentiment was also echoed by Vulcan Real Estate President Ada Healy and real estate developer Martin Selig. Both business leaders insist that the boom is showing sign of slowing down. Indeed, Healy thinks that Amazon’s second headquarters could take some pressure off the market and let everyone “take a bit of a breath,” opening up room for smaller tech companies to grow and operate.

Seattle’s housing market continues to be red hot, with more than half of Seattle homes sold in July fetching more than the listing price.  Indeed, it’s a seller’s market out here; GeekWire reports that Seattle is among the top US cities for sellers to get the best return on investment. In 2016, Seattle sellers gained on average 53.1% or $185,000 on the sale of their home in which they lived for approximately 9 years. The return on investment for sellers doesn’t seem to be slowing, with King County home prices surging 18% in the last year alone. In southeast King County, prices have increased even higher at 20%, and Shoreline jumping an enormous 33%! Seattle has topped the nation in home price growth, nearly double that of any other US city, and has continued to claim the title of Nation’s Hottest Housing Market for the 11th-straight month.  Much of this steep increase is due to the large lack of supply in relation to demand, with the Seattle area home inventory hitting its lowest point in 10 years.  As prices rise, mortgage lenders are becoming more lenient, making it easier to purchase a house. Fannie May and Freddie Mac are loosening some of the strict standards developed after the housing crisis in the mid-2000’s to encourage homeownership.

ARENA

Oak View Group has set a proposed completion date for their Key Arena renovation, planning to spend $600 million to renovate the area by October 2020. The LA-based group plans to commit $40 million to improve traffic, transport and parking in the area. Both sides are hopeful that the draft Memorandum of Understanding (MOU) is approved by December 31 of this year.

OTHER NEWS

The Seattle Space Needle is officially getting a makeover. The $100 million project is now underway, though there is no official end date and is expected to last for multiple years. The SkyCity Restaurant has closed, but is set to reopen in June 2018. The Needle’s observation deck remains open to visitors.

Biotech company Juno Therapeutics has taken matters into its own hands and built itself a custom headquarters in South Lake Union. The building at 400 Dexter Avenue has 176,000 square feet of office and 65,000 square feet of lab space over 9 stories. A full gallery of images can be found here.

Now that Bertha has been officially dismantled, the new post-viaduct waterfront has started to become more reality than dream. New drawings and concepts for the waterfront show naturalistic landscaping, artistic glass-and-steel kiosks and inventive walkways. More information can be found here.

Written by // flinn

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