Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of September 2018.
Development continues to rise as Downtown Seattle hit a new record for construction this June. $5.6 billion in projects are currently under way – 224 projects in various stages of completion. 65 of those projects are under construction, and the rest are still in predevelopment. 6.5 million square feet of space is currently under construction, the majority of which is residential real estate. Last year, Downtown Seattle accounted for 20% of all the central business district office construction completed throughout the United States.
Martin Selig Real Estate has acquired the Commuter Building on Seattle’s Waterfront from the Jacobi Family for $44 million. The waterfront property has been owned by the Jacobis for over 50 years, and John Jacobi plans to remain involved with Selig on the redevelopment of the property, which will eventually be called the Windermere Building. The new building will have approximately 18 stories, ground-floor retail and 300,000 square feet of office space. 10 floors of apartments and 350-stalls of parking will make this mixed-use building a key feature on the new Seattle waterfront.
Alexandria Real Estate still hasn’t officially broadcast its plans for 701 Dexter, but according to a new city blog, it will likely be a 10-story building with up to 217,000 square feet of office, lab, or both on the west side of Lake Union. Alexandria paid Unico $33 million for the property and has now filed permits to demolish the building and start from scratch. While the site is zoned to allow building heights up to 280 feet, it’s in the range of sea plane landing, so will likely be curtailed further to fit these limits. ARE has been busy investing in Seattle, buying the Furuya-Corgiat buildings in Pioneer Square and the 5th & Bell Building in Belltown. Alexandria is also constructing a spec lab building, 1818 Fairview near Lake Union, which already has two biotech tenants.
Vulcan’s proposed building at the old Guitar Center block (520 Westlake Ave N) in South Lake Union has landed a tenant: Google. Vulcan and NBBJ had already outlined a detailed plan for the building, but that was scrapped and revised after Google leased the tower. The building will be 12 stories, and have 322,000 square feet of office along with four levels of parking underground. 17,000 square feet of ground floor retail will take up one corner. GLY Construction will be the general contractor on the project, and they will demolish four buildings that currently stand on the site to make room for the brand new tower.
Vancouver, BC – based Onni has purchased half a block from Clise Properties with plans to build two mixed-use towers on the west side of 7th Avenue between Battery and Bell Street in the Denny Regrade neighborhood. The sale included the master-use permit and tower plans. Onni intends to add 40 feet to each tower, and will increase the projects size from 175,000 square feet to 310,000 square feet of office. There will also be over 600 residential units and 8,000 square feet of retail space. Onni hopes to begin construction in under a year.
As noted earlier, Martin Selig Real Estate bought the Commuter Building block from the Jacobi Family for $44 million ($1,303/SF). The original building along with a parking lot on the block will be demolished, allowing Kiewit Construction to use the block in the short-term while removing the Alaskan Way Viaduct.
Graham Street Realty out of San Francisco has purchased the Interbay Work Lofts for $19.5 million or $305/sf from Goodman Real Estate. The three-story building has 64,024 square feet and was purchased due to its strategic location between the Downtown core and ever-expanding residential neighborhoods in Queen Anne and Ballard. GSR will manage the property through its affiliate Paramount Property Company.
Longtime owners McBride Construction sold 224 Nickerson Street to 224 Nickerson Street LLC (an associate of the Krinbring Family) for just over $2.6 million dollars. The deal was worth about $568 per square foot. The Krinbring family runs AAA Fire Protection just next door to 224 Nickerson. The triangle-shaped parcel is the second one that McBride has sold in recent days; earlier in the month, they sold their space at 151 Nickerson. The company plans to move to Burien.
Office leasing has been quieter than in past months, but Skanska’s new office tower 2+U already has two rumored pre-leasing tenants. Job-placement website Indeed.com is said to be negotiating for around 200,000 square feet of office space in the 38-story tower. Regus-affiliated coworking company Spaces is also rumored to be negotiating for a large block of space in the tower, between 60,000 and 100,000 square feet. The tower will be complete in 2019.
Ride-share giant Uber has signed a lease for 115,000 square feet at Second and Seneca, with plans to double its Seattle headcount. The company already has space in the building, but this new acquisition more than doubles the number and will allow Uber to relocate its employees from Second and Spring across the street. Uber has plans to spend $9 million on building out their new space, which should be completed this upcoming summer and will make room for Uber to double its headcount from 350 to at least 750 employees. Currently, Uber has over 60 jobs open in Seattle.
While Seattle is regularly touted as the “younger sibling” of Silicon Valley, new numbers hint at Seattle coming into its own regarding startup growth and funding. An analysis by Pitchbook shows that Seattle and Silicon Valley had comparable valuations of Series A funding (~$25 million) and deal size (~$10 million). While Silicon Valley still reigns supreme when you look at all stages of startup investing, the comparable Series A numbers are encouraging and new. Investment from the Bay Area into Seattle startups has also increased dramatically over the past decade.
In the hopes of ending a strike that began August 21, the Associated General Contractors of Washington (AGC) made generous edits to its deal with operating engineers. The AGC is offering raises in pay/hour for workers in districts 1-4, with pay increasing 16% in districts 1 and 2, and 15% in districts 3 and 4. The Union has also signed independent contracts with other employers, outside of their negotiations with the AGC.
King County’s housing market continues to slowly cool, as housing prices year-over-year rose less than 3% to $669,000 in August. The main reason for this slowdown is an increase in inventory. For the first time in years, supply is finally beginning to catch up with demand. The number of houses and condos for sale in King County was 74% higher than in August 2017. Prices have even dropped in new home communities. Median condo prices continue to rise at a higher rate all across the Puget Sound area.
Has Amazon’s hiring cooldown contributed to Seattle’s housing market slowdown? Likely not directly. The true reason for this market cooling, according to local real estate experts, is the simple law of supply and demand. At last, buyers have more choice as more and more units hit the market. While Amazon is experiencing a hiring slow, other large tech tenants like Google and Facebook continue to eagerly hire and recruit talent. While it’s far from a buyer’s market in Seattle, the winds have begun to shift at last towards a more even footing of power between seller and prospective buyer.
Speaking of Amazon, the question on everyone’s mind continues to remain up in the air. Where will HQ2 land? According to Jeff Bezos, we will know “before the end of this year.” The Amazon founder gave this response at The Economic Club of Washington, D.C’s 32nd anniversary dinner. All eyes were on the e-retailer magnate as he took the stand during this high-profile dinner and answered questions, cracked jokes, and reminisced. While it seems a long time to wait, by next year we will all know the landing place of the highly-coveted HQ2.
After much debate the King County Council voted to spend $135 million in taxpayer dollars to help fund work on Safeco Field. The 5-4 vote ends the debate that began in May, after the Marieners reached a new lease at the ballpark. The Mariners hope to use the funds to help renovate the aging stadium.
This King County Council vote finally answers the question of when taxpayers will stop funding stadiums: likely never. The precedent set with this vote also increases the likelihood that taxpayer money will also fund future renovations to CenturyLink as well. Entangling taxpayer money into private, for-profit sports has now committed the King County taxpayer to 25 more years of stadium taxes.
On a more popular and exciting note, the Seattle City Council took the last step to allowing the redevelopment of Key Arena in the hopes of courting an NHL team by 2020. The council unanimously approved lease and development agreements allowing Oak View Group to renovate Key Arena. The Seattle Arena Company (ArenaCo) which includes Oak View Group will spend $700 million to build a new facility seating 17,000-19,000 people and preserve the current roof of the building. With luck, the NHL Board of Directors will vote to allow an NHL expansion to Seattle for the 2020-2021 season.
The Alaskan Way Viaduct has until early next year before it closes down on January 11, 2019. This delay pushes the demolition of the Viaduct a full three years beyond its original target completion date of 2015. The WSDOT has changed their timeline both to accommodate holiday traffic and minimize road closure, as well as to finish paving the tunnel entrances and testing signals, lights, and other finishing touches on the new tunnel. While this delay may ease holiday traffic, businesses on the waterfront worry that Viaduct demolition will be pushed into tourism season instead of completing in May 2019 as was promised.
After the 2016 election approved transit expansion, Sound Transit is still sifting through two dozen different route combinations for future Light Rail stops. Some routes would add more than $300 million dollars, several would delay projects by years, and one would tack on an additional $1.2 billion dollars to the already-strained budget. Despite having two years to study, plan and strategize, leaders are no closer to deciding where tracks will be laid for the Sound Transit 3 plan.
Despite worsening traffic conditions for cars, the number of people who bike to and from work has fallen to its lowest level since 2007. In 2017, just 2.8% of workers commuted via bicycle, down from 3.5% in 2016. The number of commuters riding bikes has fallen below 12,000, a far cry from 2015 estimates for 16,000 people. There is no single factor that can be highlighted when looking for the cause of this slump. It could be weather (with the 2016-2017 winter one of the wettest on record), safety issues, or the abundance of construction projects making commuting routes disjointed.
The new two-year budget was released at the end of the month, and it proposes boosting spending on streets, sidewalks and buses by $130 million next year. This number is more than a 25% increase of what was spent this year, and also projects another $70 million in transportation spending for 2020. Mayor Jenny Durkan’s ambitious hopes may run at odds with what transportation services, specifically buses, can provide to Seattle’s riders within the year.