Q1 2014 Seattle Office Market – Tenant Perspective

Analyzing the Data

General Conclusion: At the start of 2014, the vacancy rate for Seattle’s office market dipped below 10% for the first time in this cycle to 9.9% and .6% below the 10.5% rate in Q4 2013.  Year to date positive absorption is already 347,990 square feet signaling a fast start to an increasingly tight market.  Rental rates are high and concessions are decreasing for all submarkets and building classes when compared to recent years.  Office owners, developers and investors are extremely confident about the Seattle market and the Puget Sound region.

Economy: The seasonally adjusted unemployment rate for the state of Washington continues to drop as it is now 6.4% according to The Washington State Employment Security Department. The state unemployment rate was 6.8% last quarter and 7.2% at this time in 2013.  According to the Bureau of Labor Statistics, the Seattle/Tacoma/Bellevue unemployment rate increased slightly to 6% in February although it is also historically low.  Confidence in the regional economy is also supported the strong residential real estate market with indicators like property valuations and sales volume at pre-recession levels.

Office Construction: In the first quarter of 2014, Amazon broke ground on phase one of their proposed 3.3 Million square foot development in South Lake Union.   Also, a couple of office developers announced plans to begin construction on speculative projects including Schnitzer West (278,000 sf at 501 Fairview) and Holland Partner Group (150,000sf of office as part of a mixed use project at 1101 Westlake).  Other notable office projects that are under construction include: 400 Fairview (360,000sf (Tommy Bahama as anchor tenant)), Dexter Station (~341,000 square feet), Hill7 (~300,000 square feet), Stone34 (129,000 square feet for Brooks Sports), and a couple of Vulcan projects in South Lake Union (260,000 for the Allen Institute for Brain Science and 380,000sf for Amazon Phase VI). There are still a lot of other proposed office developments that are on hold until they achieve significant pre-lease at top of the market rental rates.

Office Sales:  Investment interest and activity in office product in Seattle continues to be extremely strong. The following transactions were completed in Q1 2014:

  • Vulcan sold 401 Terry to Kilry Realty for $106.1Million or $755 per square foot.
  • Equity Office Properties sold the World Trade Center East building at 2211 Elliott to LaSalle Investment Management for $74.5 Million or $414 per square foot.
  • Hudson Pacific Properties paid $302 per square foot or $57.7 Million for the historic Merrill Place at 411 1st Ave S.
  • Manchester Capital Management purchased the F.X. McRory’s building at 419 Occidental Ave S for $17.55 Million or $205 per square foot.
  • Principal Real Estate Investors sold the Broderick Building at 615 2nd Ave and the Miken building at 1417 4th Ave to Hannay Realty Advisors out of Phoenix. The prices paid for the historic buildings were announced to be $13.75 Million for the Broderick Building and $9.3 Million for the Miken Building or $196 per square foot and $198 per square foot respectively.
  • Sun Capital bought the Pioneer Building at 606 1st Ave in Pioneer square for $170 per square foot or $12.3 Million.

Office Leases:  Below are lease transactions that were concluded in Q1 2014:

  • MulvannyG2 leased 63,000 square feet at 1101 2nd Ave
  • Tableau Software leased the 50,000 square foot former Sound Mind & Body gym at 437 N 34th Street.  The building will be used as office space
  • Chef leased 42,000 square feet and Artifact leased 28,000 square feet both at 619 Western Ave
  • SURF Incubator leased 21,400 square feet at 999 3rd Ave
  • Co-working company Makers expanded into 11,000 square feet at 92 Lenora
  • AssureStart leased 8,400 square feet at Merrill Place

Below is a table providing information for the major submarkets of Seattle:

1Q2014 Market Data

The total vacancy rate for Seattle is 9.9%.

Recommendations:

If your company:

  1. Doesn’t need to move
  2. Has an upcoming space/lease requirement in the next 2 years
  3. Can forecast headcount needs for years into the future
  4. Has a rental rate in line with or above market

- Start educating yourself on available alternatives and negotiating with your current building to get an understanding of your landlord’s position in the market.  Given the increasing pressure on rents and decreasing concessions, companies are incentivized to be educated on proposed developments that will be delivering in 18-24 months.  It is also helpful to be educated on the market so you can prepare to react quickly to increasingly competitive conditions.

Alternatively, if your company:

  1. Might need to move
  2. Needs size flexibility
  3. Wants to pursue a sublease or plug-n-play opportunity
  4. Prefers not to commit to a lease term beyond the next six months

- Wait until six months prior to your lease expiration and be prepared to act quickly.  The three to six month window prior to lease expiration is when you are most attractive to potential landlords and when they will offer you the best economics.   However, have a lease/sublease signed three months before your lease expires.  You don’t want to be in a holdover situation or without space and you need to give your company time to complete tenant improvements and plan a move.

Posted in Market Reports | Leave a comment

Seattle Office Space News – March 2014

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of March 2014.

BUILDING SALES

The office investment market in Seattle remains one of the most robust in the country.  The F.X. McRory’s building located at 418 Occidental Ave S and built in 1906 was purchased by Manchester Capital Management for $17.55 Million.  Intracorp sold the 85,725 square foot building near Century Link field after generating interest from over 100 potential buyers.  The price per square foot equates to $205.

Principal Real Estate Investors of Des Moines sold the Broderick Building at 615 2nd Ave and the Miken buiding at 1417 4th Ave to Hannay Realty Advisors out of Phoenix. The prices paid for the historic buildings were announced to be $13.75 Million for the Broderick Building and $9.3 Million for the Miken Building or $196 per square foot and $198 per square foot respectively.

Vulcan sold one of their first developments in South Lake Union located at 401 Terry Ave N for $106.1 Million to Kilroy Realty.  The 104,605 square foot building is mostly occupied by the Institute of Systems Biology and the price per square foot equates to $755.

After reports of being under contract, it was revealed that Greg Smith’s Urban Visions and Richard Nimmer were unable to finalize the transaction to purchase the Eitel building at 2nd & Pike.

OFFICE LEASES

Leasing news this month was dominated by co-working or shared working spaces geared towards housing small and startup companies.  First, it was announced that Makers expanded their space from 7,000 to 11,000 square feet at 92 Lenora near Seattle’s Pike Place market.

Next, news broke that SURF Incubator will be relocating to the 5th floor of 999 3rd and taking more space.  SURF previously occupied roughly 16,000 square feet at the Exchange Building and now will be leasing 21,400 square feet.

SOUTH LAKE UNION DEVELOPMENT

Schnitzer West will start construction without prelease on two office projects in Seattle and Bellevue later this year.  The Seattle building, located at 501 Fairview, will be called Urban Union and will have roughly 278,000 square feet of office space in 12 stories.

Vulcan has applied for a land use permit to develop a full block in South Lake Union between Westlake & 9th Ave N to the East & West and Denny & John to the North & South.  Zoning for the land, currently home to Denny Park and the South Lake Union Discovery Center, would allow for a 400 foot tall residential tower and a 240 foot tall office building.

Holland Partner Group announced their plans to begin construction this summer of a mixed use development at 1101 Westlake Ave North.  The development, called Westlake Steps, will have a hotel, 570 apartment units and 150,000 square feet of office space.

Vulcan is developing a 51,200 square foot administrative office building for Seattle’s EMP Museum that will be Seattle’s first ‘salmon safe’ building.  Located at 120 Sixth Ave N, the building will have a rain water collection system that uses 75% less water than a traditional building of the same size.

This article provides perspective from a general contractor on the dynamics of building in South Lake Union considering all of the construction happening there.

OTHER OFFICE DEVELOPMENT

Urban Visions has filed plans to build a up to a 77 story office building at Second & Marion in Seattle’s central business district.  The preliminary plans presented a conceptual model of how the tower, which could have between 1.5 -2 million square feet of office space, will look. Despite the planning, Urban Visions won’t start the project until at least 2018.  Should the building be completed at 77 stories it would be one story taller than Columbia Center, which is currently Seattle’s tallest building.

Chophouse Row, a boutique office project on Seattle’s Capitol Hill on Pike street between 11th & 12th Avenues, is under construction.  Developer Liz Dunn announced that 40% of the office space has already been leased.

Citing a lack of office space in Ballard, Henbart LLC is creating a mixed use project at 5601 22nd Ave NW.  The two building complex will have 21,000 square feet of office space, an equal amount of retail, 80 apartment units and 4 large townhomes.

TUNNEL/VIADUCT

News was dominated in February by the stall of Bertha, the machine responsible for boring the tunnel that will replace the Alaskan Way viaduct along Seattle’s waterfront.  In March, Brierly Associates was selected to design the rescue shaft that will be used to access and repair Bertha.

To make matters worse, a new inspection by the Department of Transportation revealed that the viaduct has new and widening cracks causing safety concerns for the 85,000 vehicles that use the viaduct daily.

ECONOMY

Seattle’s housing market saw a 5% drop in sales between February 2013 and February 2014.  The drop is a signal of a slowing housing market, although it is less than the national average of a 10% drop as analyzed by online real estate company Redfin.

Zillow, another online real estate company, released a report indicating that Seattle is the nation’s fifth-best market for home sellers as values have increased 10% in the past year.  The top four residential markets were San Jose, San Francisco, San Antonio and Los Angeles.

OTHER NEWS

Seattle held ‘Waterfront Week’ in March which was expected to draw more than 1,000 people and had festivities celebrating plans and designs for the transformation of the city’s waterfront area after the removal of the Alaskan Way viaduct.  Different ideas for how to access the waterfront included an elevator and a gondola.

Posted in News | Leave a comment

Seattle Office Space News – February 2014

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of February 2014.

OFFICE LEASES

There was a lot of leasing news in February 2014.  First, Rumors swirled in early February that Amazon.com is the tenant that will be leasing the 187,000 square foot building at 635 Elliott owned by Martin Selig.  The lease would be a huge relief for Selig who has been unable to fill it since it was built over 4 years ago.

Regional architecture firm MulvannyG2 announced plans to relocate their 200 employees from Bellevue to Seattle.  The company leased 63,000 square feet at 1101 2nd Ave, a building owned by Rockwood Capital, and will move in June of 2015.

Fast growing technology company Tableau Software added to their footprint in Seattle’s Fremont submarket by leasing 50,000 square feet at 437 N 34th Street.  The building, owned by Stephen C. Grey & Associates, was previously occupied by Sound Mind & Body Gym.

The Western Building, located at 619 Western Ave along Seattle’s waterfront, has landed a tenant for the top two floors.  Technology company Artefact will move their 50 employees into roughly 28,000 square feet once tunnel drilling machine Bertha passes under the building.  It was later reported that the building also has a tenant for floors 2-4 in the six story building.

Online insurance company AssureStart leased 8,400 square feet at Merrill Place.  Merrill Place is a 191,000 square foot building located at 411 1st Ave S in Pioneer square and was recently purchased by Hudson Pacific Properties.

PROPOSED DEVELOPMENTS

Seattle Developer Touchstone Corp. announced more plans for development in Seattle’s Denny Triangle Neighborhood.  They plan to build an 11 story 300,000 square foot office building at 1812 Boren Ave, across the street from their Hill7 development that is already under way.  The development plans also call for a 37 story residential building with 372 units.

Touchstone also revealed that they will break ground without a tenant for their 214,000 office and lab NorthEdge project.  NorthEdge is located on the corner of N Northlake Way and Densmore Ave N in Seattle’s Wallingford submarket.

Additionally, life science developers BioMed and Alexandria Realty are gearing up to build a couple of buildings in Seattle’s South Lake Union neighborhood.

TUNNEL/VIADUCT

Seattle news in February was dominated by stories about the stall of tunnel boring machine Bertha.  Stalled for over 2 months, Bertha is supposed to be creating a tunnel that will eventually replace the Alaskan Way viaduct along Seattle’s waterfront.  Stories early in the month revealed that Bertha is broken because of clogged cutterhead and overheating which damaged the seal system necessary for lubricating the drive system that spins the cutter.  State officials said that they plan to hold the contractors, Seattle Tunnel Partners (STP), accountable for any repairs and cost overruns on the project.  However, it has been reported that potential problems with the seals were known prior to the project start date.

Meanwhile, STP worked with experts on studying ways to fix Bertha.  It looks as if the solution will involve digging a giant 120 foot deep shaft in front of the machine.  STP is looking at ways to try to stay on schedule by shifting crews to other projects associated with the tunnel as it looks like it will take 6 months before Bertha might start digging again.

ECONOMY

More support of the health of the regional economy was revealed when property tax valuations were released in February.  Both residential and commercial real estate values are approaching 2008 levels.

OTHER NEWS

Regardless of the stall of Bertha, design for Seattle’s waterfront after the viaduct is torn down is being refined and the design team is moving towards next steps.  The initial schematic phase of design should be complete in June.

Posted in News | Leave a comment

Seattle Office Space News – January 2014

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of January 2014.

BUILDING SALES

Investment activity in Seattle’s office market continued to be strong through the month of January.  720 Olive Way, which consists of 301,000 square feet of office space in 20 stories, is on the market for sale.   Built in 1981 and renovated in 2004, the building owned by Hines is expected to sell for roughly $120 Million or ~$398 per square foot.

Equity Office Properties of Chicago sold the World Trade Center East building (2211 Elliott Ave) to LaSalle Investment Management for $74.5 Million.  The price for the 187,000 square foot office building built in 1999 equates to ~$414 per square foot.  Unico was then hired to manage the building as they continue to diversify their ownership and management portfolio in anticipation of the expiration of their land lease contract with the UW for downtown’s metropolitan tract.

Merrill Place, a 191,000 square foot historic office building located at 411 1st Ave S, was sold by Nitze Stagen for $57.7 Million.  Hudson Pacific Properties paid $302 per square foot for the building originally built in 1906.  The high price per square foot can be attributed to future development opportunities on the site that will be in addition to the existing building.

Sun capital Corp purchased the Pioneer Building at 606 1st Ave in Pioneer Square for $12.3 Million. Richard and Dorothy Sikora sold the 72,000 square foot office building, originally constructed in 1892, for ~$170 per square foot.

PROPOSED DEVELOPMENTS

Ground has broken for the first phase of Amazon’s proposed 3.3 Million square foot development in South Lake Union.  This article provides an interesting time-lapse video showing the pouring of over 11,000 cubic yards of concrete for the foundation of the first 3 buildings.  In addition, Amazon exercised their right to purchase a block between Bell & Blanchard and 7th & 8th, which is adjacent to their proposed campus, for $52 Million from Clise Properties.  Amazon has rights to purchase additional land nearby for what could be a continued expansion of their headquarters in South Lake Union.

Vulcan Real Estate is seeking  a master use permit to develop two more six-story 194,000 square foot office buildings on Eighth Ave N in South Lake Union.  These buildings would be in addition to the two 12-story office buildings Vulcan is building on Ninth Ave N.

Touchstone Corp. is considering building a mixed use project at 1812 Boren Ave on the current site of a Goodyear service center.  The project would include offices and housing.

Legacy Commercial is looking to build a mixed use building on 11th Avenue and East Pine Street in Capitol Hill.  The project would include 14,000 square feet of retail, 53,000 square feet of offices and 20 residents.

TUNNEL/VIADUCT

There was lots of news in January concerning the tunnel project that will eventually replace the Alaskan Way viaduct on Seattle’s waterfront.  Some ponder whether retail operations will recover after the extensive construction period in the area.   For most of the month, crews tried to figure out what was blocking Bertha, the machine boring the tunnel. Eventually it was discovered that an eight inch steel pipe was the cause of the delay.  Late in the month, crews were finding more blockage in Bertha’s massive spokes that have stopped the digging machine since early December 2013.  Throughout January it was quite the cluster of finger pointing regarding who was at fault for not knowing about the obstructing objects.  Towards the end of the month it was reported that WSDOT crews were able to stay productive working on other aspects of the project.  Finally, it appears that Bertha will begin tunneling the week of January 27-31 and should complete 2 more feet of progress of the 1.7 mile distance.

ECONOMY

Always a strong economic indicator, the residential real estate market has bounced back from the recession and sales volume has reached its highest level since 2007 with 75,517 closed sales in 2013 in the region.

OTHER NEWS

Two architecture firms, MulvannyG2 and NBBJ, are on the hunt for new office space.  Both firms are reportedly looking for more than 50,000 square feet.

Jordan Selig, daughter of Seattle office building mogul Martin Selig, is back in Seattle and getting into the family development business.  This article provides background on Jordan and her plans.

Here is a look at pictures of Twitter’s Seattle engineering office.

Finally, here is an interesting look at the history of development of Seattle broken down by decade.

Posted in News | Leave a comment

Q4 2013 Seattle Office Market – Tenant Perspective

Analyzing the Data

General Conclusion: In Q4 2013 Seattle’s office market vacancy rate remained flat at 10.5% up slightly from the 10.4% vacancy rate in Q3 2014.  Positive absorption for the year totaled 1,115,316 square feet.  Rents continue to increase despite being historically high across all submarkets and building classes.  There has been no sign of a decrease in confidence as office building owners, developers and investors continue to be bullish about the Seattle market and the region as a whole.

Economy: The Washington State Employment Security Department posted  a preliminary unemployment rate for November of 6.8% for the state.  This is down from 7.6% for the same month in 2012.  According to the Bureau of Labor Statistics, the Seattle/Tacoma/Bellevue unemployment rate remained historically low at 5.7% in November of 2013.  Several indicators continue to inspire optimism about the state of the commercial real estate market and the future of the economy in the city and region.

Office Construction: 2013 brought a lot of news from developers planning office towers in Seattle, but most will require a significant pre-lease at top of the market rental rates in order to attain adequate financing.  However, some developers are planning or building speculative projects.  Touchstone Corp landed USAA Real Estate Co as equity partner for their two phase 820,000 square foot project at 307 Fairview Ave N, which is set to break ground in early 2014.  Also, 400 Fairview broke ground on the 360,000 square foot project after announcing Tommy Bahama signed a lease to be the anchor tenant.  Otherwise, the only other projects recently completed or under construction are: Homeplate Center (~346,000 square feet), Dexter Station (~341,000 square feet), and Hill7 (~300,000 square feet).  Build to suits under construction include: Stone34 (129,000 square feet for Brooks Sports), Vulcan South Lake Union (260,000 Allen Institute for Brain Science), as well as plans by Amazon to add to their Vulcan campus.

The following developers have announced plans to build or redevelop significant projects, but have not announced a timeline for breaking ground:  University of Washington (Rainier Square), Daniels Real Estate (5th & Columbia), Schnitzer (Madison Center), Amazon (3.3M SF campus at 2701 7th), and Urban Visions (77 stories in the CBD).  The soonest any of these developments would be ready for occupancy would be mid 2016.

Office Sales:  Seattle remains one of the top few office markets in the country attracting commercial real estate investors. The following transactions were completed in Q4 2013:

  • A joint venture between Talon Private Capital and Prudential Realty Group sold 1800 9th Ave in December for $150.4 million to Chicago based Heitman America.  The purchase price for the 312,000 square foot building that was built in 1990 equates to roughly $481 per square foot.
  • Beacon closed on the Exchange building at 821 2nd Ave in Seattle for $66 million or $219 per square foot.  Ashforth Co. was the seller for the 22 story 300,500 square foot historic building.
  • Holland Partner group purchased most of a block (including the 82,000 square foot 1300 Dexter office building) bordered by Westlake Ave and Dexter Ave and Galer Street and Highland Drive for $79.5 Million
  • The 82,000 square foot office complex located at 2, 4 & 6 Nickerson in Seattle’s Fremont submarket were sold by Columbia West Properties.  Stephen Grey & Associates paid $13.6 Million for the three half empty buildings built in 1986. The price per square foot for the sale equates to $166/SF
  • Goodman Real Estate bought the Grand Central building located at 216 1st Ave S in Pioneer Square for $11.5 million. The purchase price for the 72,500 historic office building equates to $158.62/SF.
  • Martin Smith purchased the Holyoke Building from Dina Corp. for $7.4 Million.  The sale of the 113 year old building at First and Spring equates to a price per square foot of $185.19.

Office Leases:  Below are significant lease transactions that were concluded in Q4 2013:

  • Bank of America restructured their lease at 800 5th Ave and will continue to occupy ~310,000 square feet there.
  • The Washington State Department of Commerce leased 205,000 square feet at the Pacific Medical Center building on Beacon Hill.
  • Tommy Bahama signed a lease for 110,000 square feet in the low-rise at 400 Fairview in South Lake Union.
  • Sur La Table leased 50,000 square feet at 6100 4th Ave in SODO.
  • Online skin care company Paula’s Choice leased 21,000 square feet at 705 Union Station.

Below is a table providing information for the major submarkets of Seattle:

4Q2013 Market Data

The total vacancy rate for Seattle is 10.5%.

Recommendations:

If your company:

  1. Doesn’t need to move
  2. Has an upcoming space/lease requirement in the next 2 years
  3. Can forecast headcount needs for years into the future
  4. Has a rental rate in line with or above market

- Start educating yourself on available alternatives and negotiating with your current building as soon as possible.  Given the foreseeable upward pressure on rents, look for buildings/spaces that your organization can use to leverage renewal discussions today.  The educational process is quick/free and should only take a couple of hours.

Alternatively, if your company:

  1. Might need to move
  2. Needs size flexibility
  3. Wants to pursue a sublease or plug-n-play opportunity
  4. Prefers not to commit to a lease term beyond the next six months

- Wait until six months prior to your lease expiration and be prepared to act quickly.  The three to six month window prior to lease expiration is when you are most attractive to potential landlords and when they will offer you the best economics.   However, have a lease/sublease signed three months before your lease expires.  You don’t want to be in a holdover situation or without space and you need to give your company time to complete tenant improvements and plan a move.

Posted in Market Reports | Leave a comment

Seattle Office Space News – December 2013

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of December 2013.

OFFICE LEASES

Two integral organizations within the Seattle startup community are moving from South Lake Union to the University District.  Founder’s Co-op and Techstars will be located at Condon Hall on the University of Washington campus.  It will be interesting to see if this is the beginning of a trend for startups and other technology companies locating in the submarket.

BUILDING SALES

A joint venture between Talon Private Capital and Prudential Realty Group sold 1800 9th Ave in December for $150.4 million to Chicago based Heitman America.  The value of the building increased dramatically this year after Amazon.com leased more than half of the 312,000 square foot building that was built in 1990.  The purchase price equates to roughly $481 per square foot.

Holland Partner group purchased most of a block bordered by Westlake Ave and Dexter Ave and Galer Street and Highland Drive for $79.5 Million.  Holland plans a mixed use development for the site near the growing South Lake Union submarket, but does not plan to demolish the 82,000 square foot office building at 1300 Dexter built in 1986.  The seller was an affiliate of Equity Office and Blackstone Group.

The 82,000 square foot office complex located at 2, 4 & 6 Nickerson in Seattle’s Fremont submarket were sold by Columbia West Properties.  The buyer, an LLC led by Stephen Grey & Associates, paid $13.6 Million for the three half empty buildings built in 1986. The price per square foot for the sale equates to $166/SF.

PROPOSED DEVELOPMENTS

Progress was announced by Touchstone Corp regarding their proposed 820,000 square foot office project at 307 Fairview Ave N in Seattle’s South Lake Union submarket.  The USAA Real Estate Co joined the Seattle development company as equity partner.  Construction for the first building of the two phase project will begin in Q1 2014.  General contractor Lease Crutcher Lewis will start the 12 story 380,000 square foot first phase, which will be followed by another 13 story 440,000 second phase.

Urban Visions released plans for a 77 story skyscraper in the central business district bordered by 2nd & 3rd Avenues and Marion & Columbia Streets.  If approved and constructed, the building would be the tallest in the city.  Urban Visions is partners with Martin Smith Inc and a few others on the project that will include a redeveloped Metropolitan Grill.

Schnitzer West continues to hint that they will begin construction soon on Madison Center, a 37 story 750,000 office building at 5th & Madison in Seattle’s central business district.  The project is one of several proposed developments in the southern part of the CBD that likely need significant pre-lease in order to break ground.

In addition to a Bellevue project and a medical redevelopment on Seattle’s First Hill, Trammell Crow Co. is planning a 14 story office project at 1007 Stewart Street in downtown Seattle.  The project on Stewart could be ready for occupancy by Q2 2016.

Seattle’s Department of Planning and Development approved the design of the three sphere biodome that will be the most iconic aspect of Amazon.com’s proposed 3.3 Million square foot campus project in South Lake Union.

TUNNEL/VIADUCT

Progress on the drilling of the Highway 99 tunnel that will replace the viaduct along Seattle’s waterfront continues to experience delays.  In addition to discovery of unidentified object clogging the pathway, the project has also experienced delays due to labor disputes.  As of the end of December, Bertha had been stuck for 25 days. So far contractors have been able to build 1/8th of the tunnel for half of the budgeted cost.

ECONOMY

In 2013, Seattle’s commercial real estate market had, literally, a record year.  Downtown Bellevue saw record prices for land at $535/SF then $808/SF for sites that can accommodate high-rise development.  The price per square foot for a building sale in Seattle was set at $749/SF when 202 Westlake Ave traded.  The Bravern, a two tower apartment project that sold in downtown Bellevue, set the price per unit record at $676,923. The record sale price for warehouse buildings in South Seattle was also broken at $120/sf.  Generally, the regional commercial real estate market has been bolstered by strong job growth mostly led by the high-tech industry.  52,000 jobs were added in 2013 and economic forecasters are projecting another 52,000 jobs in 2014.   Money chasing commercial real estate projects in the region has been and will continue pouring in from all over the world.

OTHER NEWS

Dan Flinn, founder of prominent Seattle tenant representation firm Flinn Ferguson, offers his take on the Seattle office market.  Flinn expresses that there is still an abundance of commodity vacancy for companies that occupy less than 20,000 square feet although the demand for space for creative companies in locations with amenities has increased.  So far, more traditional companies located in Seattle’s downtown core still aren’t ready for to sign a lease that will kick off significant new office development.

Posted in News | Leave a comment

Seattle Office Space News – November 2013

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of November 2013.

OFFICE LEASES

After years of speculation, it was finally confirmed that Bank of America has restructured their lease at 800 5th Avenue in Seattle’s central business district.  The bank leases about 780,000 square feet under a 35-year deal that expires in 2016. Of that amount, the bank subleases 270,000 square feet and occupies 510,000 square feet, according to bank spokeswoman.  The rumors are that the bank gave back roughly 200,000 square feet and now only occupy 310,000 square feet of the 934,000 square foot high rise.

Throughout most of 2013 it has been rumored that Amazon will be leasing almost all of 5th & Bell and Blanchard Plaza, two office buildings in the Denny Regrade.  If the transaction closes, the fast growing online retailer will take another 275,000 square feet off of the market near their campus in South Lake Union.  Amazon currently leases over 2.2 Million square feet in Seattle and has plans to develop another 4 Million square feet.

The Washington State Department of Commerce has leased 205,000 square feet at the Pacific Medical Center for the nursing and healthcare programs of Seattle Central Community College.  The former Amazon headquarters atop Seattle’s Beacon Hill will now be roughly 75% leased.

The Georgetown area of South Seattle got a boost when Sur La Table announced the lease of roughly 50,000 square feet for their corporate headquarters.  The space at 6100 4th Avenue South in a building owned by Benaroya Co. will include office space, a mock retail store, a rooftop deck and a test kitchen.

BUILDING SALES

Talon Private Capital and Prudential have begun marketing 1800 9th in downtown Seattle for sale.  The 312,700 square foot office building recently underwent a major renovation designed by LMN Architects after Amazon signed a lease for roughly 200,000 square feet earlier this year.  Talon bought the building in 2011 from Regence who leases roughly 30% of the 97% occupied building.

One of the buildings that housed the former headquarters of the Seattle Times was purchased by Omni Group out of Vancouver B.C for $29 Million.  The block bounded by Fairview and Boren avenues north and John and Thomas streets is part of an assemblage by Omni Group that is planning redevelopment based on new zoning rules allowing for taller buildings in the South Lake Union area of Seattle.

PROPOSED DEVELOPMENTS

13 Coins announced it will be opening its first new restaurant in 40 years at Stadium Place, the 1.5 million-square-foot mixed-use complex in Pioneer Square developed by American Life.  The restaurant will occupy 9,500 square feet in the East block of the complex, which will also include 680,000 square feet of office. Construction is expected to begin in the middle of next year and be done in the summer of 2016.

Development of Stone34, the 129,000 square foot office building at 34th & Stone Way in Seattle’s Fremont neighborhood, is progressing nicely.  The future headquarters for Brooks Sports was designed by LMN Architects and is being built by Skanska

R.C. Hedreen’s plans to develop a $500 Million mixed use project at the Greyhound terminal block, bounded by Eighth and Ninth avenues and Stewart and Howell streets, is on hold.  Despite confidence that they had city approval for the 2.1 Million square foot project, new guidelines and requirements presented by the city recently has frustrated the developer.

Sabey Corporation has been chosen by King County to redevelop portions of Harborview Hall, a 10 story building located at 326 Ninth Avenue on First Hill.  The plans are to demolish parts of the 82 year old building and add new a medical office building and a landscaped plaza. As part of the project, Sabey plans to add an extra floor and build a seven-story addition.

Legacy Companies announced plans to redevelop the century old Pine and Value Village Buildings on Capitol Hill. Pine Building is an 18,200 square foot building at 1021 East Pine Street and Value Village Building is a 36,900 square foot building at 1525 11th Avenue.  The plans are to create a mixed-use project with office, ground-floor retail, and residential components. The architect on the project is Ankrom Moisan.

PROPOSED ARENA PROJECT

Analysis from Private Valuations Inc. of Bellevue is suggesting that the proposed NBA and NHL arena in Seattle’s SODO area will end up costing Seattle tax payers roughly $732 Million in tax breaks and other services.   The study was paid for by Seattle attorney Cleveland Stockmeyer who opposes the arena plans.  There has been no recent news about potential NBA teams that could occupy the arena.

ECONOMY

The Urban Land Institute and PwC released their ‘Emerging Trends’ report for 2014.  The report suggests that Seattle is the 4th best market in the country to invest thanks to foreign investment interest and growth in the tech industry.  Seattle ranked 7th in both development and homebuilding.

OTHER NEWS

After 25 years, the façade of 1201 3rd will be cleaned.  The process is to take 3 years.

Posted in Miscellaneous | Leave a comment