Q1 2016 Seattle Office Market

Analyzing the Data

General Conclusion: Seattle’s office market continued rapid growth at the start of the year with vacancy decreasing to 7.9% in Q1 2016 down from 8.3% in Q4 2015. Positive absorption for Seattle was 554,060 square feet in the first quarter.  Due to strong demand for Seattle commercial real estate investment product and decreasing vacancies, rental rates across all submarkets and building classes continue to increase, sometimes on a weekly basis.  For the foreseeable future, market fundamentals will be in the favor of landlords.

Economy:  The northwest has continued to add jobs in Q1 2016. Washington’s preliminary seasonally adjusted unemployment increased slightly to 5.8% in February 2016 according to The Washington State Employment Security Department.  The Bureau of Labor Statistics is reporting a slightly lower rate of 5.3% for the Seattle/Tacoma/Bellevue area.

Office Construction: The record amount of construction in Seattle can partly be attributed to office development with the following projects currently under construction:

  • Amazon II, and Amazon Phases VI, VII & VIII totaling: ~ 2,094,000 square feet (100% leased to Amazon)
  • Troy Block: ~817,000 square feet (100% leased to Amazon)
  • Madison Centre: ~764,00 square feet
  • The Mark: ~528,000 square feet
  • Yale & Thomas: ~370,00 square feet
  • 200 Occidental : ~370,00 square feet (100% leased to Weyerhauser)
  • Midtown 21: ~365,00 square feet
  • Dexter Station: ~345,992 square feet (100% leased to Facebook)
  • Tilt 49: ~307,296 square feet
  • Urban Union: ~291,00 square feet (100% leased to Amazon)
  • 15th & Market: ~204,000 square feet
  • NorthEdge: ~202,620 square feet (100% leased to Tableau)
  • 1101 Westlake: ~150,000 square feet

Despite all of this development, the available supply is not enough to outpace current demand.

 Office Sales:  The following building sales were completed in Q1 2016:

  • 101 Elliott (former home of the Seattle Post Intelligencer) sold to Credit Suisse Group for $40.4 million from Legacy Partners. That price is just over $397 per square foot for the 101,750 square foot property. The Landmark Seattle P.I. Globe is not part of the sale and is planned to be brought to MOHAI.
  • Vulcan has sold the commercial portion of Alley 24 on Yale and John Street to Met Life. Met Life paid $129.4 million or $600 per square foot for the 215,000 square foot office space.  Vulcan’s total sales in the past few years equates to nearly $2.93 billion.
  • 2001 8thAve sold for $370 Million or $740 per square foot to Rreef property Trust. Rreef is part of Deutsche Asset & Wealth Management.

Office Leases:  Office leasing in the first quarter of 2016 heated up significantly from the end of 2015, due to several large transactions in the technology sector:

  • Google leased over 600,000 square feet in South Lake Union on the Lake Front Blocks that will be developed by Vulcan.
  • In the same neighborhood, Amazon has announced that they leased an additional 286,000 square feet in the Urban Union building.
  • Tableau will be taking over a 110,000 square foot building next to their headquarters in Fremont. The company now has 16 locations in 10 countries worldwide.
  • Oracle continued to grow their presence in Seattle by expanding to 90,000 square feet at Century Square in the central business district.
  • Also at Century Square, Qumulo revealed that they have also expanded into nearly 70,000 square feet.
  • In one of the few non technology related leases, Saltchuck will be moving into 91,000 square feet at Hudson Pacific’s new 450 Alaskan Way project.
  • Daily deal site Groupon is moving into the central business district after leasing 42,000 square feet at 1201 Third.
  • In anticipation of their move to the Seattle waterfront, Expedia leased 38,000 square feet at 645 Elliott.
  • Local coding school Code Fellows announced they will be moving from crowded South Lake Union to 20,000 square feet at Third and Broad in Belltown.
  • Snapchat found a home in Seattle with a lease of 8,000 square feet at 101 Stewart near Pike Place Market.

Below is a table providing information for the major sub-markets of Seattle:

1Q2016 Market Data

The total vacancy rate for Seattle is 7.9%.

Recommendations:

If your company:

  1. Doesn’t need to move
  2. Has an upcoming space/lease requirement in the next 2 years
  3. Can reasonably 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 volatile 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.

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Seattle Office Space News – March 2016

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of March 2016.

OFFICE DEVELOPMENTS

Office developers remain confident in Seattle.  At 1201 2nd Avenue in the central business district, Skanska is in for design review on their planned 671,000 square foot 2+U office tower.  Skanska has not announced any leasing in the project.

Expedia plans to expand its already massive waterfront headquarters on Elliott Ave. Expedia submitted plans to build an additional 600,000 square foot building and has room for several more phases of development on the 40 acre campus in the future. Construction to turn the former Amgen laboratory space into office is slated for 2016.

The Civic Square development that has long been delayed finally has a new developer.   Triad development which has been working on the deal since 2007 has asked the City to transfer its interest to Touchstone. Touchstone has until May 11 to reach terms with the City before the deal that has been plagued with political scandals finally dies.

BUILDING SALES

Last year King County’s largest  25 real estate sales brought in more than $4.8 billion. The sale of the Columbia Tower to Hong Kong based Gaw Capital tops the list.  In total, foreign investors acquired $2.8 billion worth of commercial real estate. A trend to make note of is that nearly $875 million was spent on Industrial Properties, likely due to the strong investor competition for high prized office buildings.

OFFICE LEASES

The biggest headline in recent Seattle office leasing history came this month. Vulcan announced it will be developing a 600,000 square foot campus for Google in South Lake Union between Mercer & Valley Streets and Terry and Fairview Avenues North. Google will relocate from their current Seattle offices in the Fremont submarket.

Amazon also had an announcement in March revealing that the company has leased the 286,000 square foot Urban Union building from Schnitzer.  Urban Union is near Amazon’s headquarters in South Lake Union at 501 Fairview Ave N. Some estimates show Amazon has committed to 8.8 million square feet In Seattle not including the 1.1 million square foot headquarters they plan to construct at Westlake Avenue.

Local coding school Code Fellows announced they will be moving from crowded South Lake Union to 20,000 square feet at Third and Broad at the edge of Belltown.  High prices in South Lake union led Code fellows to the new location, which is owned by Martin Selig Real Estate.

ECONOMY

The Seattle economy seemingly continues to boom with most indicators showing little sign of a slowdown.  The amount of construction cranes in Seattle is now up to sixty, which is 43% higher than this time last year. The same report indicates that 9,000 residential units have been built in the past few years here. Even though 9,000 residential units have been built in Seattle over the past few years, the residential market continues to be hotter than ever. The number of homes available in King County decreased 30% year to date and home prices spiked 19.8% last month. Much of this growth has been spurred by technology giants such as Amazon and Google. Tech workers now make up more than 8.2% of Washington’s Workforce and they make a lot of money. The average salary was $130,000 for tech workers the second highest in the nation. Seattle now has the 5th highest concentration of rich millennials according to Zillow.

The amount of high paying jobs available from large technology companies combined with a more affordable housing market has caused many workers to migrate to Seattle from the Silicon Valley. The amount of Valley residents searching for homes in the Northwest quadrupled between 2011-2015.

This article profiles how ten years ago Amazon quietly created Amazon Web Services and how that has led to Seattle becoming the cloud capital of the world, attracting even more talent to the Northwest.

Despite the strong real estate and jobs market in Seattle, Venture Capital investments in the area are down so far this year. There has been 67 percent less capital invested in Seattle than this time last year apparently because of the sluggish global economy and fears of a tech bubble forming.

TUNNEL/VIADUCT

The tunnel boring Machine Bertha has reached its “safe haven” and will undergo maintenance for a month before it starts tunneling under the viaduct. Bertha has now made it 17% of its 1.7 mile journey.

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Seattle Office Space News – February 2016

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of February 2016.

OFFICE DEVELOPMENTS

Hudson Pacific Properties to bring some needed Class A office space to the Pioneer Square sub market.   The announcement suggests that construction will start within the next couple of months on the  160,000 square foot project at 450 Alaskan Way.  So far, there have been no pre-leases have signed.

In the Central Business District, the mega 102 story skyscraper planned by Crescent Heights, has been downsized from 102 stories to 100 stories to comply with a FAA injunction.  Initial filings show a 2017 start date for the half block mixed use project on Fourth Avenue between Cherry and Columbia.

Just down the street, the largest development currently under construction in Seattle, Madison Centre has received a $150 million equity deal. Developer Schnitzer West has joined with Cornerstone Real Estate Advisors on the equity portion and has closed on a construction loan with Blackstone Debt Strategies. The 754,000 square foot office project is scheduled for completion in spring of 2017.

Seattle developer Greg Smith of Urban Visions hopes that he can attract another tech tenant to a new building where Amazon once had space. The Launch Pad at 1516 Second Ave will be 170,000 square feet of creative space and is in the initial design phase.

Martin Selig will also begin construction on a project in the Ballard submarket this month. The 200,000 square foot building at the intersection of 15th and Market Street already has leases signed for the top two floors, although Selig declined to say who the tenant was.

BUILDING SALES

Seattle’s landmark Post Intelligence globe building has a new owner. Credit Suisse Group purchased the building for $40.4 million from Legacy Partners. That price is just over $397 per square foot for the 101,750 square foot property. The Landmark Globe is not part of the sale and is planned to be brought to MOHAI although a timeline has not been set for the move.

In its latest disposition, Vulcan has sold the commercial portion of Alley 24 on Yale and John Street to Met Life. Met Life paid $129.4 million or $600 per square foot for the 215,000 square foot office space.  Vulcan’s total sales in the past few years equates to nearly $2.93 billion.

A building mostly occupied by Amazon at 2001 8th Ave, sold for $370 Million or $740 per square foot to Rreef property Trust. Rreef is part of Deutsche Asset & Wealth Management and this is the second property they have acquired in the region recently.

OFFICE LEASES

This month, cloud company Oracle continued to grow its presence in Seattle by expanding to 90,000 square feet at the Century Square building in downtown Seattle. In addition, Qumulo announced an expansion in to 70,000 square feet at Century Square.

In anticipation of its move to the Seattle waterfront, Expedia has leased space along Elliot. The travel company signed a lease for 38,000 square feet at 645 Elliott owned by Martin Selig and will use the space to test the location and move from the Eastside.

ECONOMY

In no surprise, the Seattle area economy continued to show strong indicators even as national and international stock markets remained stagnant. A report by John L. Scott showed that year over year median home prices were up nearly 21% for condo sales in Snohomish county with other areas following closely behind. The report also indicated that the number of homes selling within 30 days is twice the amount of a normal “healthy” market.

The City’s job market is currently ranked the fourth hottest in the Nation according to CareerBuilder and is one of the main reasons the housing market is on fire.  Another indicator showed that Seattle is still a top moving destination in the country. Penske Truck Rental ranked Seattle as the 8th most popular moving destination, dropping slightly from 6th last year

There have been significant conversations around the revitalization of the central business district and several statistics confirm this statement. The City’s 12 greater downtown neighborhoods are the fastest growing in the state with nearly 70,000 people calling the core home. There are 46 active construction projects in this submarket which will add to the amount of bars, restaurants, and other entertainment that will stay open long after the work day ends. At the same time, the CBD has added nearly 30,000 jobs since 2010 which also helps to propel growth.

Finally, with rising rent for commercial space this article profiles five popular trends in office space design including: Integration, culture and the use of open space.

OTHER NEWS

For pictures and more information about King 5’s very tech friendly Sodo office click here.

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Seattle Office Space News – January 2016

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of January 2016.

OFFICE DEVELOPMENTS

Office development is challenging and January brought news of hurdles for a few projects in Seattle.  The proposed 102 story Crescent Heights Tower in Seattle’s CBD hit a roadblock when the FAA delivered a “notice of presumed hazard” to the developer.  The building would be the tallest on the west coast and the FAA is concerned that the tower would interfere with operations at Boeing field. Preliminary document show the FAA would rule in favor of a redesigned tower at a shorter height of 965 feet rather than the 1,117 foot height currently being proposed.

The proposed Maritime Building redevelopment on Seattle’s waterfront is also facing some resistance. The city’s Landmarks Preservation Board voted to give the building landmark status, which will require all alterations to be approved by the Board. More renderings of the proposed redevelopment can be found here.

A hospitality Labor Union is fighting the proposed Rainier Square redevelopment in the central business district. The Unite Here Union states that developer Wright Runstad has not contributed enough to the city’s affordable housing program, as it should under the scope of the project. A review board is set for March 30th.

In better news for development, the Seattle Design Commission reviewed Skanska’s 38 story office project at Second and Union in downtown Seattle and approvals are on schedule for construction to start in August of this year.  Completion is set for 2018.

Kilroy Realty Corp has announced they are targeting a fall construction start for a 600,000 square foot office project on the former King 5 site in South Lake Union. It is unclear if Kilroy will begin construction without preleasing for the site named 333 Dexter Ave.

This article details the eight new office buildings that will be opening in the northwest in 2016.

BUILDING SALES

In January, Vulcan Real Estate issued its annual update showing that the company sold nearly $1.2 billion worth of assets and completed three developments totaling 1.3 million square feet in 2015.

OFFICE LEASES

Data visualization company Tableau continues to gobble up space in the Northwest. This month they confirmed rumors of signed leases in Seattle and Kirkland. Tableau will be taking over an 110,000 square foot building next to its headquarters in Fremont and will also be expanding by 92,000 square feet in Kirkland. The company now has 16 locations in 10 countries worldwide.

Daily deals website Groupon seems to be having success hiring engineers in Seattle, as it has just inked a lease for 42,000 square feet of space at 1201 Third in Downtown Seattle. The new office will have enough space for 400 employees.

Snapchat found a  home in Seattle by signing a lease for 8,000 square feet at 101 Stewart across the street from Pike Place Market. Snapchat is just the latest of several companies opening an engineering outpost in the Northwest.

Singapore based GrabTaxi, also opened a new engineering office in Seattle. The ride hailing service focused in Southeast Asia has signed a lease for just over 3,000 square feet in Two Union Square downtown.

ECONOMY

In no surprise, office space rents were up 28% percent year to date in the South Lake Union office submarket with other markets trailing closely behind. On average, asking rents increased 7.5% last year hitting a ten year peak. With Amazon being responsible for much of the growth in Seattle, experts are forecasting that increases will not continue on this rapid trajectory in 2016.

With rising rents, comes increased commercial real estate investment. Seattle is now rated in the top five U.S. cities for foreign commercial real estate investors. Some recent evidence of this trend is the $711 million dollar sale of the Columbia Tower to Hong Kong based Gaw Capital.

The Seattle area housing market is also on fire. One recent study showed Seattle is the 3rd highest city for rent growth in the Nation.

Home prices in King County have jumped 15% year to date with the median price of a single family home hitting a record of $508,000.  There has also been a record volume of home sales with 88,331 homes sold in Washington, up 14.3% from 2014. Finally, cash sales for homes have increased 38% year to date, evident of the increasingly competitive market.

Zillow has Seattle ranked as the second hottest market for 2016 behind San Francisco with an estimated 5.4% increase in home prices forecasted.

At the regions 44th annual forecast, business leaders continued to show optimism for the Pacific Northwest fueled by growth at Amazon, Microsoft, and Boeing as well as other large technology firms. Experts forecast that the economy will expand by 2.5%, while much of the nation is expected to remain stagnant in 2016.

The U.S. Census Bureau also recently ranked Seattle as the ninth most educated city in the country.

TUNNEL/VIADUCT

In January the giant tunnel boring machine nicknamed Bertha was moving about an inch a minute after finally making its way out of the rescue pit where it underwent repairs for almost two years.  However, just when the project was moving forward, Governor Inslee ordered the project to stop after the formation of a sinkhole along the waterfront. Seattle Tunnel Partners disagrees with the move stating that stopping Bertha could create more problems. Bertha has completed about 1,280 feet of the tunnel that will eventually replace the Alaskan Way Viaduct and has nearly 8,000 more feet to go. If Bertha ever completes its journey, there are several new developments that plan to cash in on the new waterfront promenade.

OTHER NEWS

Finally, on March 19th the Sound Transit light rail project connecting the University of Washington to Westlake Station will be open for use.

 

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2015 Year End Seattle Office Market Report – Tenant Perspective

Analyzing the Data

General Conclusion: Seattle’s office market finished 2015 strong with vacancy decreasing to 8.3% in Q4 2015 down from 8.8% in Q3. The year closed with 3,535,636 square feet of positive absorption, a staggering increase from the 1,392,917 square feet of positive absorption in 2014. Due to strong demand for Seattle commercial real estate investment product and decreasing vacancies, rental rates across all submarkets and building classes are on the rise while concessions continue to decrease.  Market fundamentals were in the favor of landlords for all of 2015.  Looking ahead, there are no indications of a slowdown – bring on the supply!

Economy:  The northwest continued to add jobs in 2015 as many companies are moving operations to the area in order to tap into Seattle’s talent pool. Washington’s preliminary seasonally adjusted unemployment rate dropped to 5.0% in December 2015 according to The Washington State Employment Security Department.  The Bureau of Labor Statistics is reporting a slightly lower rate of 4.5% for the Seattle/Tacoma/Bellevue area.

Office Construction: The Seattle construction boom continues with the following developments all currently under construction:

  • Amazon II, and Amazon Phases VI, VII & VIII totaling: ~ 2,094,000 square feet
  • Troy Block : ~817,000 square feet
  • Madison Centre: ~750,00 square feet
  • The Mark (5th & Columbia): ~528,000 square feet
  • Former Pemco HQ: ~370,00 square feet
  • 200 Occidental : ~370,00 square feet
  • 400 Fairview: ~367,898 square feet
  • Midtown 21: ~365,00 square feet
  • Dexter Station: ~ 345,992 square feet
  • Urban Union: ~291,00 square feet
  • Hill 7: ~285,000 square feet
  • North edge: ~202,620 square feet
  • 1101 Westlake: ~ 150,000 square feet

In addition, several proposed developments were announced in the fourth quarter of 2015 including:

  • Miami based Crescent Heights is planning a 101 story mixed use project at the west side of Fourth Avenue between Columbia and Cherry Streets.
  • Vulcan has finally revealed plans for the Lakefront Blocks on Valley Street in the South Lake Union submarket. The three block area will contain 787,000 square feet of office space and approximately 370 apartments.
  • Martin Selig released plans to add twelve floors of apartments atop the 36 floors of office space at the former Federal Reserve site in the central business district
  • Selig also closed on the Firestone tire center site at 400 Westlake Ave N in South Lake Union and has plans to construct a 190,000 square foot office and biotech building.
  • Finally, Beacon Capital filed plans for an eight story addition to the Maritime Building at 911 Western Ave.

Office Sales:  In general, Seattle office product is in high demand for investors worldwide.  Something to note is that one fifth of Seattle’s office sales in 2015 went to Asian firms.  The following building sales were completed in Q4 2015:

  • Macy’s sold the top four floors of its building in downtown Seattle as an office condominium. Starwood Capital Group paid Macy’s $216 per foot or $65 million for the 300,000 square foot space.
  • Hong Kong based Great Eagle holdingspurchased the historical Dexter Horton Building at 821 2nd Ave for $124.4 million or $369.69 per square foot.
  • New York based Brickman Real Estate purchased the Olympic Block at 101 Yesler for $22.4 Million or $317.73 per square foot.
  • Unico properties purchased701 Dexter for $17.7 million or $285.48 per square foot.
  • 400 Fairview sold for $234.8 million or $763 per square foot.
  • A Chicago based co-working company acquiredthe Pioneer Building in Pioneer Square for $20.5 million or $285 per square foot.
  • Finally, a new collaboration by Greg Smith, ACT Theatre, Cherry Street Coffee and artist Jane Richlovsky purchased the 1st& Cherry building for $4.5 million.

Office Leases:  Several large office lease transactions were completed in Q4 2015 including:

  • Safeco Insurance signed a lease to expand their presence at Safeco Plaza at 1001 4th  The company will occupy twenty-six floors or ~500,000 square feet in the building by the end of 2016.
  • Docusign leased six floors, or 119,000 square feet, at 999 3rdAve
  • Moss Adams LLP completed a renewal for 77,274 square feet also at 999 3rd
  • AECOM leased 55,242 square feet at 1111 3rd Ave
  • Uber leased ~50,000 square feet at Second & Seneca
  • Oracle leased 45,050 square feet at Century Square at 1501 4th Ave
  • Seattle Metropolitan Credit Union leased 43,500 square feet at the Home Plate Center at 1521 1st Ave S
  • Antioch University leased 38,000 square feet from Martin Selig at 2403 3rd Ave
  • WeWork leased 32,000 square feet at Westlake Tower at 1601 5th Ave
  • Hillis Clark Martin & Peterson P.S. signed a lease for 31,000 square feet at 999 3rd Ave
  • Leisure Care leased 25,200 square feet at 999 3rd Ave

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

4Q2015 Market Data

The total vacancy rate for Seattle at the end of 2015 is 8.3%

Recommendations:

If your company:

  1. Doesn’t need to move
  2. Has an upcoming space/lease requirement in the next 2 years
  3. Can reasonably 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 volatile 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.

 

 

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Seattle Office Space News – December 2015

News

 

 

 

 

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of December 2015.

OFFICE DEVELOPMENTS

Continuing the trend from all year, the month of December was filled with announcements for office developments. First, Vulcan revealed plans for the Lakefront Blocks on Valley Street in the South Lake Union submarket. The three block area will contain 787,000 square feet of office space and approximately 370 apartments. Vulcan has stated the office space would not be constructed without a tenant, so a start date is yet to be set. You can view a slideshow of the proposed development here.

Just to the south, Amazon has begun moving into the first phase of their new Seattle campus. The entire project is nearly four million square feet of office space complete with meeting centers, indoor basketball courts, and a rooftop dog park. So far only two of the three towers are completed and Amazon recently announced construction on the third will begin in the fall of 2016.

In a major milestone, the Rainier Tower project at 5th & Union has obtained a master use permit from the City of Seattle.  Developer Greg Johnson of Wright Runstad stated that construction will begin in 2017 because they “plan on having tenants by then.” Wright Runstad is talking to several different office and retail tenants as well as a hotel operator that would be new to Seattle.

Also in the financial district, Martin Selig will be adding 12 floors of apartments atop 36 floors of office at the former Federal Reserve site. These new apartments would be across the street from Crescent Heights’ planned 101 story 4/C tower.  Both developers are hoping to create a 24-hour neighborhood in an area that has been traditionally quiet after business hours.

In December Selig also closed on the purchase of the Firestone tire center site at 400 Westlake Ave N in South Lake Union.  Selig paid nearly $17.5 million or $900 per square foot for the land and has plans to construct a 190,000 square foot office and biotech building.  A timeline for the start of construction is not yet clear.

In the aftermath of a political scandal, the proposed Civic Square development for the block between Third & Fourth Ave and James and Cherry Streets is clinging to life.  The City has given the previous developer Triad, who has been working for eight years to develop a 43 story office and condo building on the site, 60 days to assign its rights in the project to a new partner.

Talon Capital completed an $11 million makeover of 720 Olive that has dramatically changed the exterior entrance as well as the lobby. The lobby now contains a restaurant/bar, and juice bar. Legal technology company Avvo recently moved their headquarters to the building, and there will be an additional 92,000 square feet available in 2017.

Finally, Beacon Capital filed plans for the redevelopment of the historical Maritime building located at 911 Western Ave along Seattle’s waterfront. The plan calls for an eight story addition, which would contain two floors of office as well as six floors of apartments. The plans will have to be approved by the City’s historical preservation board.

BUILDING SALES

In general, building sales in 2015 brought an interesting trend regarding the amount of Asian capital chasing Seattle commercial real estate product.  The most notable statistic is that one fifth of Seattle’s office sales in 2015 went to Asian firms, including the tallest skyscraper in the Northwest – Columbia Tower.

Office building sales in South Lake Union continued in December with 400 Fairview selling for $234.8 million or $763 per square foot. The building was sold by developer Skanska to TIAA-Cref, although Skanska will retain a 10% ownership stake.

In the Pioneer Square submarket of Seattle, a Chicago based co-working company acquired the Pioneer Building in December. The company paid $20.5 million for the 72,000 square foot office building (~$285/sf) and has plans to renovate the space into a co-working facility.

Just down the street there will be a new collaboration between developer Greg Smith, ACT Theatre, Cherry Street Coffee and artist Jane Richlovsky. Together the group, named Good Arts, purchased the 1st & Cherry building for $4.5 million. Good Arts plans to create a collaborative environment for Artists in the space.

OFFICE LEASES

Although it has been rumored for some time, in December it was announced that Docusign will lease six floors, or 119,000 square feet, at 999 3rd in the central business district of Seattle. In the same building, owned by Ivanhoe Cambridge and Callahan Capital Properties, Moss Adams LLP recently completed a renewal for 77,274 square feet.  Additionally at 999 3rd, law firm Hillis Clark Martin & Peterson P.S. recently signed a lease for 31,000 square feet and senior living community operator Leisure Care will be moving in to 25,200 square feet.

News in December also confirmed that WeWork will lease 32,000 square feet at Westlake Tower, which is their 3rd Seattle location.  The coworking space provider indicates that the space at Westlake Tower will provide enough room for 600 members.

ECONOMY

2015 closed with lots of news regarding the red-hot housing market in Seattle. Seattle is now the 8th most expensive city to rent in the nation according to Zillow, with an average rent of $1,922 per month.  A report by Forbes also stated that Seattle ranks number 10 for cities building the most single and multifamily homes.  This article indicates Seattle has the fastest rising home prices in the nation with Seattle area homes reportedly worth $41 billion more than this time last year.

A mobile processing company, Invoice2Go, has named Seattle as the number one city for small business based upon revenue invoiced. Seattle was nearly $23,000 higher than the second place city of San Francisco.

TUNNEL/VIADUCT

In the first good news since 2013 regarding the replacement of the Alaskan Way viaduct, the tunnel boring machine Bertha is fixed and seems to be running smoothly.  According to Seattle Tunnel Partners, Bertha is scheduled to break out of the repair pit at the end of January 2016 and resume tunneling the remaining 8,000 feet in March.

OTHER NEWS

Here is a look inside the new Allen Institute building.

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Seattle Office Space News – November 2015

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of November 2015.

OFFICE DEVELOPMENTS

News of new office development continued in November of 2015.  New details were released for the proposed 101 mixed use project in downtown Seattle by Miami based Crescent Heights. The building, nicknamed 4C, would be the tallest on the West Coast and would contain retail, office and hotel space.

Kevin Daniels of Daniels Real Estate is developing the 43 story Mark at Fifth and Columbia and is confident he will have leased space by early next year.  Together with the new Madison Centre project across the street, there will be nearly 1.3 million square feet of office space added to the intersection. It appears that no leases have been signed for either project.

BUILDING SALES

Heading in to the end of the year, investment money continued to flow in to Seattle especially from foreign markets. Hong Kong based Great Eagle holdings purchased the historical Dexter Horton Building at 821 2nd ave for $124.4 million or $369.69 per square foot. Just two years ago the building was purchased for $76.4 million.

New York based Brickman Real Estate purchased a new building in Pioneer Square months after selling its previous holding at 111 S. Jackson Street. The Olympic Block was acquired for $22.4 Million or $317.73 per square foot.

Unico properties continued its buying spree in Seattle in November. The Seattle based company purchased 701 Dexter for $17.7 million or $285.48. With this latest transaction, Unico has spent nearly $139.5 million in the South Lake Union submarket.

OFFICE LEASES

In very disappointing news to Seattle Developers, Safeco Insurance announced it will consolidate into its existing building, the Safeco Plaza at 1001 4th Avenue. The company will occupy twenty-six floors or 500,000 square feet in the building by the end of 2016. Safeco would have been the perfect tenant for some of the speculative office space coming to the market in the central business district.

Seattle Metropolitan Credit Union capitalized on the red hot commercial real estate investment market by selling their building at 801 3rd Avenue and leasing space elsewhere. After operating on 3rd for several decades, the longstanding Seattle institution will move in to 43,500 square feet at the Home Plate Center at 1521 1st Ave S.

ECONOMY

The US bureau of Economic Analysis reported that the Seattle is the fourth richest city in the nation at an average GMP of $75,874.  With high paying job growth comes a massive population increase and thus The Puget Sound Regional Council predicts that another one million people will live in the region by 2040, outpacing the growth of San Francisco.

Contrary to most reports we have seen lately, a study by Mortenson Construction indicated a slight softening in the construction industry. The cost of building was up .4% from Q2-Q3, matching the lowest increase since the summer of 2013. However, the report cautioned this is is only data from one quarter and can not be taken as evidence of a larger slowdown.

TUNNEL/VIADUCT

In a rather slow month for Viaduct and tunnel news, the WSDOT reported that the viaduct has sunk slightly near Seneca Street. The sinking was less than a half inch and the WSDOT insists the structure is still safe to travel on.

OTHER NEWS

Here are looks inside the new offices of REI, and Facebook.

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