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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Seattle Office Space News – October 2015

News

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

OFFICE DEVELOPMENTS

News of a possible political scandal regarding a proposed mixed-use development between Third and Fourth Avenue and James and Cherry Street produced a bunch of headlines in October.  A Senior Vice President at Triad Development was accused of blackmailing City Council candidate Jon Grant into settling the lawsuit that was stalling the project. Allen sent a text message to Grant insinuating that a $200,000 anti-Grant political activist campaign would go away if the lawsuit was settled. The SVP of Triad is no longer employed there and he issued a statement apologizing for his behavior. Triad has since settled the lawsuit with the Tenant Union. It is unclear if Triad will meet other criteria for the project to move forward by the end of the year.

BUILDING SALES

Macy’s has reached an agreement to sell 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.

OFFICE LEASES

Office leasing news was somewhat slow in October.  Alternative newspaper The Stranger, inked a lease to stay in their space at 1021 E Pine Street in Capital Hill.

In October it was also revealed that Snapchat has an office at 999 3rd in the SURF coworking space and it is rumored that they are on the hunt for a larger and more permanent space.

ECONOMY

There seems to be no sign of a slowdown here in Seattle as indicators of growth continued in October. Venture capital investments were up 228% year to date with total investing at $80.14 million.

The Seattle area housing market is now the fourth strongest overall real estate market in the nation, according to a new report by PWC and the Urban Land Institute.  However, a new Zillow report warned that the housing market may finally be slowing down due to the growing feeling now is not a good time to buy.

Robust growth around the area also brings some negative effects such as traffic. A new WSDOT report stated that the Puget Sound region’s main corridors have seen a 19% increase in congestion since 2007. A similar report by INRIX put the region as the seventh worst for traffic congestion in the nation.

An interesting article from the New York Times chronicles Seattle’s struggle to manage growth while not losing its “soul”.  The piece uses examples of other cities such as San Francisco that the report claims have lost their culture to massive growth

TUNNEL/VIADUCT

In no surprise, the giant tunnel boring machine Bertha will be delayed another month. The new schedule has Bertha resuming digging Dec 23. Bertha has only made it 11% of the distance to complete the tunnel and has been plagued with delays.  A new estimate shows that the delays have cost Washington State nearly $80 million dollars. For a detailed account of the repairs being performed Seattle Tunnel Partners released a four minute video found here.

OTHER NEWS

Here is a look at Best Buy’s new Seattle Engineering office.

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Q3 2015 Seattle Office Market – Tenant Perspective

Analyzing the Data

General Conclusion: Seattle’s office market continued the hot streak in Q3 of 2015 with vacancy decreasing to 8.8% down from 8.9% in Q2. Total positive absorption for the year is 2,139,397 square feet in the Seattle market.  It will remain a landlord’s market for the foreseeable future as demand for office space and Seattle commercial real estate investment product should continue to put upward pressure on rental rates across all submarkets and building classes.

Economy:  The northwest continued to add jobs in the third quarter of 2015.  Washington’s preliminary seasonally adjusted unemployment rate dropped to 5.2% in September 2015 according to The Washington State Employment Security Department, which represents a .2% decrease from Q2. The Bureau of Labor Statistics is reporting a 4.1% unemployment rate for the Seattle/Tacoma/Bellevue area.

Office Construction: The office construction boom continues in Seattle with the following developments under construction:

  • Amazon II, and Amazon Phases VI, VII & VIII totaling:~ 2,094,000 square feet (100% leased)
  • Troy Block :~817,000 square feet (100% leased to Amazon)
  • Madison Centre:~750,00 square feet
  • The Mark:~528,000 square feet
  • 200 Occidental:~180,00 square feet (100% leased to Weyerhaeuser)
  • Midtown 21:~365,00 square feet
  • Dexter Station:~ 345,992 square feet (100% leased to Facebook)
  • Tilt 49:~300,000
  • Urban Union:~291,00 square feet (rumored to be 100% leased by Amazon)
  • Allen Institute for Brain Science:~272,408 (100% leased)
  • NorthEdge:~210,000 square feet (100% leased to Tableau)
  • 1101 Westlake:~ 150,000 square feet
  • Third and Battery:~68,429 square feet*
  • The Commons at Ballard:~22,000 square feet

* = broke ground in Q3 2015

Proposed Development

Given the health of Seattle’s market, office developers are eager to break ground.  The following proposed developments made news in the third quarter of 2015:

  • Project: 888 Second Ave, Size: 1,000,000 square feet of office, Location:888 Second Ave, Developer: Urban Visions
  • Project: Former Federal Reserve Building, Size: 533,000 square feet of office, Location: 1015 Second Ave, Developer: Martin Selig
  • Project: 1150 Eastlake Size: 280,000 square feet of lab and office space, Location: 1150 Eastlake Ave, Developer: Alexandria Real Estate Equities
  • Project: University of Washington light rail office building, Size: TBD up to 240 feet tall Location: Brooklyn Ave NE and 43rd Developer: University of Washington
  • Project: Fourth and Columbia, Size: 151,650 square feet of office, Location: 701 4th Ave, Developer: Crescent Heights

 Office Sales:  Q3 2015 continued to provide proof of the robust demand for office investment in Seattle.  The following transactions were completed in Q3 2015:

  • Project/Location: Columbia Center at 701 5th Ave, Price: $725 Million, Size: 1,500,000 SF Price/SF: $483, Buyer: Gaw capital, Seller: Beacon Capital
  • Project/Location: 2201 Westlake, Price: $251 Million, Size: 317,000 SF Price/SF: $792, Buyer: American Realty Advisors, Seller: Vulcan
  • Project/Location: Rosen Building located at 960 Republican Street, Price $41 Million, Size: 60,375 SF Price/SF $769, Buyer: Urban Renaissance Group, Seller:
  • Project/Location: 1101 Westlake, Price: $67.4 Million, Size: 150,000 SF Price/SF: $449, Buyer: Holland Partner Group , Seller: Invesco

Office Leases:  Office leasing activity was on fire again this quarter, dominated by the technology sector.  Below are lease transactions that were concluded in Q3 2015:

  • Tenant: Amazon, Size: 285,000, Project/Location: Urban Union located at 501 Fairview Ave, Landlord: Schnitzer West
  • Tenant: Tableau, Size: 210,000, Project/Location: NorthEdge located at N 34th & N Northlake Ave, Landlord: Touchstone
  • Tenant: Avvo, Size: 105,000 Project/Location: 8th & Olive located at 720 Olive Way, Landlord: Talon
  • Tenant: Trupanion, Size: 100,000, Project/Location:6100 4th Ave South, Landlord: Benaroya
  • Tenant: Docusign, Size: 60,000, Project/Location: Wells Fargo located at 999 Third Ave Landlord: Callaghan Partners
  • Tenant: Antioch University, Size: 38,000, Project/Location: 2403 Third Ave, Landlord: Martin Selig
  • Tenant: Avalara, Size: 36,000, Project/Location: Second and Seneca located at 1191 2nd Ave, Landlord: Rockwood Capital
  • Tenant: Apple, Size: 30,000, Project/Location: Two Union located at 601 Union Street, Landlord: Washington Holdings

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

3Q2015 Market Data

The total vacancy rate for Seattle is 8.8%.

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.

Posted in Market Reports | Leave a comment

Seattle Office Space News – September 2015

News

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

OFFICE DEVELOPMENTS

September brought the first news of a mammoth proposed development at 701 4th Avenue by Miami developer Crescent Heights Inspirational Living.  The proposed tower at 701 Fourth Ave will be 1,111 feet and 102 Stories, making it by far Seattle’s tallest structure. The building will potentially have 1,200 residential units, 151,650 square feet of office space, 150 hotel rooms and 15,500 square feet of retail.

Urban Union, the 291,000 square foot office tower being developed by Schnitzer at 501 Fairview, is scheduled to open in early 2016.  A spokesman stated that there are no signed leases but several companies are interested in the project (and it has been rumored that Amazon is taking down the entire thing).

California based Alexandria Real Estate Equities has proposed a ten story lab and office building at 1150 Eastlake Ave E. There is currently a small light industrial building and two parking lots on the site.  Alexandria is hoping that the 280,000 square foot building will be leased quickly as the biotech market continues to grow in Seattle.

A technical panel from The Urban Land Institute concluded that the highest and best use above the transit tunnel in the University District would be a “nontraditional office tower.”  The development of an office tower would bring much needed space to the area and could help create an “Innovation district” where technology companies could expand with valuable proximity to the University of Washington.

Unico Properties purchased the former Pemco headquarters at 325 Eastlake Ave E and plans to reposition the 160,000 square foot office building from Class B to Class A creative space.  Unico has renamed the site Yale and Thomas and will be putting significant capital in to the project in the hopes of attracting the regions next technology headquarters requirement.

BUILDING SALES

As evidence of the frothy commercial real estate investment market in Seattle, an office building under construction at 1101 Westlake sold before it was finished and without any pre-lease. Invesco paid $67.4 million or $449 per square foot for the 150,000 square foot office building, which is scheduled to be completed in December.

Vulcan Real Estate sold their very first South Lake Union project, the Rosen building located at 960 Republican Street, to Urban Renaissance Group in September.  URG paid $41 million for the 60,375 square foot building equating to $769 per square foot. The lone tenant of the building is the University of Washington School of Medicine, who has a long term lease.

OFFICE LEASES

Antioch University sold its current campus at Sixth and Battery and announced plans for a move. The non-profit university signed a lease three blocks to the East for 38,000 square feet at Martin Selig’s’ 2403 Third Ave project.

September also brought news of another Bay area tech company opening a Seattle office. Lyft revealed plans to open a development office and hire twenty full time employees by the end of the year.

ECONOMY

In big news for the Seattle economy, Chinese President Xi Jinping spent several days in the region in September. Xi met with several key northwest political figures as well as the regions biggest tech leaders from companies such as: Microsoft, Amazon, Alibaba, Boeing, and Starbucks.

This article measures the startling impact that the growth of Amazon.com has had on the Seattle area.  At a Seattle Metropolitan Chamber of Commerce meeting an Amazon representative indicated that Amazon’s recent growth has spurred the creation of 28,000 additional non-Amazon jobs, contributed over $400 million in tax revenue, and $5 billion in overall economic impact.

Further proof of the Seattle area growth is seen by the number of new residents settling here. The Seattle-Tacoma-Bellevue area added 61,373 residents last year making it the nation’s 11th fastest growing urban area.

The construction boom in Seattle is definitely tied to all of the employment and population growth.  Interestingly, the city of Seattle reported that 25% of sales tax in 2015 was attributed to construction.

TUNNEL/VIADUCT

The giant tunnel boring machine Bertha has made a significant step towards resuming operations. Crews have put in place two one-hundred ton plates that make up the machines outer shield. These were the last two parts to be replaced of Bertha’s extensive repair.  The machine has been stalled since December 2013 after overheating 1,000 feet along its 9,270 foot journey.  Engineers will begin testing the machines drive shafts and slowly test the machines ability to resume digging. Once bertha receives the green light to begin drilling, it will begin to make the trip under the Viaduct. The latest schedule for the project has the tunnel opening in spring of 2018.

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Seattle Office Space News – August 2015

News

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

OFFICE DEVELOPMENTS

Once again the month of August brought a flurry of development news. Eager to cash in on the development of Seattle’s waterfront, Beacon capital is planning a major renovation to the Maritime building located at 911 Western Ave.  Beacon has notified existing tenants that they will eventually be required to vacate in an effort to reposition the building from class C creative office to class A creative office.

Expedia has proposed a master plan that over fifteen years would allow the company to more than double the amount of office space on its new property near Elliott Bay. The campus currently contains 750,000 square feet and Expedia has already revealed plans to build an additional 200,000 square feet.

Seattle developer Martin Selig showed further plans for the former Federal Reserve building. Selig is required to leave the structure of the building in place, and thus he has developed a plan to add major structural reinforcement that will allow him to add 533,000 square feet above the existing structure.

The University of Washington has indicated that it is considering an office tower up to 240 feet above the light rail station. If completed, the building would be one of two new office space developments in the area within the last few years.

Greg Smith has renamed his 1.1 million square foot Stadium East project to simply “S”. S represents not only the curvature of the buildings, but also Seattle, Sounders, and Seahawks.

Miami developer Crescent Heights has submitted early plans for a large mixed use development at the corner of Fourth and Columbia where a parking garage currently resides. The plans show 840 residential units, 160,000 square feet of office space, and 30,000 square feet of retail.

BUILDING SALES

The sale of Columbia Center closed in August. The purchase is part of a larger trend of international money landing in the hot Seattle investment market. Gaw capital paid $711 million for the 1.5 million square foot building, equating to $474/sf.  Gaw has several improvements planned that it hopes will attract new high-tech tenants.

Also, the Dexter Horton Building at 821 Second Ave hit the market in August. The proposed sale is just two years after the purchase by Portland based Gerding Edlen.

OFFICE LEASES

In no surprise, the tech industry dominated office leasing news once again in August. It seems that Amazon is not quite done leasing space in Seattle. A source commented that Amazon will be taking the entire 285,000 square foot Urban Union building at 501 Fairview Ave near its campus in South Lake Union.

It has also been reported that Docusign has signed a letter of intent to lease six floors at the Wells Fargo Center (999 Third Ave).  The company would be moving out of the Russell Investments Center where another fast growing company, Zillow, is headquartered.

Tax automation software company Avalara will be leaving its longtime home in Bainbridge Island and moving in to the Second and Spring building in Seattle. The company already occupies 36,000 square feet in the building and will double their footprint.

Trupanion will be relocating their headquarters from Ballard to SODO.  The pet insurance company leased over 100,000 square feet at 6100 4th Ave South, which is owned by Larry Benaroya.

ECONOMY

The Seattle economy has continued to be noticed as one of the hottest in the country, ranking #5 in a WalletHub survey for best cities to live in. The survey used metrics such as livability, amenities, activities, quality of health and job growth.

Other indicators, such as unemployment, continue to support this notion.  The Seattle-Bellevue-Everett jobless rate dipped to 3.7% in July according to the state Employment Security Department.

The Seattle area has seen an increase in construction costs, which have gone up 5% year to date and are expected to increase another 6% in the next six months.

Office rents have peaked to a new level not seen since early 2008.

Finally, although the median home prices fell in July, the housing market showed little sign of slowing down. This was the best July on record for the Seattle area according John L. Scott chairman Lennox Scott. Scott commented that median prices traditionally decline at the end of the summer and that the supply of homes available for purchase is still at record lows.

TUNNEL/VIADUCT

The delays continue for the repair of Bertha, as the replacement of the cutter head is two weeks late. The project is just over two years behind schedule. In related news, a group of eight insurance companies have sued to avoid paying for the $143 million it has cost to repair Bertha. The suit claims that the design of the machine was at fault and the insurance companies should not foot the bill.

OTHER NEWS

In the first significant hiccup for the seawall project, it is now estimated that the project will be 33% more expensive and be at least one year delayed. Officials cited unforeseen issues related to the process of protecting against erosion in the soil for the delay and increase in cost.  In contrast to the Bertha project, this is the first major derailment during the project. The Seawall replacement is now scheduled for completion in 2017.

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