Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of February 2015.
As expected, February 2015 brought plenty of news about new office development plans in Seattle. It was reported that Skanska USA will present two options to redevelop the property between First and Second avenues and Seneca and University streets to the City. The more aggressive proposal calls for 690,000 square feet of office and 30,000 square feet of retail. The smaller of the two, is designed with 510,000 square feet of office and 12,000 square feet of retail.
In some promising news for Yesler Terrace, the massive proposed mixed use development on the southern slope of First Hill, Vulcan announced this month that they will break ground on their first phase of multifamily development in about a year. Overall, Vulcan plans to invest $200 Million in Yesler Terrace as a part of an effort to create up to 5,000 residences and 900,000 square feet of tech or medical office space in the neighborhood.
Stephen C. Gray Associates and First Western Development are planning a 124,320 square foot building in at 744 N. 34th St in Fremont. Grey said that they have not signed a tenant but that two or three companies in Fremont are “bursting at the seam” and the group hopes to land one of them. If construction starts in 2016 the building should open by spring 2017.
Seattle permit records indicate that Kilroy Realty Corp is planning on building two twelve story office towers at 333 Dexter Ave N where King 5’s current headquarters resides. Kilroy paid nearly $42.6 million for the property earlier this month.
Finally, an entity related to Walton Street Capital of Chicago paid $10.5 million for two parcels of land at 721 Ninth Ave N in South Lake Union. The former site of Buca di Beppo italian restaurant will be developed into an office building by Walton in conjunction with Talon and Lake Union Partners.
It is no secret that the investment appetite for Seattle office product has been insatiable over the past couple of years. This article notes that in 2014 the region recorded over $2 billion in sales, and industry experts believe that 2015 will surpass $2.5 billion.
The largest building sale in February occurred when Holland Partner Group and Pemco Insurance traded several parcels of land In South Lake Union. Most notably, Pemco paid $31.55 million or $394 per square foot for the 80,000 square foot building at 1300 Dexter Ave and will relocate their headquarters there following renovation of the building.
The Seattle Cancer Care Alliance purchased an empty office building and surrounding land at 1213 Valley Street for $20.5 million or $580 per square foot. The building measures 35,350 square feet and SCCA plans to use the building for its administrative staff, freeing the current clinic at 825 Eastlake to treat more patients.
The old Federal Reserve building at 1015 Second Ave sold for a winning bid of $16 million. The new owner of the 90,000 square foot building was not immediately revealed, but should be available at the transfer of title in sixty days.
The largest lease so far this year was inked by tech giant Facebook in February, significantly increasing their footprint in Seattle making room for up to 2,000 employees. Facebook has leased 280,000 square feet in all but two of ten floors at Dexter Station in South Lake Union.
A Denver based provider of co-working spaces known as Galvanize has agreed to lease 70,000 square feet at 111 S Jackson Street in Pioneer Square.
Finally, Best Buy has become the latest company to open and engineering outpost in Seattle. The company has leased 32,000 square feet at the top of the Seattle Times building at 1000 Denny way. The company will initially hire 50 engineers with room to double.
February brought promising news for the tunnel project as Seattle Tunnel Partners began making notable progress reviving Bertha, the broken machine tasked with boring the tunnel that will replace the Alaskan Way Viaduct. Bertha made the 20 foot trip to the rescue pit where repairs to bearings and steel reinforcement will take place to prevent Bertha from overheating again. Seattle Tunnel Partners has not set a timeline for when the repairs will be complete, but it is expected that it will take more than two months until Bertha can begin work to dig the remaining 8,000 feet of the 9,000 foot journey.
According to the most recent report from OfficeSpace.com, the average asking rental rate for office space in Seattle is $27.63 per square foot, up from $27.29 per square foot in the fourth quarter of last year.
Given the massive amount of development in the Seattle area, Key Bank market president Carol Nelson encourages caution. Her feeling is that despite the region’s economy moving at a slightly faster pace that the rest of the country, the current rate of growth in the multifamily development sector could potentially exceed the speed of demand.
The hot construction market in Seattle has led to an increase in the average construction costs. Mortenson’s quarterly cost index predicts construction costs in Seattle will rise five to six percent in 2015 compared to an average increase of 3.5% over the past two decades.
2015 is on track to be the biggest year for residential real estate since 2008 according to Redfin.com. There have been more customers requesting home tours this year than there has been since 2013, indicating a huge year to come. At the same time, the median home price in Seattle has jumped 9.1 percent year to date up to $360,000. As demand rises it is interesting to note that inventory of homes for sale is decreasing.
The downtown Seattle Association revealed that more than 65,000 people live in downtown Seattle, and that number is just expected to increase. Residential growth downtown is growing twice as fast as the region as a whole.
Finally, the University of Washington was named one of the top ten best public colleges in the U.S. by the American City Business Journals.