Seattle Office Space News – June 2015

News

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

OFFICE DEVELOPMENTS

One of the bigger proposed office developments in the CBD received further approval from city review in June.  The mixed use Rainier Square development at 5th & Union will have 1.2 Million square feet that includes retail, residential and 756,000 square feet of office.   The project, being developed by Wright Runstad, is expected to break ground late next year and once completed will be Seattle’s second tallest tower.

Also, Touchstone has finalized a financing deal with Principal Real Estate Investors and the Bank of the Ozarks for Tilt 49.  Construction of the 37 story apartment tower and 11 story office building in the Denny Triangle started in June.

BUILDING SALES

Seattle’s tallest building traded hands in June with Beacon Capital selling the skyscraper to Hong Kong based Gaw Capital. Gaw paid nearly $725 million or $483/sf for the 1.5 million square foot property at 701 5th Ave. It was reported that with the sale Beacon was barely able to repay the loan it had originally defaulted on in the economic crash of 2008.

In further proof of the frothy office investment market, an early 20th century building in Pioneer Square sold for nearly 51 percent more than it was purchased for in 2007. Following a lease with co-working space provider Galvanize, the 70,000 square foot building located at 111 S Jackson Street was purchased by Deutsche Asset & Wealth Management for $34 million or $485/sf from Brickman Real Estate.

OFFICE LEASES

June brought more news of tech companies from Silicon Valley opening and expanding engineering offices in Seattle.  First, it was announced that Twitter is expanding its presence by taking another floor at 1501 4th Avenue in Seattle’s CBD. The company now occupies over 44,000 square feet and employs as many as one hundred in Seattle.

Additionally, Dropbox inked a lease for an engineering center for as many as 50 employees at 701 5th Avenue in the CBD.

Also in June, Facebook owned Oculus VR leased 51,000 square feet across the street from Safeco Field at 1501 1st Ave S in Seattle’s SODO neighborhood.

In further proof that tech companies need to be located in areas with quality amenities in order to attract and retain employees, it was reported that Tukwila based Zonar Systems leased space at the Exchange Building at 821 2nd Ave with room for 100 employees.

Another Tukwila based company, Spaceflight Industries, will be moving to South Lake Union. Spaceflight is taking 17,000 square feet at the West Lake Union Center.

Finally, the largest lease reported in June was that of Community Health Plan finalizing a deal for 91,800 square feet at 1111 Third Ave in the CBD. The once mostly vacant building is now 80 percent occupied.

TUNNEL/VIADUCT

Repairs have finally begun on the tunnel boring machine Bertha. Crews have started replacing the seal system that broke down. The 3.1 billion project is now more than two years behind schedule.

ECONOMY

Seattle area home prices and apartment rents continue to climb. Much of this growth is related to the tech boom in Seattle. For every 1 percent increase in technology worker salary, Seattle’s home prices rise about a half a percent.  As a result, home prices have increased by more than 9% so far in 2015.

With a steep increase in home prices, more people are renting, causing apartment vacancy rates in King and Snohomish Counties to drop to 4.5 %. Although home prices continue to climb, new data shows that Millennials, who comprise of the bulk majority of tech workers, are not willing to purchase homes at these inflated prices. The rate of people ages 25-34 who own homes in the Puget Sound region are at the lowest levels seen since the Gold Rush era.

OTHER NEWS

On June 24th the groundbreaking event was held for the $72 million addition to Pikes Place market.  The new space will have 30,000 square feet of open space, 12,000 square feet of retail and 40 low income apartments.

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