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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