Seattle Office Space News – October 2016

News

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

OFFICE DEVELOPMENTS

In October the University of Washington released ambitious plans to add nearly six million square feet of academic, office, and research space to its Seattle campus. The new plans are a part of the draft master plan released this month in anticipation of an upzone in the University District’s height limits, by the Seattle City Council. All of the expansion is planned for land that the University currently owns and is focused around the South and West areas of campus.

Also, a Chicago based coworking provider called Level Office unveiled its newest location at the historic Pioneer Building this month. Level Office purchased the building last December for $20.5 million and has remodeled the space to fit today’s tech driven demand. The company is advertising individual desks as well as 800-2,400 square foot private suites as available.

BUILDING SALES

Building sales activity remained relatively quiet in October with only a few properties trading hands. Los Angeles based Hudson Pacific Properties and Toronto based Canada Pension Plan Investment Board purchased the 11 story Hill 7 building at 1099 Stewart Street. The sale price was $179.8 million for the 285,680 square foot building, equating to $629 per square foot.  Touchstone was the seller of the property hosts marquee tenants such as Redfin & HBO.

In addition, the Broadacres building at 1601 2nd Ave in downtown Seattle was purchased by LBA Realty. Principal Real Estate sold the 123,108 square foot building for $25.4 million or $206.3 per square foot. The office portion of the building is 50% leased and Asian grocer H mart will be occupying much of the retail portion in the next year.

Chris Hansen purchased another building and parcel of land in Seattle’s SODO neighborhood this month for $25 million as he continues to gobble up property around the area. The six story building located at 1518 1st Ave South contains office space above Henry’s Tavern. All in all, Hansen has spent nearly $122.5 million on twelve acres in the area in the hopes of assembling enough parcels to build an arena and surrounding retail to attract the NBA and NHL.

Hansen revealed in October that his group is now offering to privately fund a proposed new NBA and NHL arena. A few months ago, the City Council did not pass a vote to allow a vacation of a portion of Occidental Avenue that Hansen would need to build the arena. Hansen’s new plan does not require any taxpayer funds to be allocated to the project and he has also agreed to put up nearly 20 million dollars for a Lander Street overpass to decrease congestion coming from the Port (one of the main opponents of the arena).

OFFICE LEASES

Once again, Amazon dominated office leasing news this month. The e-commerce giant announced that they will be leasing all of Centre 425 (354,000 square feet) in downtown Bellevue.  In addition, Amazon leased 81,000 square feet in South Lake Union at 428 Westlake Ave N, the former headquarters of Tommy Bahama.  This is relevant to the Seattle market because it is the first office expansion by Amazon outside of their Seattle campus in the Puget sound market. In recent years, Amazon has accounted for roughly 2/3 of positive absorption in Seattle and further expansion on the Eastside may have a negative effect on absorption in Seattle.

ECONOMY

Seattle’s red hot commercial and residential real estate markets showed no sign of slowing in October.  The Emerald City now has more than 58 construction cranes currently at work, more than any other city in the nation.

In relation, a new report by Zillow shows that Seattle has the third highest home value appreciation and the highest rent appreciation year over year among the 35 largest housing markets in the United States. Median home values rose 11 percent in Seattle and surpassed $400,000 for the first time in history.  This means that Seattle is the most expensive housing market outside of California, just edging out Boston for the top spot.  Finally, in that same report, Zillow predicts that Seattle will remain in the top spot for highest rent appreciation over the next twelve months.

Not surprisingly, with the rapid growth in Seattle the unemployment rate in the Seattle metro area fell to 3.9%, down from 4.1% in August.  In total, 92,600 jobs were added in the year long period.

While the Seattle area market seems hot, global venture investing has been way down. VC funding dipped for the 5th straight quarter in the number of companies receiving investment and a 32% quarter over quarter decline. Over $15 billion was invested in more than 1,600 companies this last quarter, the lowest figures since Q4 2010.

CB Insights Anand Sanwal had an appropriate response to criticism that the VC funding is not going well: “Before everyone starts saying the sky is falling, it’s worth noting that a bit of sobriety is a good thing… 2015 funding levels were irrationally high with a new unicorn being birthed every 3rd days as investors were keen to force-feed perceived startup winners with cash.”

This month the Washington Employment Security Department released concrete numbers on how Amazon is shaping the Northwest. Between May and August, Amazon.com posted 11,042 job openings online in King County, double the number from the same period last year. It is now estimated that the tech giant has nearly 25,000 local workers.

TUNNEL/VIADUCT

Wow- it has been several months with nothing but good news from the Tunnel and Viaduct project. Bertha is now halfway done with its journey and if all goes according to plan; it could break out near the space needle by May of next year.

OTHER NEWS

Finally, this month the PSBJ took a look at the Docusign office located at the Wells Fargo Center in downtown Seattle.

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