Seattle Office Space News – March 2018

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of March 2018.

OFFICE DEVELOPMENTS

Unico Properties has refined its plans for a second building at the site of the former PEMCO Headquarters in South Lake Union. The building, which will be called Yale and Harrison, is a companion building to another Unico development: Yale and Thomas. Yale and Harrison will have 200,000 square feet of office space over nine stories, and is being designed by Perkins + Will. No tenant for the building has been disclosed as of yet.

Trammel Crow is planning a high-rise office building on a parcel of land in Denny Triangle that is not yet under contract. 1916 Boren Avenue is the current home of the Dutch Shisler Center, a medical clinic and group home sober center founded by Dutch Shisler, an advocate for alcoholics and addicts. The owners, Safe Haven Associates, have announced that the parcel is indeed on the market. Trammel Crow is proposing a 115,000 square foot office tower with ground floor retail and underground parking on the site, should they acquire it.

Prologis’s new project, Georgetown Crossroads, is garnering quite a lot of attention from across North America. The project is the first multistory industrial building in the US, and is three stories with capabilities for manufacturing on all floors, many levels of parking, and an innovative top floor office space. It has 590,000 square feet, and construction started last spring.

OFFICE LEASES

Facebook has doubled in size in Seattle over the last two years, and has started to move into the second of four buildings it has leased in South Lake Union. The new building is 1101 Westlake Avenue North, across the street from Facebook’s offices at 1101 Dexter. The 150,000 square foot building has enough room for 900 more employees. Facebook has also leased the Arbor Blocks, two buildings currently under construction. This makes Facebook one of the largest occupants in SLU. Facebook reports that their Seattle headquarters is second in importance only to the Menlo Park, CA location.

Google has subleased more of Tableau’s extra space in Fremont, taking two floors at 837 N 34th Street. Today, Google employs 3,000 people in Fremont and the Eastside. Tableau, who leased a large amount of available space before its NorthEdge headquarters building was completed, has been subleasing its space since consolidating into the new building.

Madrona Venture Group has doubled its footprint with a 10-year lease of 20,000 square feet on the floor below their existing office at 999 3rd Ave downtown. Madrona plans to offer space similarly to co-working groups like WeWork and Galvanize. With room for its portfolio companies and startups in Madrona Venture Labs, in addition to other companies seeking co-working space, Madrona will charge for space and open up space for collaboration between its portfolio companies and others.

After a successful funding round, Vera Whole Health has moved into a larger office space. The new 14,500 square foot space is in their current building, the Decatur Building between Pike and Pine in 6th Avenue, but now enables them to hire more people and accommodate their expected growth. This new space can accompany up to 110 employees, and will serve as the company’s new headquarters.

ECONOMY

It may seem that construction in Seattle is still at an all-time high, but it has actually declined at the fastest rate in at least 12 years. There are currently 57 active projects underway in Seattle, down from 74 projects just six months ago. Still, development activity is higher than anything seen before 2015. Many development projects are still in the pipeline, waiting to begin. Rents are also dropping now for the first time in a decade, owing to the large amount of residential construction in the recent boom.

The Downtown Seattle Association reports that the downward trend in construction could be temporary, since project counts may simply be either starting or finishing, thereby taking them out of the count. Construction could rebound in 2019, though it still likely will not reach 2017 heights. Hotel and residential development continues to drive construction, with 5,723 residential units completed in the past year. Over 30,000 more are under construction or in development.

In other news of a potential slowdown, Chinese investment in the Seattle real estate market has declined 23% in 2017 from the year before, with acquisitions by Chinese investors falling to $78 million. This is an 81% decrease, a vastly smaller number than 2015, which saw Chinese investors bought $1.17 billion of Puget Sound development, warehouses and office buildings. China’s government has clamped down on overseas deals due to speculative investing concerns. The majority of recent sales have been domestic in nature, with plenty of other foregin interests competing with China, eager to snap up parts of this hot market.

On the flip side, the Seattle housing market is now so hot that some buyers are submitting offers with an open price line – the seller is told to simply fill in the amount. The surrounding area is just as intense. 14.4% fewer homes are for sale this year than last, which means that prices continue to rise due to high demand and low supply. All the surrounding counties also report price increases above 15%.

It is the 17th month in a row that Seattle has led the country in rising home prices, and there is no sign that the trend will slow or stop. The current median price of a home in Seattle is $777,000, and it’s even higher on the Eastside at $950,000. Population surges are creating intense competition for the limited housing supply. While more listings will emerge this spring, more potential buyers will follow, and demand will drive up prices even more. It remains a seller’s market in the area for the foreseeable future.

Amazon founder Jeff Bezos has topped Forbes’ annual list of billionaires in March, beating out Bill Gates with a net worth of $112 billion. Ten other Seattle-are billionaires also made the list, including other Microsoft co-founders and Seattle developer Martin Selig.

According to Indeed.com’s list of “Best Jobs in the US”, construction-related jobs are rising hand-in-hand with the tech boom. With all the demand for space, development in Seattle has caused the construction and project management sector to surge. The number one job on the list is Commercial Project Manager – just last year, it was number 19. Sixteen of the top 25 jobs were not even listed on 2017’s list. To see the full list, click here.

Is Amazon good for Seattle? That was the question posed at KUOW’s hosting of “That’s Debatable.” Two opposing sides met to debate the question. Arguing “yes” were representatives of the Seattle Metropolitan Chamber of Commerce; arguing “no” were Cary Moon and Nikkita Oliver, both candidates during the 2017 Seattle mayoral election. Questions of gentrification, traffic, rising prices and the ethics of fulfillment centers cast shadows on the positives of economic growth, salary increase, and general prosperity.  As both side made their case, the original audience poll of “Good vs Bad” changed from 56/44 to 50/50. It is clear that feelings about Amazon in Seattle remain mixed and complicated.

Amazon has narrowed its search for HQ2 down to 20 finalist cities, including Dallas, Denver, and the Washington D.C. area. Denver may be one of the first cities to be visited by the Amazon executive committee, which was made up of 10 people from the economic development team. They visited Denver, toured the entire metro region, and met with educators and local CEOs to discuss diversity, inclusivity, and the workforce at large. Unsurprisingly, Amazon was tight-lipped about their thoughts on Denver but seemed to enjoy their stay. To learn more and see all of Amazon’s finalist cities, click here.

While the tech scene in Seattle is one of the best in the country for talent, start-ups have a surprisingly hard time developing here due to a dearth of venture capital. Bellevue-based BitTitan had to raise capital down in San Diego before they could grow their business, despite looking hard in their home area. The lack of capital creates challenges for entrepreneurs, who are forced to look outside Seattle for funding and spend time on the road. It discourages entrepreneurs from staying in Seattle and growing their business here, pushing them to other cities who have more investment capital.

ARENA

Chris Hansen is still buying property in SoDo – an interesting revelation, as the City has already approved a renovation on KeyArena spearheaded by the Oak View Group.  Still, a company led by Hansen paid $2.4 million for a small property just south of his desired sports and entertainment arena parcel. Hansen and his group, which includes Sonics legend Wally Walker, and Seahawks quarterback Russell Wilson, has been trying to bring the NBA back to Seattle (and resurrect the SuperSonics franchise). It is estimated that Hansen’s company, WSA Properties, has spent around $124.1 million on SoDo properties in pursuit of this goal.

TUNNEL/VIADUCT

The WSDOT plans to select one of four contractors to demolish the Alaskan Way Viaduct by June for a project that will cost between $80-$100 million. Kiewit Infrastructure West, Granine Construction, Faltiron West, and a joint venture of Myers & Sons Construction and Silverado Contractors are competing for the chance to earn the contract. The price is currently $20 million over previous estimates, owing to the “added scope” of replacing the Marion Street pedestrian bridge and more utility work. The project will likely start in fall and will also include decommissioning the Battery Street Tunnel and regrading Aurora Avenue N between Harrison Street and Denny Way. Whoever wins the contract, they will have to be finished within nine months or face the penalty of a fine.

The new Highway 99 tunnel could be open by as early as October. Crews are finishing up the final lights on the upper deck and painting the walls. Tests of emergency signals and ventilation have started, and once the state confirms the lanes and safety systems are properly done, it will take only three weeks to connect the tunnel portals to their entry and exit ramps. These three weeks will cause significant regional congestion, as the Alaskan Way Viaduct, the Battery Street Tunnel, and the Sodo lanes will all be closed.

The new Highway 99 tunnel is “one of the smartest tunnels ever built” according to experts. View how the tunnel plans to keep drivers safe in this video.

OTHER NEWS

Chris Hansen’s arena dreams may be all but dashed, but he still holds three key parcels in SoDo. What he plans on doing with them will depend largely on the authorities at the Port of Seattle. While plenty of people want to push the development boom further into SoDo with creative use neighborhoods, housing, retail, and innovative office space, plenty of others argue that gentrification of SoDo will harm maritime and industrial jobs that revolve around a natural port that cannot be moved.

The Industrial Lands Advisory Panel recommends that new homes be prohibited from being built in SoDo, citing numerous problems with the idea of housing such as interrupting the industrial nature of the the neighborhood, lack of schools and retail in the area, and noise and emissions from the various plants and manufacturing uses. They recommend that the area be kept largely for industry, with some allowance for retail and office development.

Take a look at Delta Dental’s new 61,000 square foot headquarters in 400 Fairview Avenue, a far cry from the company’s old “1980’s” cubicle and silo-filled  premises. Their new location takes a giant leap into the present with wide open spaces, plenty of light, and room to collaborate.

Avalara Hawk Tower also boasts plenty of new and unique features. Tour through Avalara’s top 4 floors of the tower, complete with Tiki-lounge common area, open plan layouts, and liberal use of the company’s signature orange hue.

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