Seattle Office Space News – March 2017

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of March 2017.

OFFICE DEVELOPMENTS

Seattle continues to be at an all-time high construction boom. At the end of 2016, over 68 major projects were underway (from Sodo- South Lake Union) the most of any time since recording began in 2005. Nearly two thirds of that development is in the multifamily sector with the remaining third being large office developments.

Earlier this year it was announced that Big Fish Games will be moving to the renovated Maritime Building on Seattle’s waterfront at 911 Western Ave. The developer has now filed plans showing that the project will be complete for occupancy by mid-2018, just a year before the new waterfront promenade is estimated to be completed.

Unico Properties acquired a 60,000 square foot building at 701 Dexter in South Lake Union a little over a year ago and have just filed plans for a renovation. Due to height restrictions in the area, Unico plans to extend the building envelope over what is currently a surface parking lot to create 40,000 additional square feet of office space. Unico has not released a timeline for construction to begin.

At the corner of Second and Union, crews have begun to demolish several small buildings to make room for Skanska’s 2+U project. The 650,000 square foot office project is expected to be completed in the second quarter of 2019.

This month, mayor Ed Murray signed legislation allowing for the upzone of the University District. This is the first Seattle neighborhood to use HALA (Housing Affordability and Livability Agenda) which allows for developers to build higher buildings in exchange for contributions towards affordable housing. Many sites in the University district can now be built up to 320 feet for residential towers and 160 feet for office.  Using the same HALA framework, a similar plan is currently in the works for both South Lake Union and the Downtown core. The Seattle City Council will vote in April whether to approve this measure.

BUILDING SALES

There were no reports of significant office building sales in March.

OFFICE LEASES

Another month, another huge lease for Amazon. The  ecommerce giant has just leased all 300,000 square feet of the Tilt 49 office building in South Lake Union. The developer, Touchstone, has been working on the project since 2015 and expects to be complete near the end of this year.

In addition, the DJC took a look at the new North Highland offices in Seattle, where they have leased and renovated just under 6,000 square feet of the historic Standard Building.

ECONOMY

According to the most recent Silicon Valley Competitiveness and Innovation Project’s report, Seattle’s population is growing at nearly double the rate of Silicon Valley. Much of the population increase is due to Seattle based tech giants such as Amazon and Microsoft, but more and more Bay Area companies such as Google and Facebook continue to expand in the Northwest as well. Although Seattle’s job growth has started to outpace the valley, Seattle continues to lag when compared to other tech hubs in the number of venture capital fundings and IPO’s.

With all of this Job Growth the Seattle-area unemployment rate has dropped to 3.5% in February with the United States unemployment rate holding steady at 4.7%. In addition, the Seattle area was the ninth fastest growing metro region in the nation according to population estimates by the U.S. Census Bureau.

After a brief winter slowdown, King County homes have surged to record heights. The median single family home price was $560,000in February up 6.7% from January. The new price levels mean that Seattle homes have nearly doubled in median price over the last five years. New data from Zillow, suggest that Seattle has the second fastest home value increase in the nation.

TUNNEL/VIADUCT

Bertha’s course was slightly altered this month after crews discovered that the machine was about six inches away from the correct location. The slight mishap did not seem to cause any delays and on March 28th the Seattle Tunnel Partners announced that Bertha is just 219 feet from its final destination. The new double-decker highway in the tunnel is still expected to open in 2019.

A new 360 video has also been released this month showing footage of how the highway is being assembled as Bertha continues to mine along.

ARENA

The saga of if and when Seattle will see a new stadium has not become any more clear in the past few months. In 2016, the City did not approve a vacation of Occidental Avenue which would make potential developer Chris Hansen’s proposed SODO arena “shovel ready”, which is what it would take to attract a NBA team. At that same time, the City Council has been wrestling with the thought of what to do with publicly owned Key Arena in Queen Anne. Just recently, Hansen agreed to waive exclusivity to the Key Arena project and that has opened the process to other alternatives.

OVG and AEG are two entertainment firms that are sending redevelopment proposals for Key Arena to the city by April 12th. For now, we will have to wait and see what the City thinks of these proposals.

OTHER NEWS

Two northwest projects have won Engineering News Record magazines “Best of the Best”. Google’s new office building in Kirkland won the green category while the new Allen Institute building in South Lake Union being named best higher education project.

The PSBJ also took a look at Tableau’s new Northedge Building in Wallingford, photos can be found here.

Finally, this month Geekwire chatted with molecular biologist John Medina on the effect of office space on employee’s happiness and productivity. Interestingly enough, Dr. Medina stated that a huge open office space is not always best, while it does seem to increase creativity it can be tough for many employees to focus on complex tasks in this environment.  Medina did offer a warning that research in the topic is very early: “Our understanding of how (the brain) works is childlike, particularly in relationship to the kinds of questions we are asking about designing buildings”.

 

 

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Seattle Office Space News – February 2017

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of February 2017.

OFFICE DEVELOPMENTS

In February Amazon revealed further expansion plans…again. The E Commerce giant has filed permits to build a 17 story office building at 2205 7th Ave, where the Days Inn currently sits. Amazon recently surpassed 341,000 employees globally and nearly 40,000 in Washington state.

Also this month the Seattle City Council unanimously voted to “up zone” the University District neighborhood in Seattle, allowing developers to build much higher than current limits.  Several parcels currently zoned between 65-85 feet can now reach heights of 85-320 feet. In addition, several single family parcels are now zoned for low rise multifamily uses. Many community members think that the University District could be the next big “tech hub”, given its proximity to the University of Washington, walkability, and the spur of new developments that will likely follow the upzone vote.

BUILDING SALES

There were no building sales reported in February.

OFFICE LEASES

Office leasing in February was again driven by the tech sector. Google revealed that they will be taking over the 50,000 square foot former Sound Mind and Body gym that was previously converted to office and occupied by Tableau.  Another California based tech giant, Apple, added another floor at the Two Union Square building in Seattle with many sources stating that the company is on the lookout for much more space in the near future. Apple declined to mention how many employees are at the downtown Seattle site, but revealed that they have 1,200 people in Washington State including retail locations and an engineering center in Vancouver Washington.

Kaiser-owned Group Health stated that about 100 employees will be moving from its Westlake Terry building to Two Union square at the expiration of its lease. The remainder of the employees in Seattle will be relocated to a new facility currently under construction in Renton.

Finally, it was announced that Delta Dental will fill the last remaining vacancy at 400 Fairview in South Lake Union. Delta plans to move from Northgate to the new 61,000 square foot facility this summer.

ECONOMY

Seattle continues to be at the forefront of technology growth and our local economy continues to reap the benefits. A new study ranked Seattle as the second highest paying market for tech workers with the average salary being $126,000, just behind San Francisco at $134,000.

High paying jobs and hiring sprees continue to feed a development frenzy of office and residential construction in the downtown Seattle core. In the last two years, over 5 million square feet of office space has been built with an estimated 13 million more to come by 2020.  In the residential market, more than 20,000 units have been built in the past 10 years with an additional 30,000 currently under construction. In the region, Colliers estimates that 100,000 new apartments will be built in King, Pierce, and Snohomish counties from 2010 to 2020.

The downtown core is now home to over 70,000 residents, which is up roughly 18% since 2010.

Not surprisingly, U.S. News and World Reports ranked Seattle as the sixth best city to live in the country by ranking migration, desirability, quality of life, value and job market health.

TUNNEL/VIADUCT

Tunnel boring machine Bertha has continued to plow along with no delays. The dig is now more than 83 percent complete with only 1,600 feet to go; crews expect Bertha to reach daylight this May.

OTHER NEWS

Chris Hansen took another shot at building a new Arena by offering to finance the stadium without public subsides, with the exception of a waiver of admission and occupation tax for revenue generated out of town. Hansen has asked the City Council to close part of Occidental Ave South, so that they can assemble enough land for the project.

Seattle has been on pace for the past few years to reach commuting standards set several years ago. A new study revealed that only 30 percent of city center workers drive in alone. Although the working population has increased by 45,000 in the past six years only 2,255 of those employees drive by themselves.

Finally, the Pike Place Market construction has been humming along and opening is set for June 29th.  Photos of the progress can be found here.

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Seattle Office Space News – January 2017

News

Below are comments and links to news articles and other topics relevant to the Seattle office space market from the month of January 2017.

OFFICE DEVELOPMENTS

The Schuster Group, which has been known locally for developing the Walton Lofts and other high end housing, has launched a new division called Full Scale that will focus on consulting, project management and real estate services to other developers. Full Scale’s first customer is the 202 luxury apartments that will be a part of the Rainier Square expansion. Construction on the mixed use project, which is mostly office is expected to begin this year and end in 2019.

Also, in January Hines Real Estate showed off some of the features of its $46 million dollar renovation at 800 Fifth Avenue in Downtown Seattle. Photos of the renovated lobby, restrooms, and elevators can be found here.

BUILDING SALES

Just one office building was reported to have traded hands in January.  New York based TriStar and RFR Holdings purchased the 290,647 square foot Urban Union building located at 501 Fairview Avenue in South Lake Union and 100% leased by Amazon. Schnitzer was the seller fetching $268.9 million or $925.32 per square foot, setting the new highest per-foot sale record.

OFFICE LEASES

Several technology companies expanded their footprint in January. Facebook announced in January that they leased the entire 150,621 square foot 1101 Westlake building, which brings their total footprint in the region to nearly 1 million square feet.

Another California-based company Snap Inc, (better known as Snapchat) leased nearly 50,000 square feet at the Market Place Tower. The space that Snapchat will move into was just recently vacated by Redfin.

Local tech titan Zillow is also expanding. The online real estate company leased the top two floors (38,000 square feet) for expansion at the company’s headquarters in downtown Seattle at 1301 2nd Ave.

ECONOMY

2016 marked the best year ever for the Seattle area housing market. The median home price increased by more than 12% in King, Pierce, and Snohomish counties in December alone, and there seems to be no signs of a slowdown with inventory at an all-time low.

Seattle economist Chris Medford talked with a panel about how the election of Donald Trump will impact the Puget Sound Economy. For the time being, he mentioned that there is unlikely to be a dramatic impact and that the tech sector growth will continue to fuel the market forward. Larger changes to NAFTA and other trade agreements will take more time and require congressional approval. Medford estimates that it will take twelve months before real impacts can begin to be seen or evaluated.

With the hot commercial real estate market there seems to be a new acronym being thrown around: “GAFA”. This of course is in reference to Google, Amazon, Facebook, and Apple all of whom have been expanding very quickly in Seattle.

Amazon alone now accounts for nearly 20% of Seattle’s office space inventory, the highest concentration of any single corporate entity in the country. Many experts predicted that Seattle would have started to see a slowdown in both the commercial and residential market by now. However, the explosive growth in the tech sector has created unforeseen demand for residential and commercial product, thus propelling Seattle past the typical slowdown. Experts are closely watching the moves of President Donald Trump as well as federal interest rates to see if they can predict if and when a slowdown might finally hit the Emerald City.

In an interview of  five of the Seattle area’s top venture capital firms,  those interviewed seemed bullish on the general market, number of IPO’s, and funding to the region for 2017. The full interviews can be found here.

TUNNEL/VIADUCT

Early in the year Bertha took a planned maintenance stop and resumed digging on the 18th of January. The Machine has now dug 6,822 feet of its 9,270 foot route.

Also in January, WSDOT began to brief business owners near the viaduct on the potential impact of the viaduct demolition. WSDOT stated that the structure will come down in phases and will last approximately nine months. WSDOT said that a general contractor will be hired by summer of 2018, at which time further details on how exactly the structure will come down will be released.

 

 

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Seattle Office Space News – December 2016

News

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

OFFICE DEVELOPMENTS

At the close of 2016, Seattle’s office development boom showed no signs of a slowdown. Martin Selig’s plans for The Landmark Building at 1015 Second Ave (former Federal Reserve) will have seven new stories of office space creating a total of 223,000 square feet. Selig hopes to start construction in 2017 with a 15 month build time.

Selig also revealed plans this month for the former Firestone Building at 400 Westlake Ave North in South Lake Union. Early renderings show that Selig plans to maintain the façade and add twelve stories of office space, totaling 230,000 square feet. Again, he hopes to start construction in 2017 with a 15 month build time.

In Pioneer Square, Urban Villages Inc. released plans to redevelop the block where FX McRory’s currently operates. The Denver-based company plans to add shops and restaurants in the alley between the Manufacture’s Building at 419 Occidental Ave South and the Westland Building at 100 S King Street and also the Schoenfeld Furniture Building at 115 S Jackson. The alley will receive new lighting and paving to create a more friendly pedestrian experience while the Schoenfeld Building will have one floor added to the structure. Renderings can be found here.

Surprise surprise, this month public records indicate that Amazon acquired another chunk of land in the Denny Triangle neighborhood near their headquarter campus. Amazon affiliate Acorn Development paid $19.2 million for a half block along Seventh Avenue between Blanchard and Bell Streets, directly across from the recently opened Day One Tower.  The site will likely be the location of another new building for Amazon.

Another Seattle tech giant began construction on its new campus on Elliott Bay to the North of downtown. Expedia is swinging hammers to convert old lab space formerly occupied by Amgen into office. Expedia plans to move from Bellevue to the new campus in 2019 and could add up to 1.9 million square feet on the property.

BUILDING SALES

There were no building sales reported in the month of December.

OFFICE LEASES

Not long after its new headquarters opened in Seattle, Bay area based Facebook inked another large lease in the South Lake Union submarket of Seattle. The social media giant will occupy 384,000 square feet along Eighth Avenue North between Thomas and Harrison Streets. The buildings, owned by Vulcan, are scheduled to be completed in the third quarter of 2018.

Amazon continued its expansion spree into December by leasing the Westlake Terry building that Microsoft currently occupies in South Lake Union. The 320,000 square foot building is just one peg in the massive expansion of the E-commerce giant; it is estimated that they will occupy 12 million square feet in Seattle by 2022.

ECONOMY

According to the S&P CoreLogic Case-Shiller National Index, Seattle maintained its status as the nation’s hottest housing market in part due to the ever-increasing tech job growth in the region. Seattle experienced a 10.7 percent year over year price increase to hold on to the top spot in the nation. The Seattle region now has 10 of the nation’s 30 most competitive neighborhoods for house hunters according to Redfin. Another factor adding to the surge in demand was the rise of interest rates, which caused purchasers to rush to close on homes. This resulted in a 30% increase in total sales from this time last year.

The unemployment rate of the Seattle-Bellevue-Everett area was just 3.7 percent in November according to the Washington State Employment Security Department, down from 4.7 percent a year ago. Construction, healthcare, and especially the technology Industry have spurred the drop in unemployment.

Not surprisingly, the Seattle region ranked eighth among the nation’s largest cities for patent awards according to the U.S. Patent and Trademark Office, fueled by companies such as Microsoft, Boeing, and Amazon.

This podcast from Geekwire makes an interesting point regarding the effect on tech workers of large Silicon Valley companies establishing footprints amidst the Seattle area startup scene.  These companies challenge the entrepreneur community as workers weigh the risk of a career at a startup versus a stable and sizable paycheck at a company such as Google or Facebook.

TUNNEL/VIADUCT

Finally, tunnel boring machine Bertha is starting to make its way towards the surface after reaching its lowest point in November, the machine is now about 70% complete with its journey. The final completion date for the project is now 2023. However, not everyone in Seattle is thrilled with Bertha’s progress. Many business owners along the viaduct have claimed loss of income and disturbance from the vibrations, noise, and other distractions that have come with the delayed project.

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Seattle Office Space News – November 2016

News

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

OFFICE DEVELOPMENTS

Several large technology office buildings were completed in November. The first was Tableau Software’s 208,000 square foot NorthEdge campus near Gas Works Park in Fremont. In addition, Amazon opened the second tower of their newest development in downtown Seattle. The 36 story high rise opened just eleven months after the first 36 story building to the north opened to employees.  Amazon also started construction on a third tower in November that will include a 37 story building totaling 1.1 million square feet of office at Westlake and Lenora.  Together with phases one and two, the E-commerce giant will have nearly 3.3 million square feet of newly developed space in the Denny Triangle area to go along with their original campuses in the South Lake Union submarket.

At the Southern end of Seattle, American Life is moving closer to completion of the Avalara Hawk Tower. Construction crews are working on floor 16 of the 18 floor office building totaling 186,684 square feet.

Finally, Martin Selig changed plans again for the former Federal Reserve Branch in downtown Seattle. Originally, the plan was to add a 660 foot tall apartment and office tower, but now the plan has shrunk to just five stories. The five story office addition would bring the total space available to 154,400 square feet and is set to be reviewed by the City on December 6th.

BUILDING SALES

November was a relatively slow month for building sales in Seattle as there was news of only one building changing hands.

New York based Tristar Capital and RFR Holdings purchased Amazon Phase VII for $244 million or $765 per square foot. Here is a look at a list of the top 10 office sales of the year in the region. Not surprisingly, three of the four largest sales in Seattle were of Amazon occupied buildings.

OFFICE LEASES

Surprise surprise, Amazon dominated office leasing news this month with the announcement that it will be leasing all of Midtown 21. The 365,000 square foot building at 1007 Stewart Street will be completed mid next year.

Big Fish games also inked a large lease in November taking the 187,000 square foot remodeled and expanded Maritime building. The move will take place in 2018 along the revitalized Seattle waterfront.

Also, Atlas Workbase which is a co-working provider just opened a new 20,000 square foot facility at 500 Mercer. Atlas seeks to cater towards all users rather than solely focusing on the tech scene.

Another technology company, RealSelf, has doubled their office footprint. The rapidly growing online community for people seeking cosmetic procedures leased at least 24,000 square feet in the 83 King building.

ECONOMY

In a surprising turn of events for many Americans, Donald Trump was elected the 45th President of the United States. Now that he is President elect, the controversial figure has received public support from many Seattle based executives, even those that previously publicly opposed him.

Jeff Bezos, Satya Nadella, Boeing, and Starbucks all offered support moving forward. Jeff Bezos said “ I for one give him my most open mind and wish him great success in his service to the country”.

Immediately following the election many Seattle biotech stock prices soared 10-16%. Investors were worried that if elected, Hillary Clinton would increase regulations on drug prices thus hurting the bottom line of many Biotech and Pharma companies.

One local economist of Windermere Real Estate believes that Trump will bring forward deregulation allowing banks more latitude to lend to homeowners, thus helping the local residential real estate market.

In Seattle’s local election, voters approved the $54 billion dollar Sound Transit Proposal. The new measure will bring 62 miles of light rail, plus bus and heavy rail service to the area which proponents hope will curb mounting traffic problems in the area.  In addition, voters passed an initiative to increase minimum wage to $13.50 by 2020.

Outside of election season, more news relevant to the Seattle economy was released in November.  Investors continue to pour billions into commercial real estate. Excluding homes, foreign investors have spent nearly $4 billion on local assets since 2015 ranking Seattle as the number 5 city in the country for foreign investments.

It is no surprise that people see Seattle as an attractive place for investment as the city continues to add 311 new jobs every week and is consistently ranked in the top ten US cities for Job Growth.  The Pacific Northwest has become highest in the nation for U.S. job growth according to the U.S. Bureau of Labor Statistics.

This month the UW Runstad Center released data that for the third quarter the statewide median for single family home prices rose to $305,000, 4.3 % higher than last year.

Seattle is now the hottest housing market in the nation. According to S&P Case Shiller, Seattle’s home price increase of 11% year to date earns the Emerald City the top spot.

All metrics seem to show positive signs for the local economy, even among those fearing that we are due for a correction. At the annual Urban Land Institute summit, experts predict a soft and slow correction for the Seattle market if any at all.

TUNNEL/VIADUCT

The giant tunnel-boring machine Bertha has finally reached the mile mark along its 9,270 foot journey. Construction started in 2007 and is slated for completion in 2023.

In addition this month it was revealed that the WSDOT is testing a new bridge as part of the viaduct replacement that is designed to bend back to its original shape after a magnitude 7.5 earthquake.

In negative news for the Waterfront Redevelopment, The Seattle Historic Waterfront Association, the alliance for Pioneer Square, and many others are challenging the redevelopment plan saying that it will cause gridlock and fail in its current form.  Although many are openly opposing the plan, they are confident that all issues will be resolved before construction begins.

OTHER NEWS

Finally, here is a look at Tableau Software’s new office space in the NorthEdge building referenced above.

Also, here are photos of the CoMoton HQ at the University of Washington, which is designed to be a hub for innovative companies, were released in November.

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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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Q3 2016 Seattle Office Market

Analyzing the Data

General Conclusion: Seattle’s office market continues to strengthen into the later part of the year with vacancy decreasing to 6.6% in Q3 2016 down from 7.3% in Q2. Year to date net absorption for the Downtown Seattle Office Market stands at 2,283,096 square feet.  Continued demand for Seattle office investment product compiled with decreasing vacancies continues to put upward pressure on rental rates across all submarkets and building classes.  Market fundamentals are expected to be in favor of landlords for the rest of 2016 and into 2017.

Economy:  The northwest has continued to see significant job growth in 2016. Washington’s preliminary seasonally adjusted unemployment decreased to 4.1% in August of 2016 according to The Washington State Employment Security Department, down from 4.7% in Q2.  The Bureau of Labor Statistics is reporting a slightly higher of 4.5% for the Seattle/Tacoma/Bellevue area.

Office Construction: The raging construction boom in Seattle continues with the following developments all currently under construction:

  • Amazon II, and Amazon Phases VI, VII & VIII totaling:~ 2,094,000 square feet (100% leased to Amazon)
  • Troy Block :~817,000 square feet (100% leased to Amazon)
  • Madison Centre:~750,00 square feet (Davis Wright Tremaine is anchor tenant)
  • The Mark:~528,000 square feet
  • Former Pemco HQ:~370,00 square feet
  • Midtown 21:~365,00 square feet
  • Tilt 49:~307,296 square feet
  • The Alexandria Center:~288,850 square feet
  • Hawk Tower:~208,840 square feet (Avalara is anchor tenant)
  • 15th & Market:~204,000 square feet
  • North edge:~202,620 square feet

Office Developments:  As noted, office development in Seattle continues to remain strong.  Below are a few significant updates on office development from Q3 2016

  • The Seattle design review board unanimously signed off on Google’smassive South Lake Union Expansion. The project will include several buildings up to 14 stories tall totaling 621,100 square feet. Construction is expected to begin in early 2017 and completion is slated for 2019.
  • Converseley, Expedia revealed that they will not initially be building an additional 600,000 square foot building on its new Seattle waterfront campus. It still remains to be seen if they will construct any new space or just remodel the existing footprint of the campus.
  • Martin Selig is also reportedly downsizing the scope of his development project on the former Federal Reserve building site. Filings show that Selig now plans to add eight stories to the existing structure, totaling 125,000 square feet of office space. Previous plans had shown as many as 44 floors added to the historic building at 1015 2nd Ave, which must be kept intact.

Office Sales:  In general, building sales in Q3 2016 stayed cool compared to 2015 with only a few properties changing hands.  The following building sales were completed in this quarter:

  • Vulcan sold the 317,000 square foot Amazon Phase VIII to Korean based Mirae Asset Global for $246.8 million. The high price of $770/sf continues to show strong demand for office product in Seattle and also reinforces the trend of foreign capital interest.
  • GLL Real Estate Partners and Vestas Investment Management (Munich and Seoul based) purchased the 793,679 square foot Safeco Plaza building from CommonWealth Partners for $387 million. The building is 98 % leased and the price equals $488 per square foot.
  • The Watermark Tower at 1109 1st Ave sold to Martin Smith Inc. The 71,150 square foot office and residential building sold for $20.25 million or $284.61 per square foot. The building is situated right in front of the soon-to-be demolished viaduct and has seen the value appreciate from its purchase in 2012 for $11.2 million.

Office Leases:  Office leasing in the third quarter of 2016 continued to slow from the second quarter, although several companies expanded:

  • Law firm Davis Wright Tremaine announced that they will be the anchor tenant for the new Madison Centre development at 5th & Madison in downtown Seattle. DWT will occupy eight floors or 164,000 square feet in the project that is expected to open in 2017
  • Dropbox leased another floor in the Columbia Tower at 701 5th Avenue as it continues to hire aggressively in the region. The San Francisco based storage provider has 65 employees in Seattle currently.
  • Darigold will be moving its headquarters from South Seattle to the Georgetown neighborhood where it has leased 37,000 square feet in the newly renovated Georgetown Squared at 5601 6th Ave S.
  • Nanostring Technologies expanded by 19,000 square feet in the Vue Research Center at 500 Fairview Ave N, bringing their total footprint to 76,800. In addition, a stealthy new Biotech, Silverback Therapeutics, will be taking 19,600 square feet in the same building.

Below is a table providing information for the major sub-markets of Seattle:

q3-2016-market-data

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