The Downtown Seattle office leasing market continues to be led by growing tech firms, especially Amazon.com. Amazon recently signed leases for 5th & Bell (125,000 square feet), 635 Elliott (180,000 square feet) and Blanchard Plaza (125,000 square feet with the possibility to take down the entire 250,000-square-foot property). The online retailer is also moving forward with the development of three high-rise buildings totaling 3.3 million square feet. Amazon owns additional lots for more projects in the future as needed. Other tech firms, including Zulily, Twitter, Tableau Software, Nuance Communications, Avalara, Acucela and Simply Measured, are either opening new offices or expanding rapidly. Developers are responding to this demand by moving fast to bring new projects to market. These projects include Dexter Station, 400 Fairview, Hill7 and Troy Block, which are all under construction. Trammell Crow recently announced its 1007 Stewart project, while Holland Partners is developing buildings sites one through three at Westlake Steps, and Schnitzer’s ready to begin construction on its Urban Union development. These development sites are all located in the South Lake Union area in and around the Amazon projects. This addresses the demand seen from other tech firms that want to be near Amazon and the …
Washington
The Seattle close-in industrial market consists of those areas within the city limits north and south of Downtown. This is a very dense market composed of about 1,995 individual buildings that amount to 46,520,000 square feet. This is the place where the first Pacific NW industries were established. The submarkets of Ballard, Interbay, SODO, Georgetown and South Park are home to old and new manufacturing-based businesses, suppliers and distributors. They are also home to behemoths like Boeing, the Port of Seattle and a majority of the Alaskan fishing fleet. In addition to decades-old industries like aerospace, ship building, custom metals fabrication, contractor suppliers and wholesale food distribution, we have newer industries emerging as well. These include craft beer, wine and spirits makers, specialty food production, software engineering, computer hardware design, new automotive sale sites, coffee roasters, digital printing, recreational equipment design and manufacturing and now even marijuana production, to name a few. This market is an amazing microcosm of the evolution of American industry. The continual growth of newer and more diverse manufacturing and distribution companies is still percolating steadily despite the setbacks of the Great Recession. This stubborn growth, coupled with the slow conversion of older industrial buildings to …
New multifamily development in Seattle was robust through 2013. That trend is continuing into this year, as demand remains strong and interest rates stay favorable. Healthy job growth, specifically those with higher wages, has particularly benefitted the Seattle market, leading to declining vacancies and increased rental rates. Vacancy rates continue to remain low at just 3.9 percent, compared to the five-year average of 5.2 percent, according to CoStar. Decreasing vacancy, combined with newer product, has pushed rental rates higher. The current average rent for a one-bedroom unit in the Seattle area is $1,078, up $93 compared to the five-year average. In addition to higher rents, concessions are currently at 1.5 percent, compared to the five-year average of 3.2 percent. Absorption remains strong and is keeping pace with new construction. So far, 3,300 units have been absorbed year-to-date. New construction in 2013 and 2014 has been at one of its highest levels ever. This development is largely concentrated in the Seattle urban core. Job growth remains strong, which has kept this additional supply in check with new demand. A total of 6,171 new apartment units were added over the prior 12-month period. As further evidence of a strengthening market, even condo …
Seattle is a top-10 market nationwide for apartment and condo construction, and retailers are following residential growth back into the Seattle core market. In the first half of the 2013, nine apartment projects added nearly 1,300 units to Downtown. As of June 2013, 30 more residential projects were under construction or permitted, representing about 5,400 units. Projects (mostly apartments) are breaking ground at a quickening pace, with total construction costs for those currently underway at about $2.8 billion — a level not experienced since 2008. Many of the projects are mixed-use developments that contain street-level retail components. Almost half are located near Downtown Seattle. In 2012, three major retail renovations were completed in Downtown. This overhauling of aging retail space has continued into 2013. Nordstrom Rack now has a new 42,500-square-foot space in the Metro level of Westlake Center, which is directly across from the Nordstrom flagship store. Pike Place Market completed several renovations that cost close to $70 million. These included upgrades to the Market’s infrastructure and features. Target acquired 95,000 square feet of space in the Newmark building (Pike Plaza) and remodeled the retail space across three floors. This urban-concept CityTarget is roughly two-thirds the size of a …
Each week seems to bring news of yet another record-selling price for a commercial property in Seattle, including assets ranging from office and retail to apartments and even development sites. Increasing occupancy rates for industrial and retail properties also suggest that property values are headed up. The King County assessor has undoubtedly tracked these price trends, too. In 2012, the assessor’s office reported overall increases in taxable values for major office buildings, major retail properties, hotels and apartments. As a result, many commercial property owners in the Puget Sound region saw increases on their 2012 assessed value notices. In March, King County’s chief economist projected that total assessed values in the county would reach nearly $327 billion in 2013 (for taxes payable in 2014), up nearly 4 percent from $315 billion in 2012. For many taxpayers, notices in 2013 will reflect assessment increases even greater than 4 percent. The general recovery in the Seattle market should not trigger increased assessments for all properties. For example, some suburban areas have missed out on the trend toward increasing property values. And there are always individual properties that do not experience the same increases as their neighbors. Accordingly, owners should be attentive to …
Amazon, Zulily, Real Networks, Intel, eBay, Attachmate, PATH, Omeros, F5 Networks, Microsoft. Collectively, these technology companies have dominated Seattle’s office leasing landscape over the past 12 months. This period has seen an eye-popping absorption of more than 1.9 million square feet. That would be astonishing growth in nearly any city, but with a Class A and B base of 63 million square feet, this number is even more impressive. The vacancy rate has dropped and now stands at 11.5 percent, while correspondingly rental rates rose more than $4 per square foot, cresting above the $30 per square foot, full service, for the first time in more than a decade. In addition, both rental abatement and discretionary tenant improvement allowances have diminished. What’s noteworthy is that none of these companies made commitments in the Central Business District. Instead, each opted for an urban campus style as opposed to a traditional stacked, high-rise presence. These companies either backfilled Class A properties immediately south of Downtown in Pioneer Square or relocated into first-generation space just north of the core in the South Lake Union submarket. Despite this current trend, Seattle’s core is very healthy. It’s even listed as a top-three investment market on …
Strong job growth characterized the Puget Sound economy throughout 2011, with the region closing the year with a 1.7 percent gain that equated to the addition of more than 28,000 positions. Home to Fortune 100 companies Costco, Microsoft, and Amazon.com, as well as large-scale operations of The Boeing Company, Seattle’s economic prospects are assured. The region will remain a leading employment generator over the next several years, with job growth trending up to 2.6 percent in 2012 and to more than 3 percent in 2013 as the metro area realizes the addition of 50,000 new jobs on average each year. For its part, Boeing now employs more than 81,000 Washington residents, having added nearly 8,000 local jobs in 2011 alone. The Seattle multifamily market deal activity has been good this year, and the market should expect to close more than $800 million in transitions. Current cap rates in the market are in the low 4 percent range and up to $500 per unit in core locations with secondary markets averaging 5.5 percent to 6 percent capitalization rates. One great thing about Seattle is that it has always skewed toward rental housing. In the three-county area alone, the population is 3.4 …
We saw plenty of activity in 2011 in both office leasing and the sale of office buildings in the Greater Seattle area, particularly in the Downtown core markets of Seattle and Bellevue. Amazon alone has leased 460,000 square feet at 1918 8th Ave.; 281,000 square feet at West 8th Avenue; and 106,000 square feet at the 1260 Mercer Building. KPMG has also leased 50,000 square feet at 1918 8th Ave. Other notable leases include Boeing’s 45,000 square feet at the Russell Investments Center; Allrecipes.com’s expansion to more than 55,000 square feet at the 5th & Pine Building; Facebook occupying 27,000 square feet at Met Park; Getty Images agreeing to nearly 60,000 square feet at 605 Union Station; and Brooks Sports inking a pre-lease agreement for 80,000 square feet for a yet-to-be-built office in the north Lake Union submarket. There have also been some major sales in the Greater Seattle market. These include the sale of 1918 8th Ave. and 818 Stewart by Schnitzer West to JPMorgan; Westlake Center Office Tower to TIAA by GGP; 505 1st Ave. and 83 King to Spear Street by Starbucks; Seattle Tower by LaeRoc Partners to the Teachers Retirement System of Illinois. As of December …
Our recent market activity spotlights the differential between the Haves and Have-Nots. Third quarter 2011 was exceptional for large, Class A facilities in Kent Valley. Thanks mostly to international corporations, direct vacancy rates dropped about 1 percent point and now hovers at 7.89 percent. We have also experienced net absorption of 348,358 square feet. This marks the fourth consecutive quarter of positive net absorption, bringing the annual total to 968,784 square feet. After experiencing record corporate earnings and large cash reserves, companies like Brooks Sports, Amazon, Sealed Air, Graybar, Electrolux, Bunzl, Pacer, International Paper, Sealy and more have expanded or looked to expand their presence in our market. Seeking state of the art, 30’ clearance, ESFR distribution facilities, these corporations have caused a shortage of Class ‘A’ space and a rent hike of 5 percent to 10 percent. However, regional and local companies are still struggling, while the mid-size market that services those spaces has not significantly recovered. On average, spaces available in that size range (over 66 spaces at press time) have been on the market for about 18 months. Unlike the otherWest Coast ports, container traffic in this Pacific Northwest region hasn’tt increased dramatically. To date, the Port …
Emboldened by renewed job growth and improving sales, retailers will push forward with new store openings in Puget Sound, which will ease the use of concessions. Leasing velocity in the Seattle-Tacoma retail market has built momentum through 2011, led by regional and national chains occupying vacant sites in high-traffic corridors. King County trade areas such as the Northgate/Central and Eastside/Bellevue submarkets have been the primary beneficiaries of resumed tenant expansions, but most suburban areas also recorded a modest upturn in leasing volume this year. The broadening recovery enabled landlords to hold the line on concessions. While the rate of recovery will remain strongest in King County heading into 2012—aided by move-ins from Ross Dress for Less, Big Lots and several grocery chains—tenant demand for established centers in Pierce and Snohomish counties will build. In addition to a collection of smaller lease transactions, nearly a dozen regional and independent retailers have secured junior-anchor and big-box sites this year, with many of the leases set to commence over the next nine months. Seattle retail developers completed about 695,000 square feet of space during the 12 months ending in the third quarter, an increase from the delivery of 250,000 square feet one year …