Commercial Lease Rates Hitting New Heights In Seattle

seattle sunsetThe Highway 99 Blues Club, established in 2004 and located in the basement of a hundred-year-old brick building, is possibly one of the best blues clubs in Seattle. As reported by The Seattle Times, in June, the business was notified that their rent would be increasing. Somewhat normal and understandable considering the immense growth Seattle overall is experiencing, especially downtown. However, their rent isn’t going up just $500, or even $1,000. Starting in January 2016, the blues club, if they intended on staying, would be responsible for paying $14, 959 a month. That’s an increase of 225 percent (or $10,359 more a month) and how the business sees it, an eviction notice.

The commercial real estate market in Seattle is reaching new heights, quite literally and figuratively speaking, so much so that downtown tenants, like the Highway 99 Blues club, are being squeezed out due to astronomical rent increases. This gentrification of downtown Seattle is well supported, as companies haven’t a problem finding tenants to fill local office space in exchange for a pretty penny. In fact, not only are rents 7.5 percent higher (an average of $36.76 a square foot) than last year, but in June of this year “the vacancy rate was 11.4 percent, down nearly by half from its high of 21 percent five years ago,” according to the Seattle Times.

This rise in lease rates in Seattle, Bellevue, and surrounding areas has been greater than any other metro area in the US, and that includes tech hotspots like San Francisco, San Jose, Boston, and New York, according to the New York based market research firm Reis. Still, Seattle is cheaper than Manhattan, San Francisco, and London, and currently offers a thriving and exponentially growing technology and health industry. In fact, many San Francisco-based businesses are on the hunt for Seattle offices, including cloud-computing giant, Salesforce.com.

It’s been reported that three-quarters of newly occupied office space in King, Snohomish and Pierce counties is located in downtown Seattle. Last year a top floor office space went for $30 a square foot, this year a lower floor office space in the same building is asking $36 a square foot. That’s a 20 percent rent increase. Demand for land is what is moving these prices, as business owners are paying huge premiums and signing large lease transactions in order secure a spot to set up shop.

Adding to the difficultly in securing an already existing office in downtown Seattle or nearby areas, many companies are signing pre-leases on buildings that are still under construction. Some of these companies being:

–          Amazon just leased 817,000-square-feet of Troy Block, which is part of two-building project in South Lake Union.

–          Holland America Line just leased Martin Selig’s new 185,000 square foot building in Lower Queen Anne, set to open next year.

–          Tableau Software is set to lease a new 2016 210,000-square-foot building north of Gas Works Park.

–          And Juno Therapeutics leased 287,000 square foot building which is under construction at 400 Dexter Ave. N in South Lake Union.

It certainly seems “Seattle is a landlords market,” Stuart Williams, managing director of commercial real-estate brokerage JLL told The Seattle Times. This isn’t a playground for the mom and pop smaller tenant. This game is only available for big time tenants ready to pay up, commit to long term leases and wait patiently for their space in the ever changing Seattle metropolis.

New Amazon Building Sale Breaks Seattle Price Record

Amazon is expanding – and they’re paying top dollar to do it! According to the Puget Sound Business Journal, on Tuesday the new 202 Westlake office building sold for a record breaking $749 per square foot, shelling out a total of $97.4 million. GLL Westlake 202 LLC bought the building which is leased by Amazon. Seattle based companies First Western Development Services and Stephen C. Grey & Associates and San Francisco’s Spear Street Capital developed the building. john st westlake

The previous record was the sale of the City Center Plaza in downtown Bellevue, which sold for $642 per square foot in 2011. For more information on commercial real estate sales, visit the Puget Sound Business Journal.

Harbor Urban Sells West Seattle Apartments

Seattle Real Estate developer Harbor Urban sold two new apartment buildings in the West Seattle junction area last week, with a total estimated sale of $105 million. Harbor Urban came to shape earlier last month as a collaboration between Urban Partners and Seattle developer Harbor Properties. The West Seattle properties were sold to a company affiliated with American Realty Advisors of Glendale, CA. The Link Apts, a 195 unit complex, were sold for $62.7 million and the 135 unit “Mural Project” was sold for $42.3 million. According to the West Seattle Blog, both buildings are almost entirely leased as well; please find the extended article from the Seattle Times here.

JCPenney Pulls out of Kress Building

When CEO Ron Johnson joined JC Penney’s in November, he wasted no time laying out a vision to transform the 1,100 store chain to include more specialty-shop areas, remodel the interiors, and other necessary changes. His plan also included a more suburban-oriented store strategy, and he plans to pull the plug on movement into the Kress Building downtown on Third & Pike, even though Penney’s had signed a  10 year lease in May sweeping two-third of the Building. Moving away from an Urban concept, Penney’s plans on focusing on their current store locations, and looking for a tenant to sublease the space. Elizabeth Best, Seattle Pacific Realty Broker who represents Penneys, said they’re looking for medium-priced apparel and home good chains to vacate the space to replace Penneys. Other tenants in the Kress Building include Starbucks, a Supermarket, and other eatery storefronts.