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.

Is Everyone Moving to Interbay?

seattle sunset“Location, location, location,” has been said is the key to success in real estate. So on the heels of Expedia’s announcement to move to Interbay, Lennar Multifamily Communities couldn’t have been more on the mark in building a seven-story, 221-unit apartment project. Located just north of the new Expedia headquarters, which plans to house 4,500 employees, the apartment project plans to wrap construction in late 2017 or early 2018. Perfect timing to welcome Expedia to the neighborhood.

Lennar Multifamily wasn’t aware of Expedia’s plans to relocate when they took on the project late last year.  The complex will go up where the Quest Church currently resides, which is moving into the previously owned Mars Hill flagship church, located in Ballard. Brad Reisinger, of Lennar Multifamily, told the Puget Sound Business Journal that, “even without Expedia, we always thought Interbay had a lot of potential.”

The sentiment rings true for a number of developers and investors, as the Lennar complex is one of three apartment projects going up in surrounding area of QFC at 15 Avenue West and West Dravus Street. Beyond the development deals happening, it seems that the investment already shows promise as new apartment complexes in the area are already full.

Nestled in between Ballard and downtown, two neighborhoods that are growing at an exponential rate, it’s not surprising the Interbay neighborhood has piqued the interest of developers and investors alike. With dependable public transportation along the 15th Ave./Elliott corridor, the area offers a lot in terms of expansion and mobility. This area will be one to watch over the next few year, if it isn’t already.

No Horsing Around – Union Stables Restored

TUNE, architecture firm Weinstein A+U, and joint owner of the building, general contractor Lease Crutcher Lewis will take up the ole’ nine to five in arguably one of the coolest workspaces in Seattle. Once housing over 300 horses, employees of TUNE, Weinstein A+U, and Lewis will be the first human tenants to move into the building.

An ode to Seattle’s pioneering days, the landmark building was used as a livery stable, housing horses used for deliveries and to pull streetcars. Once considered the most modern building west of the Mississippi, the building has seen fires, earthquakes and was the scene of a major Prohibition raid back in 1923.

Paying respects to the building’s rich history, Lewis persevered and reused 127,000 board feet of lumber and milled old beams from the original building turning them into flooring and other materials. Additionally he reused every single road brick, as road brick is no longer available. Timber chewed and rubbed on by the horses can be seen throughout the build, as well as a large V-shaped hay cart which will be hung in the lobby of the building as “a nice little reminder of what the building was like..,” Dave Rauma, Lewis senior project manager said, according to the Puget Sound Business Journal.

Offering exposed beams, bike storage, and a green roof on part of the building, the renovation hits a sweet balance in paying homage to the past while setting an energy conscious precedent for the future. Going beyond the boundaries of the building, thinking of our carbon footprint, Lewis anticipates the green roof to be certified LEED gold, and hopes to outfit his office at the highest LEED certification, LEED platinum. It seems this waterfront building has jumped leaps and bounds ahead of its time and is quickly becoming more legendary than its historic past. With the tone set, let’s hope to see some legendary business for the companies settling in.

Union Stables Building

2200 Western Ave.

Seattle, WA 98121

Real Estate Steps into the 21st Century with Cloud Based Apps

Seattle, known as a progressive leader in information and technology, houses established companies and growing start-ups alike. As Amazon expands, Facebook moves in, and numerous start-ups take up stake in Seattle’s burgeoning technology hub, it is evident the commercial real estate industry, a sector some would say is lagging on the technological front,  is a major player in assisting these innovative companies set up shop.

According to the Puget Sound Business Journal, in 2014, high-tech tenants accounted for 45 percent of leasing activity in Seattle. That’s a good chuck of business coming from a client base who appreciates system innovation – it would be wise if the real estate sector jumped aboard the techie train and geared their marketing strategy towards their forward thinking client base.

That is exactly what co-founder of Hightower, Brandon Weber and Floored CEO, Dave Eisenberg are monopolizing on. Seattle based, Hightower, takes commercial leasing to that magical place everyone seems to love – the cloud. Allowing for full business execution in the palm of your hand, Hightower allows commercial owners and brokers to manage their entire portfolio, leasing documents, and collaborate with their leasing team all in real time. Joining forces with New York City based company, Floored, a fully interactive 3D visual tool for the real estate industry, Weber and Eisenberg have created a full-bodied leasing platform like no other.

“Tenants struggle to visualize how space might look, landlords spend billions of dollars on speculative space construction,” Brandon Weber, explained to Commercial Observer. “Floored greatly reduces this need by delivering a virtual tour experience showing the tenant exactly how their space will look once built out. We believe this can save Landlords billions in spec build out costs.”

Between Hightower’s mobile app technology and Floored’s 3D visual sophistication, brokers and building owners have the ability to virtually walk clients through available properties that provide such robust example of what the space could look like, that the platform is unmatched with anything else out there. What a refreshing game changer – but it is changing the game?

According to the Puget Sound Business Journal, Weber says Hightower is tracking more than 10,000 vacant office spaces, and that figure is growing 20 percent a month. Hoping to streamline his business for bi-coastal clients, Weber is excited at the prospect of assisting a Los Angeles tenant find property in New York via the Hightower application.

Thanks to new kids on the block, infusing life into the real estate industry, like Hightower and Floored, maybe some of the biggest names in the business will step into the 21st century.

Proposed Pike Place Market Waterfront Park Plan Released

planPlans for the proposed waterfront park connecting Pike Place Market to the waterfront have been released. The plans were designed by market officials and a team from Miller Hull and consists of 30,000 square feet of public terraces with views of Elliott Bay and the Olympic Mountains, commercial space available for local produce vendors, restaurants with outdoor seating as well as Pike Place Market vendors and a pedestrian walkway which will connect to the Seattle Aquarium and allow access to the waterfront. The new building and terrace will be built of timber and glass canopies.

Some vendors are excited about the plans but are a little skeptical regarding the look of the proposed project. They are concerned that the timber and glass will not flow with the rest of the Pike Place Market image and character. The market was developed and built over time which added to its character with a variety of styles and colors. Those concerned about the look hope that the new plan will also add some variety.

The proposed plan is estimated to cost $60 million to $68 million and will also include a new 300 stall parking garage and a 40 unit low-income housing complex for seniors. It is possible construction could start next year.

Amazon Releases Design Proposal for Denny Triangle

Amazon has released a few ideas for the design of their new downtown office complex in Denny Triangle, and they’re pulling out all the stops to create the perfect working environment. The design proposal includes a large conference room that seats 2000 people, has more than 3,000 underground parking spots and three high rise towers than cover over 3.3 million square feet. So much for a quiet opening. Amazon released these details in paperwork filed on Tuesday this week with city planners and a design review board that will discuss the proposal late next week.

But the design isn’t the only thing gaining attention from the paperwork; Amazon is also considering hosting several “public benefits” in hopes of gaining permission to dramatically transform the three blocks in the Denny Triangle area. This design meeting will launch the beginning of months of a permitting process, while giving Amazon the time and opportunity to present their design ideas to the public, and gain much sought out feedback.

Seattle Commercial Property Market Improving

This past week, Seattle and the surrounding region has seen an improvement in the commercial real estate market, with the sales of three big properties.

First, Continental Properties, Inc. sold 131 apartment units at the Aqua View and Carillon Heights apartment complexes to Archstone. It sold for $47.46 million.

Arden Realty LP sold West Willows Technology Center to Griffin Capital New Lease REIT Inc. for $40 million. The office park is over 155,000 sq. ft and is located at 14500 and NE 87th St. in Redmond. AT&T is the current tenant and uses the space for network operation and R&D.

Finally, Redhill Realty Investments sold the Kent-located Hampton Bay Apartments to Hampton Bay located in Vancouver, WA. The 304 apartment units sold for  $31.4 million.

For more information, please read the original PSBJ article.

Seattle Roosevelt Neighborhood Will See Higher Buildings

Last month, I wrote about the Roosevelt neighborhood potentially seeing a commercial rezone. On Monday, the full Seattle City Council approved six-story building heights in the Roosevelt commercial area. According to the Seattle Times article, it spans about 40 blocks of the commercial core. The 85-feet high buildings are designed to add density. However, the buildings around Roosevelt High School are restricted to a 40-foot height restriction, so as to preserve views of the school. Final projects are still subject to the design review board. For more information, please visit the Seattle Times article.

Downtown Seattle Aspira Tower Will Wait to Sell

Magnolia ApartmentAccording to the Seattle Daily Journal of Commerce, the owners of the 37-story Aspira Tower, located in downtown Seattle at 1823 Terry Avenue, will wait to sell. Investors are eager to bid on it, as Seattle has the third strongest apartment market in the country; however, the owners of the 325-unit tower will sell at the time when leasing and the capital markets are stronger.

Currently, the Aspira Tower has an occupancy rate of 82%, with 6-7 leases per week. The average price of a unit is $2.85/sq.ft.

South Lake Union Attracting Universities

WalkabilityAlong with attracting business headquarters, South Lake Union is attracting universities, due to its high-tech job growth. City University is moving its headquarters from Bellevue to South Lake Union at 6th and Wall. Boston-based Northeastern University is looking at South Lake Union as a place for its graduate program. Finally, University of Washington is already working on three buildings in the SLU neighborhood.

It makes sense that South Lake Union is attracting universities. According to the Puget Sound Business Journal, South Lake Union has seen 6.35 million sq.ft in new development from 2004-2010, at an assessed value of $1.1 billion. It’s expected to generate $6 million in tax revenue, not including the added amount of property value increase. Unfortunately, South Lake Union is facing the problem of a lack of office space available over 10,000 sq. ft.