Seattle Commercial Real Estate News of the Day

Thursday, December 22, 2011

Seattle Times Daily Journal of Commerce Headline
Rise in economic gauge suggests brighter outlook

Real Estate Buzz: Have Sabey and City U reached a deal?

UW, Seattle Children’s hospital plan to build employee housing Sources say City University will lease two thirds of Sabey Corp.’s 6th & Wall building in Seattle. If its true, the lease would total nearly 87,600 square feet on two floors of the three-story building. That’s not huge, but it’s still a good-sized deal.

We’ve heard that the parties are in final negotiations for a portion of the full-block building in the Denny Triangle. One source said to expect an announcement very soon.

Details of the Sabey-City U plans are sketchy and officials from both declined to comment. City U’s broker, Leo Backer of Washington Partners, also would not comment.

City U is one of the Northwest’s largest, private, not-for-profit universities, with locations throughout the region. It has been looking for a Seattle campus for about a year and considered taking about half of’s former headquarters on Beacon Hill. School officials also toured 705 Union Station on the edge of the International District.

The 6th & Wall location makes sense. It’s across the street from Antioch University’s Seattle campus.

As far as we can tell, Sixth & Wall has been vacant since 2007, when Group Health moved to South Lake Union. At the time, Dave Sabey told the DJC that what happens at Sixth & Wall “is the next story,” and promised to deliver “an eye-buster.”

Bubble: Are we there yet?

When you drive past yet another apartment project under construction, you probably think, “Man, this development boom sure has the feel of a bubble.”

If you do, you’re not alone. Jones Lang LaSalle’s new Apartments Outlook 2012 surveyed more than 150 private investors, brokers, developers, REITs and institutional investors in October and found many wonder about a bubble.

Cap rates are hovering around an oh-so-low 4 percent in tight markets. So does that mean a bubble that’s ready to burst? Thirty-four percent say yes. Twenty-two percent say we haven’t hit the bubble stage yet, while another 20 percent expect to see a bubble in 2012.

As competition stiffens for property in core markets, the industry is seeing money flow into both upgrades and new development. That is pushing up construction costs, especially for high-rise apartments. Nearly 70 percent said the cost of high-rise construction has increased more than 5 percent in the last year.

So what keeps developers developing and investors investing? They are expecting about 6 million people will become renters over the next three or four years as they either lose their houses or elect to live in apartments.

“So why wouldn’t you want to invest more, build more, re-develop more?” said Tom Toomey, president and CEO of UDR, a multi-family REIT. “[It] just seems like a great time and the numbers are stacked up in our favor.”

Puget Western winds up, Opus winds down

The recent sale of the Kendall Lake office building in Snoqualmie moves Opus Northwest another step toward shutting down.

Opus Northwest couldn’t weather the great recession, and now has only a handful of assets to sell: 24 condos at Fifteen Twenty-One Second Avenue in downtown Seattle and a large industrial site in Centralia, according to Tom Parsons, who headed the Opus office in Bellevue.

As previously reported by the DJC, Puget Western has the Centralia site under contract. It is 77 acres and can accommodate more than 1 million square feet of space. The deal was expected to close last spring. Parsons said the contract now calls for a potential closing in February.

Gus Erickson, president of Puget Western, said his company has another large site under contract in Lewis County. The land is in Chehalis and also could accommodate more than 1 million square feet of warehouses. It’s owned by the Runyon family. “We like both of those,” said Erickson.

Puget Western recently got site plan approvals for two large parcels it owns in Tumwater. Together those could accommodate nearly 2 million square feet.

Whether Bothell-based Puget Western buys either one of the Lewis County sites or both depends on the market.

Erickson is working with Kidder Mathews broker Vanessa Herzog on the Centralia site. She says as you go farther south, demand for large spaces drops, but activity among small tenants is high. That’s the opposite of what’s occurring in the Kent Valley where big boxes are in short supply.

Another big year for Vulcan

Vulcan Real Estate had a busy 2011. Just how busy is summed up in a press release the company put out yesterday. Here’s what Vulcan did:

• Delivered 845,000 square feet of pre-leased office space with the completion of phases three and four of’s five-phase headquarters.

• Broke ground on more than 500,000 square feet of space for and the University Of Washington School Of Medicine.

• Executed nearly 500,000 square feet of new or renewal leases, and achieved an average occupancy rate of 95 percent for its commercial portfolio.

• Moved the Institute for Systems Biology to the 401 Terry Avenue Building. More than 300 employees are in 140,000 square feet of life sciences space.

• Helped tenants open 13 shops, restaurants and services, including South Lake Union’s first medical clinic.

• Achieved average occupancy of more than 95 percent for its rental housing, and sold the last condo at Enso.

Walk on the wild side

Seattle’s Department of Planning and Development is encountering some new enforcement issues — including transgender chickens. It says so in DPD Director Diane Sugimura’s recent report to the City Council.

The city allows folks to have up to eight “domestic fowl” — usually chickens, but not roosters what with their incessant pre-dawn crowing. So what’s the problem?

In responding to rooster complaints, inspectors have learned that some breeds of hens have rooster-like characteristics — combs, wattles, spurs and the like. That makes it difficult to tell whether you are seeing a hen or a rooster.

“Our inspectors are not ornithologists, so if a bird looks like a rooster and crows like a rooster, we will issue a citation for having a rooster,” DPD spokesman Bryan Stevens said, adding that it’s up to the owners to prove that what they have is not a rooster.

Regence sells Seattle HQ building for $76M
Puget Sound Business Journal
Slide show: Top cities for saving by using mass transit
U.S. homes lost nearly $700B in value in 2011
Amazon plans two fulfillment centers in Middle Tennessee
Average 30-year mortgage rate a record 3.91 pct.
Fewest layoffs since ’08 as economy strengthens
How the new 520 Bridge will be built
Other News
Foreclosures May Delay Housing Rebound to 2013
In Volatile Economy, Investors Lean Toward Certainty of Office Sector
Seattle Office Bldg Sells for $2.5M
Seattle Property Owners Brace for Tax Hike
Point Wells developer appeals ruling that halts project
Creating a Downtown Historic Theater District

About CRE Northwest

Specialist in office & investment real estate in Seattle & the Eastside
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