Seattle Commercial Real Estate News of the Day

Monday, February 13, 2012

Seattle Times Daily Journal of Commerce Headline
Clash in Redmond over plan to fell trees at Group Health site

Greg Smith’s big plans

On the move: Regina Glenn named Chamber vice president Seattle development company Urban Visions is moving ahead on two mixed-use projects: a highrise at Second and Pike, and 200 Occidental in Pioneer Square.

Urban Visions has renamed the 38-story project at Second and Pike West Edge Tower, and hired Hendricks & Partners to find equity partners. The developer hired CBRE to market the 130,000 square feet of office space in 200 Occidental.

The family that owns Diamond Parking is Urban Visions’ joint venture partner on 200 Occidental. The 11-story project planned for the surface parking lot on the east edge of Occidental Park also will have street-level retail and about 80 apartments. Last fall, Smith said estimated the cost of the project at $70 million. Mithun is the architect of record on 200 Occidental, which Smith plans to start when the office is preleased.

Olson Kundig Architects designed West Edge Tower, which is planned for the parking lot at the southeast corner of Second and Pike. The project, whose cost Smith puts at around $150 million, needs additional equity before construction starts.

Urban Visions has not selected a general contractor for either project, both of which have master-use permits.

The mix of uses at West Edge Tower is not finalized. The plan was market-rate apartments above retail. Smith says he may add a boutique hotel.

Of the two projects, Smith thinks it will be easier to get 200 Occidental started. The office market in and around Pioneer Square has been a magnet for tech and creative companies. In about the last year, six large companies have leased a total of about 500,000 square feet and dozens of smaller firms are following.

“It’s amazing,” said CBRE broker Brandon Weber, who is marketing the 200 Occidental space with colleague Owen Rice. “The market has done a complete 180 over the last nine to 12 months.”

Fast-growing Silicon Valley companies, such as Google, are expanding to the Puget Sound region. The large pool of qualified workers and less expensive office rents are the draws.

“I think that trend is going to accelerate because the valley is just getting hotter,” Weber said.

The rich architectural character of Pioneer Square and its proximity to a regional mass transit hub are prized by tech and creative companies as a tool to recruit top talent. A year ago, when a data storage firm called Isilon leased 180,000 square feet in a new Pioneer Square building, a company spokesperson said the company chose the area partly because of this.

Average asking rents at 200 Occidental are in the mid-$30 per foot range, plus expenses, Weber said.

High-rise finance

Broker Kenny Dudunakis of Hendricks & Partners’ Seattle office and investment banker Mike White of the company’s Newport Beach, Calif. office, are taking West Edge Tower out to capital markets.

It’s easier to finance mid-rise, wood frame construction. That product type is less expensive to build and requires lower rental rates. It’s why there are so many of these kinds of apartment projects under construction.

Equity partners will invest in high-rises “for the right product,” said Dudunakis, who touts West Edge Tower’s location a block from Pike Place Market as a selling point. “Location wise, it’s right in the center of the bull’s eye.”

He added that the downtown high-rise market is “tried and tested.” He pointed to The Olivian, an apartment building which is eight blocks farther out from the core. Monthly asking rents range from about $2.33 to $2.91 per square foot, according to the property’s website. Whether the property is actually getting those rates was not clear. A person in the leasing office referred questions to a manager, who was not immediately available.

For Smith, the majority owner of West Edge Tower, it’s about finding the right partner. Or, as he put it, “It’s a bit of a beauty contest.”

Over the last 15 or so years, Smith has tied up sites, brought in investment partners and sometimes managed the developments. His three big projects are Millennium Tower, which Beacon Capital Partners financed; Fourth & Madison, which a Smith partnership assembled and sold to Hines to develop; and 5th & Madison. Smith partnered with Beacon on the latter project.

Smith said he has hired Jeff Johnson, a construction expert, as a project executive. Johnson managed construction of The Olivian for the developer, Hanover.

Smith said he plans to hold onto both West Edge Tower and 200 Occidental.

Empty, foreclosed houses burden cities, neighborhoods
Puget Sound Business Journal
Retail mogul Kemper Freeman talks shop
Upgrades planned for Sea-Tac Airport
The Rock goes urban with restaurant near Seattle Center
Boeing says it’s frustrated with Dreamliner glitch
iPad 3 rumored for March
Real estate spotlight, Feb. 10, 2012
Other News
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Multifamily Units to Lead U.S. Construction Gains
Paul Allen’s Vulcan Urges Seattle to Increase Its Building-Height Limits

About CRE Northwest

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