- total sales volume nearing $1B mark again
- average price per square foot hits five-year high
- German buyers close the two largest office deals of Q2
- 2.1 million square feet of office space to come online in Q3
At the closing of 2017’s second quarter, the Seattle office market seems to be having a strong year. With sales volume recovering from a slow start in Q1, and the average price per square foot reaching a five-year high, the market continues to pique the interest of investors. Various large office projects are currently in the works, and are likely to boost investment over the coming months.
Total Sales Volume Nearing $1B Mark Again
The Seattle office market is firing on all cylinders, starting 2017 with $403 million in sales volume in the first quarter, and reaching $933 million in the following one. The year’s second quarter marked the best-performing Q2 of the past five years in Seattle–and was 18% higher year-over-year in terms of dollar volume, according to in-depth data gathered by Yardi Matrix. Though the market seemed to be winding down in the first months of the year, after peaking in Q4 2016, the second quarter saw renewed buyer interest and a surge in average sale prices.
Average Price per Square Foot Hits 5-Year High
German Buyers Close the Two Largest Office Deals of Q2
The biggest office transaction of the quarter was the $330 million sale of 1007 Stewart St. to Frankfurt-based Union Investment in mid-June. The German company acquired the property dubbed Midtown 21 from a partnership between Trammell Crow and MetLife. The 21-story, 370,800-square-foot high-rise in downtown Seattle was recently completed and includes 365,000 square feet of office space and 5,800 square feet of retail, per Yardi Matrix data. Online retail giant Amazon has already leased the entire office portion of the building, and will move into its new offices sometime this year, according to The Registry – Puget Sound Real Estate.
The second-largest office purchase of the year was also closed by a Frankfurt-based company. In late May, Commerzbank shelled out $286 million to acquire the 10-story, 351,731-square-foot Dexter Station in Seattle’s Westlake submarket. Located at 1101 Dexter Avenue North, the Class A building includes 10,575 square feet of retail, an on-site conference facility and bike storage, and boasts LEED Gold certification from the USGBC.
Seattle keeps attracting a good deal of foreign investment, especially from Asian and German companies, which are drawn to the area’s growing economy and booming tech sector. The Seattle Times suggests foreign investors are attracted by the relatively low prices compared to more expensive markets like California, Vancouver or New York.
2.1 Million Square Feet of Office Space to Come Online in Q3
Three major projects came online on the Seattle office market in Q2 2017, totaling nearly 700,000 square feet. Two of these projects are located in Seattle (Alexandria Center at 400 Dexter Avenue North and 2701 Eastlake Avenue East), while one development also reached completion in the city of Bellevue (Centre 425 at 425 106th Avenue NE).
Four large office projects totaling 2.1 million square feet of space are currently under development in Seattle, and are scheduled for completion in Q3. The largest project is Schnitzer West’s Madison Centre in the Seattle central business district. Schnitzer West kick-started the Class A+ project with the help of a $225 million construction loan funded by Blackstone, per Yardi Matrix data. The 37-story, 753,840-square-foot building will include roughly 7,800 square feet of retail space and is scheduled for completion by the end of July.
Urban Renaissance Group has two major office projects in the pipeline for Q3–the 404,889-square-foot Amazon Houdini North at 399 Fairview Avenue North and the 292,274-square-foot Tilt 49 at 1812 Boren Avenue. Both developments are expected to come online by the end of July.
Daniels Real Estate’s 695,519-square-foot F5 Tower at 801 5th Avenue is also in the pipeline for Q3, with completion scheduled for late September.
- Square footage parameters – over 50,000 square feet;
- Minimum amount per transaction – $5,000,000;
- Transactions recorded until July 6th, 2017;
- We excluded ‘ownership stake,’ ‘ground lease,’ ‘controlling interest’ and ‘portfolio’ transactions from our calculation of the average price per square foot;
- Data source: Yardi Matrix (download raw data).