October 12, 2000

Building moves to head of its class

When Boeing decided to sell its massive, 763,000-square-foot Space Center East complex in Kent last year, many of the region’s commercial real estate professionals expected the property’s eight buildings would be sold off individually, then redeveloped as cheap, class B back-office space over a period of five to six years.

Two acres of asphalt at CenterPoint were replaced with grass, shrubs and trees for tenants to enjoy.

Their reasoning was well founded. After all, the Kent commercial real estate community had never experienced such a large amount of space being brought to market at any one time. Kent’s office absorption rate has been typically lower than those enjoyed by Seattle, Bellevue and the region’s trendier suburban business centers.

But more than anything else, developers and brokers anticipated that Space Center East’s redevelopment to go as such because, quite simply, no one had found a way yet to make class A work in this industrialized Seattle submarket.

That is, until now.

Space Center East, now known as CenterPoint Corporate Park, was purchased in July 1999 by Seattle developer Intracorp and Rockwood Capital based in San Francisco. The new owners immediately instituted an intensive renovation project that would transform this once sprawling, outdated complex into a cohesive, high-end corporate campus more befitting of the Eastside than a market historically defined by warehouses.

This $35 million rehabilitation has literally rebuilt CenterPoint Corporate Park from the inside out. Office interiors, exteriors and lobby areas have been renovated to bring CenterPoint’s buildings up to industry Class A standards. Land development consultants were brought on site to revamp the complex’s 46 acres of surrounding common areas, landscaping, and vehicular and pedestrian circulation patterns.

Today, CenterPoint is more than half full with a diverse mix of national and regional companies serving a broad range of industries. Better still, CenterPoint expects to be completely occupied by this time next year.

What can be attributed to such a quick lease-up in a Seattle submarket where demand for Class A space was previously sparse?

The first inclination is to point to the region’s white-hot economy and insatiable thirst for prime commercial office space. However, renovating and filling almost a million square feet of unoccupied space is tough under any circumstances--even during these thriving market conditions.

Good timing and unprecedented market growth is just part of the story here. The main reason that CenterPoint has been a good investment has been the team’s ability to renovate smartly.

Smart renovating means finding creative ways to stretch the renovation budget without compromising the project’s integrity. It means recycling instead of dumping old waste materials, and being environmentally responsible to natural surroundings to create a park-like atmosphere in which all tenants will enjoy working.

Smart renovating requires that developers have a crystal-clear vision of how the property will look and feel when the renovation is complete. It insists that owners have total confidence in the development team to lead the charge and get the job done right--the first time. Perhaps most important, smart renovating takes countless hours of strategic planning and careful execution to keep re-development costs at a minimum and lease rates competitive with the sub-market’s newly built Class A competition.

At CenterPoint, the team has leveraged the sheer volume of material taken from demolition to create economies of scale in the project’s renovation. Rather than paying to have the unwanted interior and landscape material taken away to burden already overflowing landfills, CenterPoint has instituted a recycling partners program.

The program unites CenterPoint with local corporations and organizations specializing in the regeneration of these commercial items. Thus far, it’s saved CenterPoint tens of thousands of dollars in dumping fees, not to mention sparing the local environment huge quantities of reusable material once destined for the landfill. CenterPoint has been responsible for recycling the following:

• 7,700 linear feet of chain link fence (once surrounding the 46-acre property);

• 80 tons of sludge from retention ponds (now being used for on-site fill);

• 21 acres of ceiling tile;

• 20 miles of demountable wall partitions;

• hundreds of thousands of steel studs;

• tens of thousands of yards of copper wiring; and

• more than 20 acres of interior carpet.

And, there’s more to come as the CenterPoint team continues to renovate smartly with regard to upgrading its landscaping and rehabilitating the property’s car- and foot-traffic schematics.

The CenterPoint team has taken a great deal of care to create a park-like atmosphere at CenterPoint, preserving most of the property’s mature vegetation and original trees that flank the perimeters of CenterPoint’s eight buildings.

Realizing that the property already had more than enough land area to offer free parking to all CenterPoint employees, CenterPoint replaced two acres of asphalt with grass, shrubs and trees for tenants to enjoy. Additionally, the property’s retention pond and waterfall feature have been rehabilitated. Beyond its obvious utilitarian purposes, the pond now provides tenants with quiet common space to meet colleagues during lunch or office breaks.

These are the types of site beautification projects that don’t always present developers with obvious returns on investment, yet go a long ways toward attracting tenants seeking a better work-life environment for their employees.

Another example can be found in CenterPoint’s adoption and restoration of a short stretch of Mill Creek, a county-owned salmon-spawning stream that runs through the center of the park. In doing so, 35 truckloads of debris were removed from its overgrown banks, part of CenterPoint’s overall creek-rehabilitating project that exceeds $60,000 in unrecoverable fees.

A critical part of smart renovating, CenterPoint believes, is instituting environmentally minded projects that stand to serve the entire community, in addition to park tenants. Aside from being the right thing to do, these eco-projects save developers in the long run by improving relationships between property managers and local decision-makers working in the local governmental, environmental and business sectors.

On the systems and amenities side of the equation, the CenterPoint team has taken several smart steps to ensure that a balance is struck between property operation costs and improving the work-life experience for tenants. CenterPoint’s HVAC systems have been completely overhauled to reduce on-site energy consumption, while long-lasting, highly efficient lighting systems have been installed in all CenterPoint office buildings. Developers estimate that this $2 million investment will pay for itself in energy savings alone within just seven years.

CenterPoint has invested millions of dollars in to bring professional childcare on site, a value-added amenity that will help CenterPoint tenants attract and retain their employees. An employee fitness center is being planned, and a full-service food court is being built to give CenterPoint tenants on-site access to nearly all of their daily needs.

There are many other examples that illustrate how CenterPoint Corporate Park is leveraging smart renovating techniques to create Class A demand in this industrialized Seattle sub-market. But it isn’t easy. Smart renovating takes strategic planning, flawless execution and ownership with a true vision for the future of the project. It is in every developer’s best interest to utilize these proven strategies in order to successfully reposition their projects during any market conditions.

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