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February 22, 2018
Specialty: Real estate investment, development and property management
Management: Pam Hirsch, managing partner, investment and development; Greg MacDiarmid, managing partner, capital execution; Dan Ivanoff, founder
Projects: Madison Centre, a 750,000-square-foot office building in Seattle; Centre 425, a 360,000-square-foot office building in Bellevue; Urban Union, a 290,000-square-foot office building in South Lake Union
Managing partner Pam Hirsch responded to questions about her firm’s activities.
Q: Near-term, where do you expect growth?
A: The rezone of Seattle’s University District will draw significant interest, especially for multifamily development. The area is diverse and vibrant, add in great transit with the pending light rail at University Avenue, and you have the makings of an emerging market.
I think we’ll continue to see growth and new development in Seattle and Bellevue CBDs, but at a declining rate from what we’ve seen in the past five years.
We have an office in Denver, and are evaluating entering some other West Coast markets, but nothing concrete to announce at this time.
Q: What are the biggest challenges facing local real estate?
A: The easy and obvious answer is traffic and infrastructure, and we could talk about the issues surrounding these challenges for hours.
Another less-discussed issue is pricing. The Puget Sound area has some of the highest construction costs in the country, and rents have not caught up, especially compared to cities like San Francisco. If the real estate market is going to continue to develop office buildings, there is going to be significant rent escalation and it will be interesting to see how some of the more traditional tenants in the CBD will react; tenants may consider less costly alternatives such as the suburbs.
Q: How is demand for office space in Seattle and Bellevue, and how is leasing going on Madison Centre?
A: The demand in the Seattle and Bellevue CBDs is strong, and we are starting to see increased demand in the suburbs. There is even concern about not having enough supply ... but at some point there will be a correction, or at least a slowdown.
As for Madison Centre, I’ll say that our team is very busy.
Q: Are co-working outfits, such as WeWork, affecting the traditional office market?
A: I think we’ll need more time to really understand if or how the co-working spaces will impact the traditional office market.
In my view, co-working solutions serve two important functions. First, they fill a need when office tenants and landlords never seem to come together, and that is the short-term lease. It allows the start-up companies, or companies new to the area, an alternative as they evaluate their longer-term needs and find the right space.
The second is that they provide space elasticity for all types and sizes of tenants already established in the market. From tech to traditional tenants, we hear about how companies use co-working spaces for surges in headcount, a way to house consultants, etc., as well as touchdown spaces during travel.
It will be interesting to watch the co-working industry evolve.