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Nat Levy
Real Estate Reporter

October 2, 2014

Real Estate Buzz: JLL report says some tech tenants are ready for big moves in Seattle, Bellevue

Real Estate Reporter

Several growing tech companies are considering some big moves in downtown Seattle and Bellevue.

On a conference call Wednesday brokers from Jones Lang LaSalle said tech tenants in both cities are looking at expanding.

Jones Lang LaSalle Managing Director Charlie Malley said the video game company Valve could double its space in downtown Bellevue to about 200,000 square feet. Expedia is looking at going from 500,000 square feet to as much as 1 million square feet.

The announcement that Concur Technologies will be sold to SAP put things on hold for now, but Concur had been looking at adding 70,000 square feet to the 150,000 square feet it now has in Bellevue.

Growing companies like these don't have a lot of options right now. Malley said there is only one building in downtown Bellevue with a vacant space larger than 30,000 square feet.

There are some new buildings planned and under construction in Bellevue: Trammell Crow Co. and Kemper Development are getting started on two projects with a total of more than 1 million square feet, though Malley said there are no cranes in the air yet.

Image by studio216, courtesy LMN Architects [enlarge]
Trammell Crow has started this 19-story office tower in downtown Bellevue. Could it become the home of a growing tech company like Valve or Expedia?

Schnitzer West also plans to start construction this year on a Bellevue office tower, and several others are planned.

Growing companies — plus rising rents and falling vacancies — make Bellevue a hot office market and some landlords are preparing to cash in. Malley said Brickman's Civica Office Commons is for sale, and Ivanhoe Cambridge put its Summit portfolio on the market: two office buildings and plans for a third building, which already has a completed parking garage.

Malley said these properties could fetch big prices from landlords new to Bellevue.

“This could be an opportunity to bring more diversity of ownership to downtown Bellevue,” Malley said.

Amazon.com continues to dominate Seattle's office market. The DJC reported last month the online retail giant plans to build a fourth new tower in the Denny Triangle with 777,600 square feet on the block bounded by Bell and Blanchard streets, and Seventh and Eighth avenues.

If Amazon keeps its current space and develops all new space it has proposed, the company will occupy 8.8 million square feet, which could accommodate more than 40,000 employees, according to Jones Lang LaSalle.

But Amazon isn't the only company making noise in Seattle. Joe Gowan, vice president at Jones Lang LaSalle, said Facebook, Twitter, Zillow and DocuSign are all growing quickly.

“I would expect one or a couple of those names to do something substantial in the near future,” Gowan said.

Landlords are doing whatever they can to lure tech companies — big and small. Common areas in older office buildings are being renovated, and crews are adding gyms and bike parking.

Just as in downtown Bellevue, big blocks of space are in short supply in Seattle. There is only one space over 100,000 square feet available downtown, according to Jones Lang LaSalle.

These big tenants could be candidates for filling the new office towers being developed in Seattle by Schnitzer West and Daniels Real Estate, so developers are moving forward. Daniels is doing utility work and Schnitzer West is demolishing an old building to prepare for construction — but again no cranes are in the air yet.

“Seattle can certainly support one new office tower, but it remains to be seen whether it can support two,” Gowan said.

The Seattle/Bellevue market has a vacancy rate of 11.1 percent. That is the fourth lowest in the nation, behind only New York, San Francisco and Portland.

Jones Lang LaSalle reports more than 3 million square feet of office space is under construction in the Seattle/Bellevue area. Two million square feet of office space is expected to open next year and about half of it is pre-leased, said Patricia Raicht, Jones Lang LaSalle's vice president of research for the Pacific Northwest.

So far in the Seattle/Bellevue market, a net of more than 1.4 million square feet of space has been absorbed this year. Jones Lang LaSalle expects absorption to hit 2 million square feet, well ahead of the 10-year average of 1.3 million square feet.

7 more reasons to live here

People in Washington enjoy living in a clean and beautiful place, and a new report from RealtyTrac shows how fortunate we are.

Seven counties in Washington ranked high nationally for having few man-made environmental hazards — that's things like bad air days; Superfund and brownfield sites; and abandoned drug labs.

Here are the counties, and their rankings: Skagit (No. 4), Snohomish (5), Whatcom (7), Thurston (8), Cowlitz (9), Yakima (15) and Kitsap (24).

“Living in Washington offers a lot of benefits. We're fortunate to be surrounded by an abundance of natural beauty punctuated by low pollution levels and clean air,” OB Jacobi, president of Windermere Real Estate, said in a press release. “The areas within Washington with the least human-made hazards had less than a tenth of a percent of bad air quality days compared to a national average of 5.43 percent of days with bad air quality. Local housing markets have benefited from this healthy landscape, reporting an average 10-year home price appreciation of nearly 28 percent.”

Deschutes County, Oregon, which includes Bend, had the fewest environmental hazards.

So which areas have the most environmental hazards? St. Louis City, Philadelphia, Baltimore City, Hudson (New Jersey) and Denver.

No Washington or Oregon counties were on the list of the 50 worst counties.

Got some news for the Buzz? You can reach Nat at nat.levy@djc.com.

Got a tip? Contact DJC real estate editor Brian Miller at brian.miller@djc.com or call him at (206) 219-6517.

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