Union Investment acquires office building in Seattle
Union Investment has acquired the class A Midtown21 office building in Seattle for $330 million.
The project developer is a joint venture between U.S. insurance company MetLife Real Estate and Trammell Crow Co.
The 21-story property offers around 380,000 square feet of rental space and was completed in 2016. It is located in the high-growth Denny Triangle between the central business district and the South Lake Union submarket.
The property includes a conference center and a 306-space garage in a six-story underground car park. The office space is let on a long-term lease to the world’s largest internet-based retailer, Amazon. The occupancy rate of the property at 1007 Stewart St. is 98.4 percent.
“Seattle’s Denny Triangle is already a first-class submarket,” said Willis Kim, head of U.S. West Coast and Canada at Union Investment Real Estate GmbH. “Going forward, the quality of the location will continue to improve, for example through the expansion of the Washington State Convention Center and significant investment in local infrastructure with the extension of the urban rail system.” The Washington State Convention Center will be expanded by 430,000 square feet by 2020. Seattle’s urban rail network is expected to expand by 33 miles over the next six years and an additional 62 miles thereafter.
Midtown21 will be transferred to the holdings of open-ended real estate fund Unilmmo: Europa, which has an investment focus on Europe but also acquires properties overseas. The fund is already represented in Seattle with two office buildings and a hotel. These include the 400,000-square-foot Amazon Phase VI office building and the Hilton Garden Inn Hotel.
Seattle continues to be the city for companies to relocate, specifically the tech industry. Amazon added 1.7 million square feet of new office space in the CBD in 2016 and is on track to occupy 12 million square feet in the Puget Sound, mostly in South Lake Union, by 2022. Amazon’s total CBD inventory (both leased and owned) is approximately 7.3 million square feet. Facebook added to its Seattle footprint, leasing Eleven01 Westlake (154,000 square feet) in SLU. Having leased Dexter Station and Arbor Blocks in 2016, Facebook will occupy more than 873,000 square feet in the CBD once Arbor Blocks delivers in 2018. Google will break ground on its 600,000-square-foot SLU campus later this year. Ahead of its 2019 relocation from Bellevue, Expedia has begun demolishing old lab space at the former Amgen campus, the site of its future waterfront headquarters, which is set to break ground in the spring.
The Seattle CBD office market opened the year with an overall vacancy rate decrease of 120 bps to 6.3 percent and an overall asking rent increase of 9.7 percent to $40.78 per square foot on a year-over-year basis, according to Cushman & Wakefield. Nearly 1.4 million square feet were leased in the CBD in the first quarter, double the activity of the first quarter of 2016.
JLL predicts 2017 will likely be the fifth straight year the market sees more than 2.0 million square feet of positive net absorption, as tenants continue to occupy new class A deliveries. With consistently strong rent growth and record sales pricing, the market will remain solidly in favor of landlords as Seattle continues to grow with tenants battling for quality space.