How a Seattle Building Became 2022’s Biggest Multi-Tenant Deal So Far

For Boston Properties, the price of enlargement within the Seattle market was a lot increased than the preliminary buy-in. 

The corporate, one of many largest workplace landlords in the US, accomplished its second acquisition in Seattle final month when it acquired Madison Centre for $730 million, or $960 per sq. foot, from a three way partnership of Barings and Schnitzer West. Newmark’s co-head of U.S. capital markets, Kevin Shannon, brokered the sale, which he referred to as the most important multi-tenant workplace sale within the nation yr thus far.

“The property was stabilized, and there have been lots of people that inquired off-market,” stated Shannon. “The depth of funding capital that chased this asset displays the conviction capital has within the fundamentals of the Seattle workplace market. Workplace-using job progress is phenomenal on this market, and its tech and life science drivers are engaging.”

Boston Properties entered the market final July when it spent $465 million, or $567 per sq. foot, to accumulate Safeco Plaza, a 50-story, 800,000 square-foot tower a block away from Madison Centre.

“After exploring the Seattle marketplace for fairly a while, we have been thrilled to accumulate Safeco Plaza final yr as our preliminary flag available in the market,” Kelley Lovshin, Boston Properties’ vp of the Seattle area stated in an e mail. “The variety of firms which can be headquartered right here, the optimistic inhabitants progress, and quick access to expertise make Seattle a dynamic and fascinating location.”

The corporate acted like an all-cash purchaser. It funded the Madison Centre acquisition with a one-year, $730 million time period mortgage, however anticipates finally funding the acquisition by way of incremental asset gross sales structured as like-kind exchanges or three way partnership fairness, based on its first-quarter earnings report. Total, the corporate tasks promoting $700 million to $900 million in belongings throughout 2022.

“Debt consumers are being impacted by rates of interest,” Newmark’s Shannon stated. “All-cash consumers are taking benefit to seize an outsized share of offers proper now. They gravitate in the direction of trophy markets and belongings.”

The 37-story Madison Centre was accomplished in 2017 and authorized LEED Platinum by the U.S. Inexperienced Constructing Council. It was Fitwel Viral Response-certified in 2021. At $960 per sq. foot, Shannon estimates the worth at barely under alternative price as building prices on an identical constructing would presently be about $1,000 per sq. foot. Moreover, the constructing was grandfathered in on some constructing codes that present extra financial savings in comparison with new developments. 

Regardless of the Pacific Northwest’s penchant for rain, facilities embody a rooftop deck with panoramic views. Tenants may make the most of communal and personal assembly areas resembling an important room with a three-story fire and a dwelling wall, a convention/coaching heart, a boardroom, and a library. Washington Athletic Membership operates a 5,700-square-foot health heart within the constructing, and Amazon Go runs a cashier-less market on the bottom flooring. The world is fascinating because of glorious entry to highways and public transit, and is adjoining to the long run extensions of the East Hyperlink Mild Rail.

Along with being main company headquarters for Microsoft, Amazon and Nintendo, Seattle has attracted greater than 100 out-of-town know-how firms which have expanded into town over the previous decade, based on trade tracker Geekwire. 

“Now we have nationwide relationships with many of those purchasers, and we stay up for deepening {our relationships} with them with our enlargement within the Seattle area,” stated Lovshin.

Tenants embody know-how {and professional} service firms resembling leisure agency Hulu, accounting agency E&Y and headquarters for regulation agency Davis Wright Tremaine. On the time of acquisition, it was 93 p.c leased to twenty firms with a weighted common lease time period of seven years.

Madison Centre was accomplished practically a decade after the location was acquired by developer Schnitzer West. The unique workplace plans stalled in 2008 because of the nice recession, however building moved ahead in 2014. The intersection the place the constructing is situated was fully reworked over the previous a number of years.

The close by F5 Tower at 801 Fifth Avenue leased everything of its 516,000-square-foot workplace portion to F5 Networks in 2018 at a beginning price of $40 per sq. foot yearly, which is able to improve to $56.52 per foot by the top of its 14.5-year lease, based on Securities & Alternate Fee filings. South Korean resort model Lotte operates a 189-room resort in that constructing’s decrease flooring.

Though the Seattle market suffered pandemic-related job losses, it bounced again faster than different coastal markets closely dominated by tech firms resembling San Francisco. Asking charges have been $51 per foot as of the primary quarter within the Seattle CBD submarket the place Madison Centre is situated, based on Newmark’s workplace market report. That’s down by 1.1 p.c from the primary quarter of 2021, however up about 10 p.c from 5 years in the past. Tech employers added 16,000 jobs over the previous two years within the better Seattle space, and the area’s unemployment price dropped under 4 p.c in February 2022 after spiking to 16.6 p.c in April 2020.

With the addition of this constructing, Boston Properties’ portfolio totals about 54 million sq. ft throughout 200 properties in Boston, Los Angeles, New York, San Francisco, Seattle and Washington, D.C. Eleven of these properties are beneath building or being redeveloped.