Regions
West | Seattle - Portland
Jul 24, 2009
By: Tonie Auer, Contributing Correspondent
Despite more than 2 million square feet of new product completed this quarter, Seattle’s office market saw one of the largest leases this year when international law firm Perkins Coie L.L.P. renewed its 269,000-square-foot lease at 1201 Third Avenue, a 55-story tower in the heart of the city’s Central Business District.
The lease renewal comes on the tail-end of a speculative office boom in which Seattle’s office market vacancies will likely continue to rise over the next few quarters as businesses contract resulting in competition for tenants with landlords offering larger concessions and more perks to prospective renters, according to the Grubb & Ellis Seattle Office Trends Report for the second quarter.
Vacancy in the region increased 150 basis points to 14.4 percent while rental rates dropped nearly a full dollar per square foot to $28.88 on a full service basis, the report stated. The jump in vacancy was driven primarily by an increase in supply with more than 2 million square feet coming online including marquee projects of West 8th (492,000 square feet), 2201 Westlake (302,200) and 7th & Madison (197,000). Around 3.6 million square feet of office space remains under construction in the Puget Sound, the report stated.
The city’s office market suffered a blow when Targeted Genetics terminated its lease for 76,000 square feet in an effort to cut costs, according to Grubb & Ellis information. The report authors speculated that as the competition for tenants heats up, landlords will offer larger concessions and more perks to prospective renters.
There is now 2.85 million square feet of sublease space on the market, providing ample opportunity for bargain hunters but also depressing lease rates for direct space as well, the report stated.
“This downward pressure can be seen in the increasing pace at which lease rates have declined recently as landlords struggle to compete to shed excess vacant space. Seattle CBD Class A lease rates decreased nearly two dol¬lars, from $32.85 to $30.78, on a full service basis, while vacancy in downtown increased 270 basis points to 14.6 percent,” according to the report. “On a positive note, there was 560,928 square feet of net absorption this quarter. Most of this, however, was due to Microsoft’s move into the newly completed Bravern and City Center Plaza office buildings in downtown Bellevue.”
CB Richard Ellis represented Perkins Coie and Wright Runstad & Company represented the landlord in the transaction. Third and University Limited Partnership, a partnership between Wright Runstad & Company and an affiliate of Beacon Capital Partners L,L,C,, owns the building.
By: Tonie Auer, Contributing Correspondent
Despite more than 2 million square feet of new product completed this quarter, Seattle’s office market saw one of the largest leases this year when international law firm Perkins Coie L.L.P. renewed its 269,000-square-foot lease at 1201 Third Avenue, a 55-story tower in the heart of the city’s Central Business District.
The tower has been home to Perkins Coie since it first opened in 1988, when it was known as the Washington Mutual Tower.
Perkins Coie’s long-term lease commitment represents one of the Pacific Northwest’s largest commercial real estate transactions so far this year, according to brokers involved in the deal. Roughly equal in size to the space currently occupied by Perkins Coie, the lease includes a renovation and reconfiguration of the firm’s space within the 1.1 million square-foot high-rise.The lease renewal comes on the tail-end of a speculative office boom in which Seattle’s office market vacancies will likely continue to rise over the next few quarters as businesses contract resulting in competition for tenants with landlords offering larger concessions and more perks to prospective renters, according to the Grubb & Ellis Seattle Office Trends Report for the second quarter.
Vacancy in the region increased 150 basis points to 14.4 percent while rental rates dropped nearly a full dollar per square foot to $28.88 on a full service basis, the report stated. The jump in vacancy was driven primarily by an increase in supply with more than 2 million square feet coming online including marquee projects of West 8th (492,000 square feet), 2201 Westlake (302,200) and 7th & Madison (197,000). Around 3.6 million square feet of office space remains under construction in the Puget Sound, the report stated.
The city’s office market suffered a blow when Targeted Genetics terminated its lease for 76,000 square feet in an effort to cut costs, according to Grubb & Ellis information. The report authors speculated that as the competition for tenants heats up, landlords will offer larger concessions and more perks to prospective renters.
There is now 2.85 million square feet of sublease space on the market, providing ample opportunity for bargain hunters but also depressing lease rates for direct space as well, the report stated.
“This downward pressure can be seen in the increasing pace at which lease rates have declined recently as landlords struggle to compete to shed excess vacant space. Seattle CBD Class A lease rates decreased nearly two dol¬lars, from $32.85 to $30.78, on a full service basis, while vacancy in downtown increased 270 basis points to 14.6 percent,” according to the report. “On a positive note, there was 560,928 square feet of net absorption this quarter. Most of this, however, was due to Microsoft’s move into the newly completed Bravern and City Center Plaza office buildings in downtown Bellevue.”
CB Richard Ellis represented Perkins Coie and Wright Runstad & Company represented the landlord in the transaction. Third and University Limited Partnership, a partnership between Wright Runstad & Company and an affiliate of Beacon Capital Partners L,L,C,, owns the building.
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