In an apparent bet on office work, a Los Angeles-based real estate company bought a 28-story office tower in Seattle’s Denny Triangle for $ 490 million.
Amazon currently occupies most of the building, known as West 8th, with the Seattle Children’s Research Institute among the other tenants.
Kilroy Realty bought the building from a real estate fund affiliated with Deutsche Bank, according to documents filed with King County on Monday. The building was constructed in 2009 and last sold in 2016 for $ 370 million.
The sale price stands at around $ 909 per square foot, higher than several other recent high-profile sales such as the Amazon-occupied downtown Macy’s building, which sold for around $ 758 per square foot. , and the Boren Lofts, an office building in South Lake Union. should be turned into life science labs that sold for $ 874 per square foot, according to a recent report from commercial real estate brokerage firm Colliers.
For new owners, the site offers “the potential to raise below-market rents,” Kilroy said in a press release. Amazon rents about 70% of the space “through April 2023 at significantly below market rents,” the company said.
“We believe the Denny Regrade submarket continues to be extremely well positioned for strong rental growth over the next several years and West 8th, which offers an unparalleled location, will help generate strong earnings growth and creation. of value to our shareholders, âCEO John Kilroy said in a statement.
The purchase isn’t Kilroy’s first foray into Seattle. The company has developed two South Lake Union towers now occupied by apple and plans several other new downtown office towers.
Seattle’s office market – and the cafes and stores that depended on office workers – continues to fall behind due to the pandemic. Downtown office vacancy rates are on the rise and rents are essentially flat, according to Colliers. Seattle office sales have been slow this year, according to another firm, Kidder Mathews.
A recent poll of about 500 Seattle-area tech workers, the vast majority expect to work from home at least two days a week in the future.
Amid the latest wave of coronavirus infections, Amazon said last month it plans to postpone reopening its offices until January 3 after initially planning to bring back employees in September.
The delay has sparked another round of speculation about when South Lake Union and the once bustling downtown office buildings will once again fill with workers.
After more than a year of working remotely for its white-collar workers, Amazon said at one point that it planned to “return to a desktop-centric culture,” but later relaxed that position to say that employees would work in person three days a week.
With the expansion of tech companies in the Eastside, office vacancy rates there are slightly lower than those in downtown Seattle, according to JLL. In the Bellevue Central Business District, for example, average office rents are about $ 2.40 per square foot higher and the vacancy rate is about 4% lower than in the Central Business District. Seattle.
Microsoft announced this month that it is indefinitely postponing its return to the office.