Vulcan Real Estate appears so bullish about the prestige of the Seattle tech and office sector that it is marketing a South Lake Union development leased by social media giant Facebook for a price that could set a high watermark for the city’s sales, in a reflection of the premium new construction and a high-profile tech company can help generate.
Vulcan, which was launched as an investment vehicle for Microsoft co-founder Paul Allen, is listing for sale a months-old office tower known as Arbor Blocks East, one of two buildings totaling 390,000 square feet known as Arbor Blocks East and West, with brokerage Newmark Knight Frank, according to a person familiar with the listing and a report in Real Estate Alert on Tuesday. Seattle is home to Amazon’s headquarters.
The Arbor Blocks East building, a 196,208-square-foot office at 300 Eighth Ave. N., was opened in March and is fully occupied by Facebook, which moved into the building on April 29, according to Facebook spokesman Kyle Gerstenschlager.
The second building, Arbor Blocks West, is under construction for a planned 192,700 square feet and expected to be completed this summer, according to CoStar. Facebook has also pre-leased all the office space in that building. That property is not listed for sale but may hit the market in the future or become part of the sale of the first building, according to Real Estate Alert.
Vulcan and its brokers are seeking offers that they expect will exceed $1,000 a square foot, which would set a new record on per-square-foot price for the city of Seattle, according to a source knowledgeable of the listing. In total, the single building could fetch $200 million or more, while the pair could generate a sales price north of $400 million.
A deal of that size would surpass the city’s per-square-foot office sales record set last year by LaSalle Investment Management, which spent $992 a square foot on the 130,525 square-foot office at 202 Westlake Ave., which is occupied by online retail giant Amazon, according to CoStar.
On total value, it would still be dwarfed by the notable March acquisition by Spain-based Ponte Gadea, which paid a record $740 million for an Amazon-occupied complex called Troy Block, according to CoStar.
As the seat of the e-retail giant Amazon’s empire and a hub for other big names in tech, office buildings in Seattle’s Lake Union district have regularly garnered hefty price tags.
“Seattle’s office market continues to impress with record pricing and deals that resulted in the highest level of quarterly sales volume since 2010,” reads a CoStar Market Analytics report. “Investors’ appetites for well-capitalized tenants have driven prices sky-high in Lake Union.”
The highest prices tend to go to brand new buildings occupied by companies that are household names, a quality that the Arbor Block buildings possess.
The blockbuster sales are influencing trades of older stock further afield from the Amazon campus. Just this week, DivcoWest paid $118 million for West Lake Union Center, four times the $30 million the 10-story, 26-year-old building commanded during its last sale in 2003, according to CoStar.
Vulcan is by far the most prolific seller in the area, with over $2.7 billion in in sales volume there over the last year, according to CoStar analysis. The task of marketing the buildings falls to Newmark Knight Frank, which will start shopping the East building later this month and the West building later this year, after Facebook moves in.
Facebook first set down roots in Seattle in 2010, when it opened its first office in the city, then staffed by only three engineers, Gerstenschlager said. It now has over 3,000 employees in the metro area. As of January, Facebook had 2.7 million square feet of leased space between its offices in Seattle, Bellevue and Redmond.
Newmark Knight Frank declined to comment on the listing. Vulcan did not immediately respond to requests for comment.