Area With Most Office Investment Activity in Seattle’s Eastside May Come as a Surprise 

CoStar Insights: This Area Has Seen More than $700 Million in Sales Over the Past 12 Months

Jared Kadry | November 14, 2019

When people think of office real estate in Seattle’s Eastside, the suburbs located east of Lake Washington, the names downtown Bellevue, Kirkland or Redmond usually come to mind. But investment activity in those areas have been somewhat muted over the past year. Instead, it’s the I-90 Corrirdor that is leading the Eastiside pack this year in terms of sales volume.

The I-90 Corridor — a submarket where most of its office space is clustered around Interstate 90 and is bordered by Lake Washington to the west and Lake Sammamish to the east — has already set a record for annual office sales volume for the current real estate cycle with $725 million in sales through mid-November.

The I-90 Corridor features some of the most attractive fundamentals in the Seattle region for tenants. It has a Bellevue address, it is home to T-Mobile’s headquarters, and it features rents at a discount to the exorbitant downtown Bellevue. Asking rents in the I-90 Corridor average around $38 per square foot, compared with roughly $53 per square foot in downtown Bellevue, the most expensive area in the entire Seattle metropolitan area.

With these strong fundamentals come investor appetite for risk-adjusted returns.

In the largest deal in the I-90 Corridor this year, Los Angeles-based Kennedy Wilson and Topeka, Kansas-based Security Benefit Life Insurance Company teamed up to acquire the 153,000-square-foot Sunset North campus from Boston-based Beacon Capital Partners in September. The high-end complex sold for $227 million, or roughly $489 per square foot, at a 6% capitalization rate. The property is home to major tenants such as WeWork and Farmers Insurance.

While the sales price for Sunset North is astonishing, it’s the appreciation that is more impressive. The property was purchased by Beacon Capital Partners for $155.2 million in 2016 and was able to sell it at a 46% gain in just three years.

Other major I-90 Corridor office deals that have closed in the past 12 months include the sale of T-Mobile’s main campus in April. The property was acquired by Los Angeles-based Preylock Holdings for $467.5 million, or $482 per square foot, from Montreal-based Ivanhoe Cambridge. The campus is in the midst of a renovation as T-Mobile gears up for its merger with Sprint, which has been delayed in recent months.

Source:  www.costar.com