Vancouver, Canada-based Nicola Crosby Real Estate Investments purchased its second Seattle property this year when it acquired the University District Building, where the University of Washington (UW) is a key tenant. The buyer paid San Francisco-based Cypress Wealth Advisors $19.95 million, or approximately $276 per square foot, at a seven percent cap rate, confirmed a source familiar with the transaction. Brokers David Speers and Jim Lovstead from Kidder Mathews’ Seattle office represented both the buyer and the seller in the transaction. Neither the buyer or seller were available for comment.
“It was one of those deals where the momentum is clearly pushing northward from South Lake Union, the market is getting awful frothy,” said Speers, a senior vice president and partner for Kidder Mathews in Seattle. “I think we’re going to see more and more tenant activity in the north end area, and this is one of the markets our buyer identified as a target for that activity. Even though the building is more or less fully leased right now, I think they feel positive about future prospects, in case there does become leasable space.”
I think we’re going to see more and more tenant activity in the north end area, and this is one of the markets our buyer identified as a target for that activity
Built in 1981, the five-story building provides approximately 83,348 square feet of rentable Class B office space where UW, and several of the university’s research and life sciences groups, occupy about two-thirds of the building, says Speers. Situated in the University District neighborhood of Seattle, the property located at 1107 NE 45th Street sold quickly. “The property was on the market for about 30 days before we began to call for offers,” added Speers. “We went through a few bidding rounds of offers, and ended up selecting the buyer from that group. That process took probably another four to five weeks, it went fast.”
Surrounding the University of Washington, the University District is an eclectic mix of urban shopping areas, historic homes and architecture, along with cafes, pubs, restaurants, and theaters, says Visit Seattle’s Web site. Due to its proximity to the university, the U-District has a youthful and relaxed feel with lots of dining and shopping deals to take advantage of, says the site.
“The U-District has excellent fundamentals as a result of UW, such as a two percent vacancy,” said Stephen Cugier, a vice president for Orion Commercial Partners LLC in Seattle. “The only new construction in the submarket was a Blume project that was completely leased by UW back in April. I think the buyer was buying UW’s credit and the long-term value of the up-zone.”
According to Colliers International’s 2016 second quarter Office Research & Forecast Report for the Puget Sound region, there is a total of 20.2 million square feet of Class B office space in Seattle, of which 1.7 million is vacant, bringing the area’s Class B vacancy rate to 8.8 percent. During the year’s first quarter, 81,117 square feet of that space absorbed into the market at an average asking rate of $28.99 per square foot per year. This quarter the rates have increased to $30.17. Demand for large blocks of space continues to outpace demand for smaller spaces, says the report. Colliers anticipates vacancy rates will continue to decline until new construction delivers. Rental rates will likely keep rising due to the insatiable demand of large technology tenants driving the market, concluded the report.
In May of this year, Nicola Crosby acquired an office building in located at 1550 4th Avenue South in the Pioneer Square/SODO submarket for $18 million, according to public records. Altogether, Nicola Crosby owns 383,713 square feet of office space, 272,078 square feet of retail and another 122,349 square feet of industrial space in the Greater Seattle area.