By Jack Stubbs
An office building in South Lake Union that could approach a high watermark for the city’s price-per-square-foot level has been placed on the market for sale. According to a recent report by Real Estate Alert, a TH Real Estate and Skanska partnership could attract bids around $340 million, or approximately $975 per square foot, for the 349,000 square foot 400 Fairview Avenue North building in South Lake Union, which is home to Tommy Bahama clothing manufacturer. TH Real Estate, a unit of TIAA, and its partner, Swedish development and construction giant Skanska, have just given the listing to Eastdil Secured, according to the report.
TH Real Estate acquired its 90 percent stake in the property for $235 million in 2015 from Skanska, which retained 10 percent ownership and serves as the operating partner for the property, according to a statement from the companies at the time.
Neither TH Real Estate nor Eastdil Secured responded to calls or emails for comment about the listing of 400 Fairview in time for the publishing of this story. A call to Skanska was directed to the company’s media relations team.
At its estimated value, the Fairview Avenue building, a Class A property, would generate an initial annual yield in the vicinity of 4.5 percent, according to Real Estate Alert’s statement. The 14-story property, which was completed in 2015, is 98 percent leased with an average remaining term of 8.5 years.
Some of the tenants of the office space in the LEED Gold building include Delta Dental; technology manufacturer Impinj; lifestyle company Tommy Bahama; communication company Wireless Advocate; and mobile electronics retailer Car Toys, while the ground-floor retail space is leased to a number of restaurants. According to Skanska USA’s web site, as the first tenant in the 400 Fairview mixed-use office building, Tommy Bahama relocated its corporate headquarters to the sustainable space in 2015—the Skanska team partnered with SkB Architects to design a flexible, open floor plan that represents the Tommy Bahama brand in a sustainable environment that encourages team interactions and engagement.
South Lake Union has over the last few months in particular been recognized as a hub of investment and development activity—and the area in which 400 Fairview sits is currently active, as well. The South Lake Union submarket is 96 percent leased and the average asking rent is $50 per square foot, according to Real Estate Alert’s release. Within three blocks of the mixed-use property, there are 3,700 existing residential units and another 3,000 under construction. There also are hotels with 380 total rooms, and another 458 rooms under construction.
Currently, the average asking rent for Class A properties in the CBD is $45.22 per square foot, according to a first quarter 2018 Seattle Office Market Report written by Broderick Group.
In addition to the contemporary office space, the nearly 350,000 square foot building also includes non-traditional spaces such as showrooms and mock rooms that benefit from views and natural lighting through the installation of flexible dividing glass walls. The property also features a rooftop deck with views of the Olympics and South lake Union, electric vehicle charging stations, bike storage and an outdoor plaza.
One of the main features of the building is its emphasis on collaboration, according to the property’s web site. By blending local retail with flexible, open workspaces, the property was designed to encourage change encounters and collaborative experiences through creative workspaces. The property also features The Hall at 400 Fairview, a street-side market featuring a variety of cafes, bakeries and restaurants that also looks to capitalize on flexible workspaces and an open layout.
The offering of $340 million for 400 Fairview follows the listing of two properties fully leased to Amazon in South Lake Union. The approximately 812,000 square foot Troy Block complex, owned by USAA Real Estate and marketed by HFF, could commend bids of over $800 million, or approximately $1,000 per square foot, while the 131,000 square foot building at 202 Westlake Avenue North, marketed by GLL Real Estate, is valued at $125 million or approximately $958 per square foot, according to Real Estate Alert’s estimates.
Along with the recent large-scale office space listings that have been posted in South Lake Union in recent months, there have been several in-the-works developments that have recently been given the green light to proceed in the city’s design review process. On March 6th, a project developed by Onelin Investment located in Denny Triangle—which will include between 400 and 500 residential units and between 250 and 280 hotel rooms—was approved by the downtown review board. On March 28th, two other large-scale projects were approved: Unico Properties saw its 9-story, 200,000 square foot high-tech office building—located at 330 Yale Avenue N.—given the go ahead, while Pillar Properties also saw its 28-story, 278-unit development given the green light at a design review recommendation meeting. Most recently, on April 4th, Intracorp’s 8-story, 162-unit development, located along the bustling Dexter Ave. was approved by the downtown review board.