By Kate Snyder
As the Puget Sound region continues to contend with companies reassessing their space needs, a mixed-use project from Alexandria Real Estate Equities in Seattle’s South Lake Union is now on hold. Construction has halted for the Pasadena-based firm’s 227,000 square foot office/life science development, according to a recent report from Colliers. Colliers’ “Seattle Office 23Q3” report also shows that the project is zero percent pre-leased.
Located at 701 Dexter Ave. N, the half-block project site is bounded by Dexter Avenue North on the east, Roy Street on the south, Aurora Avenue North on the west and two adjacent parcels to the north. The original project included the demolition of the site’s existing six-story reinforced concrete structure and on-grade parking, which were constructed in 1984, according to project plans. The project is an 11-story high-rise structure with office and lab space as well as a penthouse level to accommodate tenant use and three levels of below-grade parking. Two ground level entries planned on Dexter and Roy were planned to provide access to a building lobby, retail space and elevator lobbies.
According to some industry experts, Alexandria is confronting increasing challenges regarding the long-term investment stability of the life sciences space, especially related to the utilization of neighboring office spaces. In June, the activist hedge fund Land & Buildings CEO, Jonathan Litt expressed concerns about the firm, highlighting a 50 percent fall in attendance at its life science office properties post-pandemic. Land & Buildings particularly noted substantial reductions at Alexandria’s buildings across major life sciences markets.
“This is going the way of office … and I think it’s going to be a real challenge,” Litt said about mixed-use office-lab spaces. “If you’re Pfizer or Eli Lilly or Bristol Myers, when those leases come up, you don’t need it. People are working from home. All this important research we’re doing, people are doing it from home.”
Alexandria previously reported a strong financial performance in a challenging macro environment for the first quarter of 2023, according to previous reporting from The Registry. But the firm also announced a reduction in spending on construction costs for the rest of the year, including on projects already under construction.
“At quarter end, projects under construction and near-term projects expected to commence construction over the next four quarters totaled 7.6 million square feet and are 74 percent leased or under negotiation,” Peter Moglia, Alexandria’s CEO and former co-chief investment officer, previously said. “This is very similar to last quarter, but in response to the uncertainty and volatility in the markets, we have made a strategic decision to reduce 2023 construction spend by $250 million by pausing or delaying projects that had been classified as under construction, so we can focus our capital on the most strategic projects that have the most attractive terms, enabling our highly bedded and vast tenant base.”
Alexandria isn’t the only firm hitting the pause button on projects in the Puget Sound area, however. In the past year, multiple major companies have made moves to slow down development throughout the region.
Last year, Amazon put a number of projects on hold in Bellevue. That included both construction and tenant improvement projects. At the time, Amazon had asked for construction work on three Bellevue projects to be stopped immediately for up to 24 months, which included a decision not to develop the second tower of its Bellevue 600 project. In addition, Amazon had also stopped work on half of the tenant improvement work in Vulcan’s 42-story, 967,500 square foot high-rise office project Tower 555 located at 555 108th Ave. NE in Bellevue.