Commercial property across the greater Puget Sound region continues to be an attractive investment asset for large institutional as well as local investors. In a recent example of the latter, an entity associated with local investors John and Debra Bacon of Medina, Wash. sold the retail property in Bellevue known as Bel-Red Design Center to another local investor, an entity associated with Ray Shih-Lei Chen and Huei Yun Tsai of Bellevue.
The property was sold on November 2nd for $31 million, or around $602 per square foot, according to public documents. The L-shaped property is 51,420 square feet, and it sits on a 2.46-acre parcel. It was initially developed in 1974, and it is home to the Miele Experience Center Seattle, Sherwin Williams Paint Store and Music & Arts, among other retailers.
The property is located at 13500 NE Bell-Red Road in the Crossroads neighborhood of Bellevue, just east of Interstate 405 and south of State Route 520.
In comparison to the rest of the nation, the Puget Sound’s retail market has held relatively stable over the past year and a half. The strong economic drivers behind the region’s recent growth have kept retail afloat, and now those same fundamentals, coupled with a general lag in construction, are aiding in the sector’s recovery, according to a new report released by Marcus & Millichap.
“The pandemic did little to sway Seattle’s retail sector, which benefits from a decade of robust population and income growth,” the report states. “Vacancy was at a 15-year low at the onset of the health crisis and only increased 20 basis points over the past six quarters. Asking rents continued to grow at one of the fastest rates in the country…”
Across Seattle and Tacoma, retail vacancy is expected to remain surprisingly tight, at just three percent. This is just 20 basis points above the region’s pre-recession vacancy rate, according to Marcus & Millichap, and rates have remained low due to minimal supply pressures and climbing demand.
As a result, rental rates continue to climb, and the average asking rent will increase to $23.40 per square foot, a 4.2 percent increase year-over-year. In 2020, rents increased more, recording a 6.8 percent gain. Prices for investment sales also continued to rise. Even though deal flow for single-tenant assets declined by 25 percent, limited listings increased median sales price by four percent to $522 per square foot. The average cap rate decreased to 5.4 percent.