Bothell’s commercial real estate market is booming, and investors are keen on breaking into this small suburban submarket located just north of Bellevue. According to a recent marketing brochure released by brokerage firm CBRE, Bothell’s Canyon Point East has now hit the market. Composed of five buildings, the 269,369 square foot property is currently owned by Blackstone, who purchased the asset along with 20 other Eastside assets in July of 2015.
The five buildings were constructed between 1990 and 1993 and are a mix of office, flex and warehouse space. Building D is the largest on the 16.3-acre site, totaling 86,744 square feet, while Building E is the smallest, at 27,800 square feet. The property is located along 26th Ave. NE in Canyon Park, a master planned development totaling more than 1,000 acres that currently includes several shopping and commercial centers, including Thrashers Corner and the Canyon Park Business Center.
CBRE declined The Registry’s request for comment.
Canyon Park East is currently 83 percent occupied and is anchored by PCE Pacific, Inc., who occupies 28 percent of rentable space and has just over five years remaining on its lease. Other tenants include Lyell ImmunoPharma, who has 27 percent of the property’s rentable area and who has just over 10 years left on its lease. Other tenants include the Food and Drug Administration and Viavi Solutions, who also have a long-term tenancy on the property; together, the property’s tenants have been leasing space at Canyon Park East for an average of 10.8 years, including renewals. The weighted average remaining lease term is 6.5 years. Four of the five buildings are 100 percent leased.
Additionally, recent leases by Ventec Life Systems and Lyell ImmunoPhama also mean that only 19 percent of tenancy will mature over the next five years. CBRE believes that the likelihood of renewal is high due to specialized buildouts and significant investment into tenant improvements by the tenants.
The property also presents the opportunity to add value through lease-up of the 45,000 square feet of remaining space for a $900,000 increase in NOI, according to the offering document. Favorable financing opportunities are also available to achieve higher returns, in part due to the quality of the business park’s tenants.
Bothell’s office market is becoming increasingly tight as growing companies continue to expand beyond Seattle and Bellevue and work their way through the Eastside’s various communities. As Bellevue continues to experience a large supply and demand imbalance and a shortage of large blocks of available space, Bothell’s emerging commercial real estate market offers a value alternative with plenty of upside for potential investors.
The State of Washington began investing in Bothell in the 1990s to attract growing tech companies to the area, and Bothell’s biotech, research and development, and manufacturing cluster is concentrated in Canyon Park and North Creek, and includes 2.2 million square feet of life science inventory. Combined, the two office parks include major firms such as Seattle Genetics, Juno Therapeutics, Thermo Fisher, Vioguard and Sonic Concepts. Facebook also continues to expand its Oculus campus, a satellite virtual reality headquarters along Willows Road, just ten minutes from Canyon Park East.
With these fundamentals in mind, several Bothell office properties have traded hands in recent months. In July, SteelWave purchased Buildings E, F, G and H of Corporate Campus East from TA Realty for $55.25 million. The buildings total about 154,200 square feet and are located at 3001, 3005, 3009 and 3015 112th Ave. NE. At the time of the sale, the property was 90 percent occupied. In January, Blackstone Group sold the two-building Canyon Pointe Office Campus for $51 million, or about $292 per square foot. The buyer was New York -based TPG Real Estate. The property totals 174,546 square feet and is fully occupied by T-Mobile, which is the firm’s second largest office location next to its U.S headquarters in Bellevue.