By Meghan Hall
As the commercial real estate sector becomes more competitive across Puget Sound, a number of companies are taking up a variety of strategies to invest in the region. In a recent deal, Goldman Sachs has signed up for a 99-year ground lease for a Bellevue property that will be developed into a major office project, according to brokerage firm Newmark.
Additional terms of the lease were not disclosed. Executive Managing Director Joe Lynch and Senior Managing Director Dan Harden worked to broker the deal. When contacted for this story, Newmark declined to comment on the transaction, citing confidentiality.
The property is located at 400 112th Ave. NE and totals 4.3 acres. The Bellevue Straits project was initially proposed by Legacy Cos. and includes 1.2 million square feet of space.
Initial plans indicate that about 1.1 million square feet will be dedicated to office uses, while another 36,000 square feet will be allocated towards retail. 1,953 parking spaces are also proposed.
The square footage will be spread between two towers situated on top of a podium. On top of the podium a public plaza will link up with the Bellevue Grand Connection, a 1.5 pedestrian and bike path. The goal of city officials and developers alike is that the in-the-works Bellevue Grand Connection—which spans from the edge of Lake Washington in Meydenbauer Bay Park at 100th Avenue NE, crossing I-405 and connecting the city’s downtown core with the Wilburton neighborhood to the east—will provide further transit-oriented infrastructure and connectivity in downtown Bellevue, which has seen tremendous growth in recent years.
Ground leases have become a popular development and investment strategy for those in the Puget Sound’s commercial real estate sector. In July of 2021, Brookfield executed a $263.5 million ground lease for Bellevue’s Spring District Blocks 16 and 24. Sources familiar with the deal have stated that Chatham Financial acted on behalf of USQ Special Situations in the agreement.
In another deal, Hilco spent $16.55 million to acquire access to land beneath a JCPenney in Tukwila, Wash. The 255,534-square-foot department store is located at 1249 Southcenter Mall.
Competition for property is likely to increase, especially as Washington State continues to reopen and economic fundamentals improve. At the end of the second quarter, the market was still recovering, with vacancy sitting at 10.7 percent and asking rates at $38.51 per square foot–a slightly increase from the previous quarter. Big tech and major investors on the Eastside continue to bolster the market, and the Eastside itself is currently on pace to match or exceed 2020 sales volume, according to a report by Cushman and Wakefield. Long-term, the market is well-poised for expansion as activity continues to increase across the region.