By Meghan Hall
With Seattle’s rate of development surging forward, the cities of Bellevue and Redmond are also seeing property values jump as investors move to buy early in the Puget Sound’s growing suburban markets. Newport Beach, Calif.-based KBS Commercial Real Estate Advisors, one of the largest owners of commercial real estate in the United States has snapped up The Offices at Riverpark in Redmond for $48.1 million, or approximately $453 per square foot. The seller, according to King County property records, was Colony Capital.
The five-story building, located at 15809 Bear Creek Parkway, totals 106,281 square feet. According to a leasing brochure released by CBRE, the floorplates can be as big as 22,000 square feet. The site also includes several hundred covered parking spaces. The assessed value of the property, which was built in 2008 according to public documents, is just under $34 million.
Newmark Knight Frank (NKF) Co-Head of U.S. Capital Markets Kevin Shannon, Vice Chairman Nick Kucha, Executive Managing Director Ken White, Senior Managing Director Michael Moll and Director Bill DeLacy represented Colony Capital. KBS was self-represented.
“This well-located, multi-tenant suburban office asset received strong interest from a host of pension fund advisors and separate account core-plus buyers,” said Shannon in a statement. “Given the compelling strength of Seattle’s Eastside office market, the quality of the asset, the stable in-place cash flow, and the recent leasing velocity, the bidding environment was highly competitive.”
The Eastside has become an increasingly popular landing pad for investors looking outside of the region’s more space-constrained markets such as downtown Seattle or Bellevue’s Central Business District. According to NKF, the City of Redmond is seeing a 3 percent vacancy rate for office property.
In May of this year, brokerage firm Colliers International released a special report, which predicted that the Bel Red Corridor — which stretches east from downtown Bellevue through to Microsoft’s campus in Redmond — will be the next major area of development in the coming years, thanks to recent up-zones and widespread investment in transportation.
KBS’ new acquisition is located just outside of Bel Red, ten minutes north of Microsoft’s Redmond campus, although the firm will likely benefit from Bel Red’s growing employment market. Office space, states Colliers, is already in demand in the submarket, and employment is projected to grow by 28 percent by 2035. Microsoft itself is already growing within Redmond and is moving forward with plans to construct an additional 2.5 million square feet of office space at its campus, bringing its footprint to 9.2 million in Redmond. The company has also pledged $150 million in transportation upgrades and other public amenities.
Currently, Bel Red has more than 1.8 million square feet of new office space in the pipeline, the majority of which is already pre-leased. As single-user tenants continue to lease up large blocks of space, Colliers predicts the market will only become tighter, with rents rising and vacancy decreasing.
Additionally, states Colliers, land values in the submarket have roughly tripled since 2012, and are only expected to rise. In 2012, the average price per square foot was around $52; that number has jumped to close to $150 in 2019. In 2016, AMLI Residential purchased a development site within the Spring District for $211 per square foot.
The acquisition of the Offices at Riverpark is not KBS’ first property on the Eastside. KBS also owns the Bellevue Technology Center, a 330,508 square foot, nine-building Class A/B office campus, which sits on 46 acres of land, as well as the Ridgewood Corporate Center, a seven building, 242,261 square foot office park just a half mile east of downtown Bellevue. The largest two buildings in KBS’ Washington portfolio are also on the Eastside: The Westpark Portfolio, which spans 21 buildings and more than 700,000 square feet, and the Plaza Buildings in Bellevue, which total 490,994 square feet, are the largest.
KBS, according to its website, is one of the largest owners of commercial real estate in the country and has completed transactions exceeding $38 billion. Assets under management by KBS-affiliated companies exceed $11.59 billion as of December 2018.