By Jon Peterson
Los Angeles-based Kilroy Realty Corporation is planning to start construction on the 660,000 square foot 333 Dexter office building in South Lake Union sometime during the first quarter of next year, as stated by the real estate investment trust during its 2016 third quarter earnings conference call earlier this week.
The total planned investment for this project by the REIT is $385 million, and the total cost that Kilroy has incurred through the end of September 2016 was $71.4 million. This project was put together by the company acquiring four adjacent land parcels in South Lake Union neighborhood of Seattle. This development is fully entitled and ready to go.
Kilroy stated in the earnings call that it has no pre-leasing requirement for this project although the company acknowledged that Seattle is a market where there isn’t a lot of pre-leasing for office developments generally. The design of this development is one where the property could be leased to a single tenant or have several tenants take up space in the development.
Kilroy already has a significant presence in South Lake Union and the overall Seattle commercial market. Its stabilized office assets in the Seattle market include 12 properties totaling just over two million square feet. These assets are six in South Lake Union, four in Kirkland and two in Bellevue. The entire portfolio is 98.2 percent occupied.
Kilroy Realty will be looking in all of its target markets including Seattle for the purchase of existing office assets. These are not going to be core assets at very low cap rates. The REIT stated in its earnings call that the preference would be to buy assets where the rents are under-valued or the property is in some way needs to be improved. These transactions are likely to be with deals with a total value of $100 million to $200 million or more.