Kilroy Realty, the group behind the $370 million mixed-use office complex 333 Dexter, said in an earnings call on Thursday that it will break ground on the project later in the second quarter of this year.
“We are preparing to start 333 Dexter, our first ground-up development project in Seattle later this quarter,” said John Kilroy, Kilroy’s CEO in the company’s first quarter 2017 results earnings call earlier today.
To fund the project, Kilroy’s CFO Tyler Rose said they have about $200 million to $275 million of expected development spending through the rest of the year, which includes the property on Dexter Avenue. Rose said they currently have $375 million in cash and plenty of debt capacity, explaining that the company is well-funded to pursue the development.
There are about 15 to 20 companies that are actively recruiting over 19,000 jobs in the Seattle region
Kilroy said that there has been a very positive supply and demand imbalance in the greater Seattle market, driven by the strong office absorption, as well as general expected growth of Seattle’s job market, “we couldn’t be better positioned to start the project,” he added.
Rob Parette, executive vice president of leasing and business development added, “There are about 15 to 20 companies that are actively recruiting over 19,000 jobs in the Seattle region, specifically, technology jobs. So, it’s a very robust market in terms of employment and these companies are having to plan their growth.”
The 12-story development will be of the highest quality, according to Kilroy. It is expected to be LEED Platinum with a higher parking ratio than the other buildings in the area. “It’s got all the bells and whistles. It’s absolutely first class in every way,” Kilroy added.
The building, which occupies a full city block between Thomas St. and Harrison St., is led by architecture firm Miller Hull Partnership. It will include 15,000 square feet of retail space, 582,000 square feet of office space and 10,800 square feet of space to be used for a courtyard. Plans for the project also call for a five level parking garage with 700 stalls.
While Kilroy didn’t discuss specifics on where the company stands in terms of tenant pre-leasing, he indicated that negotiations were likely under way. “We deal with a lot of people in the NDAs and so forth, and so we can’t get into specifics, but let’s just say we think we are uniquely and ideally positioned to have a home run on that project,” he said.
Ultimately, he added, they felt very comfortable where the market currently stands and what companies are demanding. Currently, South Lake Union is sitting at a vacancy rate of 1.7 percent, with little new supply competing with the project at 333 Dexter. He indicated that Vulcan may be able build a 400,000 square foot building on one of their sites, and even indicated that the Seattle-based developer may be looking to build 700,000 to 800,000 square foot build-to-suit project, “but they’re a better part of the year behind us, if they ever pull the trigger. So I think it’s the ideal timing for us vis-à-vis what others can do as well.”
Kilroy’s presence in South Lake Union and the overall Puget Sound commercial market includes 12 properties with over two million square feet of space. Six properties are in South Lake Union, four in Kirkland and two in Bellevue. As of October 2016, its entire portfolio is 98.2 percent occupied.
The quotes above were sourced from a transcript provided by Seeking Alpha.