By Meghan Hall
A sizeable office building on Mercer Island has traded hands in one of the larger transactions of the year to-date. In a sale that closed on April 14th, Phoenix, Ariz.-based VEREIT has sold an office building, formerly occupied by Farmers Insurance, for $46.5 million, or about just under $300 per square foot. According to public documents, the buyer is Mercer Park South LLC, associated with national builder and developer Ryan Companies.
Located at 3003 77th Ave. SE, the single-tenant building totals 155,200 square feet, according to VEREIT’s website. Public documents show the building sits on 5.88 acres and was originally constructed in 1982. The sale was under contract before the end of the first quarter, according to an Eastside report issued by Broderick Group, which marked the building as the only vacancy within the Mercer Island submarket. The building, states the report, will be renovated.
According to a historical breakdown of the Mercer Island submarket dating back nearly 15 years, Mercer Island’s office inventory has held steady at 483,443 square feet. Rental rates have risen from $25.89 per square foot in 2004 to $36.07 per square foot at the end of the first quarter. The vacancy rate currently sits at 33.3 percent, due in large part to the current status of the Farmers Insurance office building.
Ryan Companies, the building’s new owner, was also the developer for Kaiser Permanente’s new campus, completed in June of 2017, in Seattle. Last May, Ryan Companies also delivered Kirkland Urban, a mixed-use development with more than 370,000 square feet of office, 150,000 square feet of retail and 185,000 square feet of multifamily space.
VEREIT, according to its website, owns and manages more than 3,800 properties across the United States, of which 18.6 percent is office. The firm has 76 properties across the Pacific Northwest, which accounts for approximately 2.1 percent of its properties.
The transaction has come at a time when the Puget Sound has seen a slowdown in transactions when compared not just with the fourth quarter of 2019—which saw a record-breaking number of deals closed—but also with the spread of COVID-19, which has consequently slowed business operations for many. The Eastside, which includes Mercer Island, will not be immune to the economic impacts of the current pandemic, states Broderick Group’s report, even though Eastside fundamentals have been stronger than much of its historical past.