By Jon Peterson
Vancouver, B.C.-based Nicola Wealth Real Estate has acquired the 34,873 square-foot Studio 7500 office building in Redmond for $32.5 million, according to public records. The sale price of $932 per square foot is a new record price for the Redmond office market. The previous high was just around $500 per square foot, according to sources that track sales in the Eastside submarket.
The property is located at 7500 166th Avenue Northeast. The seller of the building was Bellevue-based PMF Investments, which had first placed the property up for sale in August of this year. The listing agent on the sale was the Seattle office of CBRE Capital Markets. Some of the people involved in the sale were Tom Pehl and Lou Senini, both senior vice presidents. CBRE declined to comment when contacted for the story.
The sale of the property produced a high four cap rate, according to industry sources. This return is based on the properties current net operating income.
The seller had acquired the property for $9.2 million in 2017, according to public records. When it was purchased, the property had been owned as a corporate store for REI. PMF had since then turned the asset into an office building that is now fully leased to Volkswagen. The plan was for the lease with the tenant to start in November and last for 12 years. Terms of the lease call for a triple-net structure with operating expenses that are fully reimbursed including repairs of the roof, garage, HVAC and amortized capital expenditures.
The new ownership will have an opportunity to redevelop the asset in the future. A strong potential use for the property in the future would be to turn the asset into apartments, which would be allowed under current zoning. The property, which was first developed in 1998, has a total of 131 total parking stalls. This includes 111 surface stalls and 20 street front non-exclusive easement stalls.
The location of Studio 7500 will make it a very strong access to transit in the future. The office building is located across the street from the Downtown Redmond Station, which will be served by light rail in the near term. This is expected to open in 2024 and allow riders to reach the Microsoft headquarters campus in 10 minutes, the Spring District in 15 minutes, downtown Bellevue in 18 minutes and downtown Seattle in 45 minutes.
There is very little room for tenants to move into in the Redmond office market. The region’s current vacancy is 2.9 percent with very little if any new development planned in the near term, according to sources that compile this data. The total amount of office in Redmond is 4.1 million square feet.