Starwood Property Trust, an affiliate of global private investment firm Starwood Capital Group, also the largest commercial mortgage real estate investment trust in the United States, sold Centennial I & II office buildings in Tacoma to a private investment firm based in Utah. The two buildings, located at 1949 & 2121 S State St. in Tacoma sold on July 13th, 2018, in a transaction worth $34.5 million, or just over $143 per square foot, according to public records filed with the county. The buyer was an entity associated with BC Warner Investments, a privately held investment company from West Valley City, UT.
The two buildings, which total roughly 240,000 square feet, were part of a portfolio that Starwood inherited with its acquisition of LNR Partners in 2013. The Class B properties, which were developed in 1986, are located in central Tacoma, just north of US Highway 5. According to Google Maps, both buildings are occupied by the Washington State Department of Social and Health Services. One building is home to its Juvenile Rehabilitation Services, while the other is home to Department of Social and Health Services Community Services.
The commercial real estate market across the region has been a target for many investors across the country and the globe. As growing companies continue to seek opportunities in cities of the Puget Sound, the commercial real estate market in the region will remain an interesting place for investment. The city of Tacoma has seen some growth recently, but not nearly as much as cities closer to Seattle.
The Tacoma office market remained relatively unchanged as it entered 2018, according to a first quarter of 2018 market report by CBRE. Class A rents were stable at an average of $25.37 per square foot, while direct vacancy dipped slightly to 16.5 percent, down 135 bps from the previous quarter, the report stated. Across classes and submarkets, absorption was negative 64,269 square feet, although Univera’s occupancy of 18,304 square feet in the Centennial II building made Suburban Tacoma a bright spot, with 16,601 square feet of positive abruption this quarter.
While no office buildings are under construction in the area, an extension of Sound Transit’s Link Light Rail was announced in March of 2018, CBRE wrote. Sound Transit reports that this project will double the length of Tacoma’s light rail, which already serves one million riders. New destinations will include the Stadium District and major medical facilities and may prove a draw to new companies exploring options around the Puget Sound, the report stated.