By Gail Kalinoski
Pembroke, an international real estate advisor that acquires, develops and manages properties in the world’s largest cities, has entered the Seattle market in a big way. The company paid $338.4 million for 400 Fairview on behalf of its investors in a transaction with Skanska and TH Real Estate that’s considered the largest office property sale so far this year. Jason Flynn and Reid Rader of Eastdil Secured represented the sellers in the transaction.
The fully leased 349,152-square-foot, Class A office building in the South Lake Union submarket is the third West Coast property managed by the East Coast-based firm with offices in Boston, Washington, D.C., London, Stockholm, Sydney and Tokyo. It also manages the 140 New Montgomery and 100 California St. office buildings in San Francisco.
“Not only are we expanding into a new market, but this first acquisition in Seattle demonstrates our continued commitment to our U.S. markets, and the growth of our global portfolio,” Cory Saunders, Pembroke vice president, said in a prepared statement. “Seattle has been a target for us due to its long-term growth potential and operational synergies with San Francisco, where we currently manage two assets.”
In 2013, Skanska announced it was developing the 14-story office and retail building for about $150 million. The project was completed in 2015 with clothing and lifestyle retailer Tommy Bahama as the anchor tenant. Impinj, Delta Dental, Car Toys, Wireless Advocates and Stantec also lease space in the building. The ground-floor food and retail hall has about 18,000 square feet of space and tenants such as Kai Market by Uwajimaya, Bar Harbor and mBar. Amenities in the LEED Gold-certified building include a roof deck and fast charging stations for electric vehicles.
Skanska, which said it received about $34 million for its 10 percent stake in the building, sold its majority interest in 2015 to TH Real Estate, an affiliate of Nuveen and the investment manager of TIAA, for $235 million. The Sweden-based Skanska, which had continued as the operating partner since 2015, said the divestment will be recorded by Skanska Commercial Development USA in the third quarter.
“Pembroke has an excellent reputation for managing Class A + properties and we look forward to watching them manage this creative asset going forward,” Murphy McCullough, executive vice president for Skanska Commercial Development USA, said in prepared remarks.
Growing office market
Skanska USA, which is based in New York City, also has an office in Seattle at 221 Yale Ave. N. The firm is building 2+U, a lifted, 38-story office tower at Second Avenue and University Street that will offer 665,000 square feet of office space lifted to 85 feet, above a 24,000-square-foot outdoor urban village that will have arts and entertainment spaces, restaurants and retail. Construction is expected to be completed by July 2019.
Office construction in Seattle has been booming since 2015. In just three years, developers have added more than 10 million square feet of office space, with nearly 60 percent of it in the South Lake Union and Denny Triangle submarkets, according to Yardi Matrix data. Amazon has been one of the biggest occupiers leasing about 35 percent of the total 3.9 million square feet delivered last year.
Kidder Mathews reports investment sales are strong too with 76 office building transactions in the second quarter of 2018 totaling $643 million, bringing the year-to-date total for the first half of the year to 155 transactions totaling $1.3 billion in total sales volumes.
The firm noted in its Seattle Office Real Estate Market Review report for the second quarter that regional office vacancy dropped to 6.8 percent, down from about 7.2 percent in Q1, setting a 10-year low.
Image courtesy of Skanska