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Amazon Factors in Unico’s $359M Seattle Purchase, Puget Sound's Biggest This Year

Two-Building Deal Shows Amazon's Heating of the Seattle Market
August 1, 2018
The office tower at 1111 Third Ave. in Seattle is part of the largest property sale this year in the Puget Sound region.

Unico Properties bought two buildings for a combined $359 million on an entire block in downtown Seattle near a development where Amazon will occupy all the office space, the biggest single-asset property purchase in the Puget Sound region this year and the latest sign of how the online retailer keeps driving the market to records.

The Seattle-based real estate management and investment firm also sold a building in South Lake Union, a neighborhood just north of downtown where Amazon maintains its headquarters.

The purchase of the Class A property breaks the $338.5 million record for 2018 set only weeks ago by the sale of fashion retailer Tommy Bahama’s headquarters at 400 Fairview. It's the latest sign of the effects on commercial real estate in an area that's home to the headquarters of the world's largest e-retailer and one of the fastest-growing large companies.

Unico Vice President and Regional Director Andrew Cox cited a nearby development, Rainier Square Tower, in which Amazon will become the sole office tenant, as a sign of the strength of the market.

The two buildings purchased by Unico are 1111 Third, a 33-story tower with 565,883 square feet of office space, and 2nd & Spring, a five-story, 140,000-square-foot building designed for creative office space. The price per square foot came in just under $505, according to CoStar research. The buildings combined are 95 percent leased.

"This purchase demonstrates confidence in the continued relevance of the southern central business district," Cox said, adding that nearby projects under construction, as well as the ongoing redevelopment of the adjacent waterfront, make the buildings "an attractive addition to our portfolio."

One of those projects, Rainier Square Tower, is being developed by Wright Runstad & Co. into a 58-story skyscraper. Amazon last year leased 722,000 square feet of space in the building, which is scheduled to open in 2020. Amazon generated headlines this spring when it announced that PCC, a Seattle-based organic grocer, would open a store on the ground floor of the $570 million project. The move drew attention because PCC is a direct competitor with Whole Foods, which Amazon bought last year and is rapidly expanding around the country.

Unico bought the properties from Ivanhoe Cambridge, a Montreal investment company that purchased the two-property portfolio for $280 million four years ago, according to CoStar data.

Unico also sold the 701 Dexter building, a six-story, Class B office tower in South Lake Union, for $33.5 million to Alexandria Real Estate Equities Inc. Unico bought the property in 2015 because of the building's redevelopment potential and the presence of Amazon and office space for social media company Facebook, said Scott Brucker, Unico's vice president of Asset Management. It still owns two properties in the South Lake Union.

"Three years later, our expectations have been met as South Lake Union continues to be one of the most dynamic submarkets in the country with at least 17 cranes visible in the skyline," Brucker said.

Average office rents in South Lake Union are $52.45 per square foot, the most expensive in all of Puget Sound, according to CoStar Market Analytics.

Unico said the timing of the purchase and sale were coincidental.

Rob Smith, National Retail Reporter  CoStar Group   
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