Amazon's headquarters project includes five phases totaling 11 buildings adjacent to the city's streetcar line in the Westlake/Terry district. The buildings are slated to have a combined 100,000 sf of street-level retail space, and to qualify for LEED-Silver certification. Billionaire Paul Allen's Vulcan Real Estate is the developer. Schnitzer West, a JV that includes Portland, OR-based Schnitzer Investment Corp. is partnering with Vulcan on the first two phases.
Amazon in December signed an agreement that had it occupying at least 820,000 sf in the development and as much as 1.6 million sf from 2010 to 2012. Since that time, the company has upped its base commitment to 1.26 million sf and, even more recently, revealed in an SEC filing that it also has secured options to lease an additional 830,000 sf in the development—40% of that at pre-negotiated terms—taking its total potential leasehold at the project to approximately 2.2 million sf. A Vulcan representative did not respond to a request for comment.
In addition to ensuring itself more room to grow at its new headquarters Amazon also said it may help construct a portion of the project. "If interest rates exceed a certain threshold, we have the option to provide financing for some of the buildings," the company stated in the SEC filing. An Amazon spokesperson declined to comment, stating that the company won't be commenting on the matter outside of its regulatory filings.
Yahoo, which leases 1.8 million sf in Sunnyvale, CA, for its headquarters, entered the Seattle market last fall with its long-term lease at One Twelfth@Twelfth. The commitment came shortly after Microsoft, Google and Expedia each ensured an Eastside spot to grow by taking down new office projects that were under construction in response to low single-digit vacancy rates.
A year later, the overall class A vacancy rate on the Eastside is back up over 10% and Yahoo isn't quite ready to fill out its space.Instead, it will bank half of the space for a few years via the sublease market. Yahoo agreed to occupy the top four floors of the development's East building in stages. It occupied the top floor earlier this year and is currently building out the fifth floor for occupancy, local industry sources tell GlobeSt.com.
The sublease consists of the third and fourth floors. The third floor was last occupied by a single tenant, IndyMac bank. The fourth floor previously held four tenants and remains set up for that. Hans Kemp of Jones Lang LaSalle has the sublease listing. Kemp and his partner Sean Barnes declined to comment on the assignment, referring questions to Yahoo. Yahoo did not respond to a request for comment.
Local brokers tell GlobeSt.com that with requirements as large as 60,000 sf in the marketplace right now and the rumored asking rate for the sublease in the high $20s to low $30s on the gross basis–which compares to that same range on a net basis for the direct available space in the development–Kemp may be able to land a single user or two full floor users as opposed to having to do five for more deals.
As for availability, vacancy in the 6.1 million-sf Bellevue CBD class A market jumped approximately 60 basis points in the third quarter to 9.4% or 579,261 sf, including approximately 150,000 sf of sublease space, according to early returns from Colliers International. Class A vacancy for the greater Eastside market is 10.18% or 2.26 million sf, including approximately 400,000 sf of sublease space.
Jeff Watson of the Broderick Group, who with Grant Yerke has the direct leasing assignment for the building, tells GlobeSt.com the sublease doesn't present much of a problem for his leasing efforts because it's a much larger block of space than is directly available in the development (10,000 sf is currently the largest contiguous block) and because most of the smaller directly available spaces are currently encumbered by the expansion options of existing tenants. "[The sublease] could be a net positive for the landlord if it helps diversify the tenant base," he says.
Yahoo has been leasing a growing amount of space over the past few years. Its gross lease commitments have grown from $55 million in 2005 to $131 million in 2008, according to SEC filings. The company currently leases office space in more than 50 markets worldwide.
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