Olympic Block Checks All the Blocks

SEATTLE—Olympic Block is a technology-oriented mixed-use office and retail building totaling 73,184 square feet in Pioneer Square at 101 Yesler Way. More than half of Olympic Block’s office space is considered creative light tech, allowing for efficient conversion to open/collaborative office designs according to tenant needs. The building is currently 90% leased to a range of tech and office tenants along with ground-floor restaurant tenants. The office, retail and residential spaces are served by a subterranean parking garage.

EverWest Real Estate Investors, in partnership with Chilean-based fund manager Frontal Trust, has entered the Seattle office market with the acquisition of Olympic Block. EverWest’s purchase includes six floors of the building, built in 1986, six floors of the Lippy Building, built in 1889, and 8,576 square feet of street-level retail space. The project also includes three floors of residential space that is owned by a separate entity and not part of the acquisition.

Managing director Ryan Madson directed the acquisition of Olympic Block on behalf of EverWest and Frontal Trust. The seller is New York-based Brickman.

“We have been monitoring the Seattle office market for a long time, looking for a project that fits the right size, submarket and value profile,” said Madson. “Olympic Block checks all of those boxes, operating as a modern mixed-use asset while still allowing us to add value and capitalize on the area’s double-digit rent growth through strategic leasing and interior improvements.”

The property’s main-and-main location at the corner of Yesler Way and 1st Avenue South is compelling for companies and Millennial employees drawn to a highly walkable downtown work environment. Its tenants are two blocks from Pioneer Square Station, within one-quarter mile of more than 100 restaurants, within one-half mile of Century Link Field and less than one mile from Pike Place Market. The building is passed by approximately 20,000 cars and 3,000 pedestrians each day.

While this is the company’s first office investment in Seattle, EverWest owns approximately one-half million square feet of industrial space in the Kent Valley submarket. This includes the three-building 286,472-square-foot ProAmpac campus in Auburn and a recently acquired property in Renton totaling 36,998 square feet at 1415 Maple Ave. Southwest. It also owns two projects in Kent: the three-building 138,296-square-foot West Valley Distribution Center and a recently completed 42,982-square-foot industrial building at 7011 S. 182nd St. In late 2015, EverWest also provided a mezzanine loan for the construction of 2202 Eighth Ave., a 447-unit multifamily tower located in South Lake Union.

EverWest continues to seek new office, industrial and multifamily investment opportunities in the Washington market.

“The conditions we’re seeing indicate that this is a very good time to be investing in Seattle,” Madson tells GlobeSt.com. “Just recently, Apple announced it would take a new building in the city, with plans to add 2,000 new employees. Corporations are picking this location for its impressive office environment and that only further supports our very bullish interest here.”

Indeed, the interest in Seattle continues with more than 4.1 million square feet of net absorption during the second quarter 2019, according to a report by Kidder Mathews. And, the regional office market continues to tighten despite the number of active cranes in Seattle and Bellevue. The tech giants continued aggressive footprint expansions in Seattle and on the Eastside during the quarter and with healthy levels of job growth, the fundamentals of the regional office market remain strong through the first half of 2019, says Kidder.

Regional office vacancy currently stands at 5.79%, down from 6.48% last quarter and below the previous low mark of 6.10% at the end of 2018.  Office vacancy is now at a 10-year low.  This is fueled in no small part by the net absorption of 4.12 million square feet during the second quarter, highlighted by 3.3 million square feet of net absorption in Seattle with the delivery of five significant new office buildings that were 94% leased.

As Madson mentions, Apple’s intention to add an additional 2,000 jobs in Seattle during the next five years will help continue to propel job growth. Year-over-year from May 2018 to May 2019 indicates 51,900 new jobs were added to the region. With job growth expected to continue and a tolerable level of new construction (currently at 4.7 million square feet versus 7.3 million square feet last quarter), the near-term outlook for the regional office market remains positive. That said, a new wave of office construction is predicted particularly in the Bellevue CBD, says the Kidder report.