The 300,000-square-foot office/medical building is located in Seattle's central business district.
SEATTLE—Long known for providing healthcare access for many downtown employees, the historic Medical Dental Building was recently sold by Goodman Real Estate Inc. for $113 million to Menashe Properties Inc. The approximately 300,000-square-foot office/medical building is located in the central business district within Seattle's key retail corridor, adjacent to Nordstrom's flagship store and a five-minute walk from Amazon's world headquarters campus.
The 18-story building was constructed in two phases in 1925 and 1950, renovated in 2008 and recently received more than $25 million in building upgrades, including new lobby finishes and the creation of a Wintergarden common area. The property includes a diverse roster of more than 130 professional tenants, primarily private medical/dental practices and office space. Bartell Drug Co., the country's largest and oldest family owned pharmacy headquartered in Seattle, anchors the building with a 12,606-square-foot ground-floor retail store. Additional major tenants include Deltek Inc. and The Polyclinic.
"The Medical Dental Building is a perfect legacy asset for us and yet another stepping stone for the next generation of Menashe Properties," said Jordan Menashe, CEO. "The iconic Medical Dental Building is in an A-plus location in the heart of booming downtown Seattle with South Lake Union only steps away. Our focus will be on providing a personal experience defined by quick decision making and a willingness to make deals with open arms with tenants of any size. We truly appreciate Kevin Freels and Logan Greer of JLL for presenting this unique off-market opportunity to us and recognize our acquisition as a value-add play in a high demand area with little vacancy."
JLL marketed the property on behalf of the seller and procured the buyer. The JLL capital markets team representing the seller was led by directors Freels and Greer, and senior managing directors Michael Leggett and Gerry Rohm.
"Seattle is the third tightest office market in the country. Rents continue to increase due to the limited supply of space combined with the immense influx of technology tenants," says Freels. "The Medical Dental Building serves a unique purpose for our downtown market and provides convenient access to healthcare for the many downtown employees."
Menashe Properties is working with the Broderick Group's Seattle office as its exclusive brokerage team for the building. The property leasing team is represented by Damon McCartney, Maverick Olivares and Ryan Nelson. Tech is, of course, the largest demand driver for space in the metro, Freels tells GlobeSt.com.
"Technology firms have been the dominant source of net new demand in 2019, accounting for nearly two-thirds of new leases on a square-foot basis," he says. "These technology tenants are struggling to find large blocks of space, and therefore are forced to either enter into an existing asset and hope for expansion space in near term or lease space defensively in new construction projects that have yet to be spoken for. The lack of new supply coupled with new owners in search of returns will push rental rates significantly over the near to mid-term."
Sales activity was steady during the second quarter, closing with 89 office transactions for a total investment amount of $1.16 billion, according to a report by Kidder Mathews. The average transaction amount unit sale price was $415 per square foot with a corresponding average cap rate of 6.13%. The most significant transactions occurred in the Eastside market. The largest transaction was the $467.5 million purchase of Newport Corporate Center (T-Mobile campus) in Bellevue at $482 per square foot. Amazon also purchased Bellevue Corporate Plaza for $195 million ($766 per square foot), in what essentially is a redevelopment play. The seller has plans for a two-tower office project known as Bellevue 600, including a 34-story office tower and 41-story hotel. It remains to be seen how this development may change with Amazon as the owner, says the report.
➤➤ Join the GlobeSt.HEALTHCARE (formerly RealShare) conference December 3-4 in Scottsdale, AZ. The event will cover the industry's major issues as well as the prevailing and upcoming trends in regulations, space use, budgeting, and technology implementation. Through panel discussions and peer-to-peer networking opportunities, the attendees will gather expert insights on how these factors will affect the development, operation, investment and design of healthcare real estate. Also, be sure to get your nomination in for our healthcare influencer and senior housing influencer feature. Click here to register and view the agenda.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
