South Lake Union’s Life Sciences Appeal Translates to $450M Buy

SEATTLE—Life science continues to take center stage in Seattle’s South Lake Union. The most recent example of investor interest was the $450 million off-market joint venture acquisition of a life science portfolio. The transaction is the largest sale completed in Washington State year-to-date.

The buyer, Clarion Partners, acquired a 70% interest in the properties. The seller was an affiliate of Alexandria Real Estate Equities Inc., developer, owner and operator of life science real estate.

Newmark’s co-head of US Capital Markets Kevin Shannon and executive managing directors Ken White and Rob Hannan cooperated with vice chairman Nick Kucha, executive managing directors Tim O’Keefe and Jesse Ottele, and senior managing director Cavan O’Keefe to represent the seller.

“This transaction marks the first core life science offering in the Seattle market in several years,” said Shannon. “Life science fundamentals are faring better than the overall office fundamentals with rents that are now ranging from $65 to $70 triple net annually, which allowed us to achieve record-setting pricing for the Puget Sound marketplace.”

The portfolio, located at 1201 Eastlake Avenue E, 1208 Eastlake Avenue E and 199 East Blaine St., encompasses 322,858 square feet of office and laboratory space, and is 100% leased to strong life science tenants.

“The last core life science opportunity was back in 2014,” Shannon tells GlobeSt.com. “The major reason is because BioMed and Alexandria are REITs which don’t often trade, so this was a rare opportunity. Clarion has a mandate for life science assets based on its acquisition research.”

The portfolio features facilities designed and constructed to represent the highest technical specifications and are capable of accommodating a broad range of occupancy requirements. Many of the tenants recently completed significant improvements consisting of lab/office renovations, upgraded lab compressed air systems and expanded collaboration spaces.

“The Puget Sound ranks third nationally for life science growth over the past five years with venture capital having increased 120% during that time frame,” Ottele says.

One driving force behind Seattle’s recent success has been its emergence as a national life science hub, which can be attributed to the combination of research, National Institutes of Health funding, strong employment growth, educational opportunities and depth of skilled labor pool.

The life science market in Seattle, which is concentrated in the Lake Union submarket, and measures roughly 6 million square feet of inventory, has exceeded the performance of the overall market by a wide margin. Overall vacancy among Seattle life science buildings was less than 4% in the third quarter and new inventory is virtually impossible to find, putting strong upward pressure on asking rents, according to Newmark research. Seattle has ranked among the strongest real estate markets in the country in recent years and is on track to become the top office market in the nation for sales velocity in the fourth quarter 2020.

“Investor capital has gravitated to COVID winners in this K-shaped recovery,” Shannon tells GlobeSt.com. “These are data centers, Sunbelt multifamily and logistics. Of course, industrial and life sciences were already doing well but the pandemic accelerated the trend.”