Seattle $669M Office Sale Shows Cities' Continued Allure
The purchase of 2+U is counterintuitive to some recent suburban office sales, but this sale shows the strength of larger cities, and specifically, the amenities found within, says Murphy McCullough of Skanska.
Another day, another sign of normalization for the commercial real estate industry. Specifically, the largest single-property real estate transaction in the country since the beginning of the pandemic has closed, according to Skanska Commercial Development USA.
South Korean financial group Hana Alternative Asset Management alongside Hana Financial Group will purchase a 95% stake in 2+U, a 38-story office tower and retail village in Seattle, for approximately $669 million. The 2+U building is a ground lease so factoring in the land price at roughly $150 to $200 per square foot would make the asset value even higher, GlobeSt.com learns.
Hana will acquire the asset from Skanska and immediately begin operations together with Hines asset management and property management. Skanska’s involvement will continue in the project, with the completion of the ground plane and retail vision. The retail portion of the property is continuing to attract new tenants including two recently signed entities.
The purchase of this downtown asset is counterintuitive to some recent office sales which have occurred in the suburbs. But Murphy McCullough, executive vice president and general manager, Skanska USA Commercial Development, says this sale shows the strength of larger cities, and specifically, the amenities found within.
“It really is about talent,” McCullough tells GlobeSt.com. “Office tenants are looking to create a culture built around attracting and retaining employees. This is done with the amenities cities have to offer, such as arts, culture, restaurants, transportation. These types of perks are what employees want and are harder to get in the suburbs. A large number of employees want to go where the amenities are.”
Indeed, gateway markets remain the most attractive locales for investment sales, according to Yardi Matrix’s October report. The top five markets were Manhattan ($4.3 billion in sales at $771 per square foot), Boston ($4.1 billion at $437 per square foot), Washington, DC ($3.2 billion at $316 per square foot), San Francisco ($3 billion at $1,129 per square foot) and the Bay Area ($3 billion at $431 per square foot.
McCullough says COVID accelerated some trends already in place and there was a movement for specific jobs to the suburbs, but cities will retain a certain gravitas after the pandemic ceases. As a result, investment sales in the suburbs are starting to gain, at least for now. Colliers International third quarter data noted that sales volume was $13.6 billion, up from $11 billion in the prior quarter. The year-over-year sales total was down by 52%.
The U+2 acquisition follows yesterday’s announcement that 1918 Eighth Ave., a 668,886-square-foot office tower, was purchased for $625 million. Hudson Pacific Properties and Canada Pension Plan Investment Board acquired the asset, and when combined with the 2+U acquisition, further establishes Seattle as one of the top-performing office markets in the nation.