Historic Buy May be the Last in This Cycle
The 95-year-old Dexter Horton building sold to CIM Group for $151 million, but the acquisition may be the last as growth may slow with rising interest rates and reduced global activity signaling the cycle’s end.
SEATTLE—Historic Pioneer Square is becoming one of downtown Seattle’s most revitalized areas, offering tenants access to a range of recreational activities, cultural attractions, landmark destinations, and an array of restaurants, shopping and hotels. Recent activity there includes the CIM Group’s acquisition of the 95-year-old Dexter Horton building, a 15-story approximately 335,000-square-foot Art Deco office building with ground floor retail located at the southern edge of the Central Business District and the northern border of Pioneer Square. GlobeSt.com learns that a subsidiary of Hong Kong-based Great Eagle Holdings Ltd. sold the asset for $151 million. CIM Group had no comment on the transaction.
Built in 1924 for the first bank in Seattle, the building was extensively renovated in 2002 and again in 2015. The most recent renovation enhanced the building amenities, adding a penthouse lounge and rooftop deck, bike storage, shower and locker rooms, and an indoor dog lounge. Dexter Horton is occupied by tenants representing a diverse set of industries including technology, government, non-profit, media, healthcare and professional services.
The property located at 710 2nd Ave. spans a full city block and is bounded by 2nd Avenue to the west, 3rd Avenue to the east, Cherry Street to the south and Columbia Street to the north. And, the property is also located just a few blocks away from Elliott Bay, where Seattle’s major redevelopment project will soon reconnect the city to its waterfront by removing the Alaskan Way Viaduct and replacing it with more than 20 acres of public space, retail and attractions.
Dexter Horton’s central location also provides convenient access to public transit options on 2nd and 3rd Avenues. The Pioneer Square Station, which provides light rail service from downtown south to Sea-Tac International Airport and north to Capitol Hill and the University of Washington, is across the street from the building. Construction is underway to expand light rail east to Mercer Island, Bellevue and Redmond, as well as further north to Northgate and Lynwood. Freeway access to Interstate 5 is just three blocks to the east and access to Highway 99 is just two blocks to the west.
CIM has been involved in the Seattle area for more than 10 years, since it originally identified the area as one with strong transportation networks where CIM could utilize its expertise and relationships to own, develop, reposition and operate properties. The acquisition of the Dexter Horton building adds to CIM’s portfolio that currently includes One Convention Place, a 17-story approximately 312,000-square-foot class-A office building located on the southeast corner of Pike Street and 7th Avenue, and the Pine Street Garage, an 844-stall garage above approximately 20,000 square feet of retail space at 1601 3rd Avenue. CIM previously owned Butler Garage, a 12-story 456-stall parking facility located near Dexter Horton in Pioneer Square.
The Puget Sound office market capped off 2018 by surpassing 2017 with higher absorption and record-low vacancy, according to a report by Colliers International. In fact, the Puget Sound region’s office market finished the year as one of the best-performing office markets in the country. Tech and co-working will continue to drive demand in the coming year and mostly insulate the local economy from rising interest rates and geopolitical events.
Vacancy fell below the 8% barrier to 7.6% as a result of 896,174 square feet of net absorption this quarter and an annual total of nearly 3.4 million square feet. Strong leasing in properties such as the recently delivered Madison Centre where tenants occupied 346,468 square feet in fourth quarter contributed to this outcome.
Average class-A rates broke $50 per square foot full service for the first time ever in both the Seattle and Bellevue CBDs, but growth may slow somewhat in 2019 as rising interest rates and reduced global growth signal the tail-end of the economic cycle. Despite concern that Amazon could scale back operations in Seattle following the HQ2 decision, the e-commerce giant continued to expand locally and will likely remain a dominant market driver. Big tech was also the story in the Bellevue CBD as Google occupied 80,000 square feet at 112th @ 12th and Amazon leased 280,000 square feet at Hines’ Summit III, to begin construction soon. Clarion Partners was a major investment player in fourth quarter, acquiring 500 Yale in Seattle for $52.3 million ($699 per square foot) and Plaza at Yarrow Bay in Kirkland for $134 million ($481 per square foot).