Safeco Leases 424,000 SF Downtown

Safeco leased 284,000 sf at 1001 Fourth Avenue Plaza for its headquarters and 140,000 sf in the Second & Seneca Building for its Northwest region office, which is currently located on its Redmond campus, which it is selling to Microsoft for $209 million. Both deals include naming and signage rights.

The Fourth Avenue Plaza building is owned by Hines. The building was formerly known as Seafirst Building and will now be known as Safeco Plaza. The Second & Seneca Building is owned by Equity Office Properties Trust. A new name for the building has not yet been announced.

"Given the favorable lease rates and the near-term availability of office space, the economics and timing led us to the decision to relocate both our headquarters and regional office in downtown Seattle," says Paula Rosput Reynolds, Safeco president and CEO. "This move places us in the center of the city's vibrant business community and will give us a significant presence in Downtown Seattle, featuring our two new office locations as well as Safeco Field."

In January, when it announced the pending sale of its Redmond campus to Microsoft, Safeco said it would consolidate operations around its landmark headquarters office tower in the University District. In March 2006, Safeco changed to the Downtown plan, saying the approach will help the company cut expenses and also provide greater flexibility to pursue telecommuting and virtual workplace alternatives through the use of technology.

Safeco plans to move as many as 800 Redmond-based employees to the Second and Seneca location by December 2006. The remaining Redmond employees will move to leased space in Bothell and the University District by year-end. Headquarters employees currently working in the Safeco Tower in the U-District will begin moving to the 1001 Fourth Avenue location in 2007.

The delay in moving into the 1001 Fourth Avenue location until 2007 is likely due to planned renovation work by Hines. The building owner plans to remove asbestos, put in a sprinkler system and really just freshen up the building.

Vacancy in the 22-million-sf Financial District was 12.2% at the end of the first quarter. Combined with other deals that are expected to be signed during the year and continued job growth, Grubb & Ellis broker James Keating and research analyst Nick Papa tell GlobeSt.com that owners are becoming more and more confident that CBD vacancy rates are heading toward the single digits."What the Safeco lease does, along with other transactions that are happening, is give landlords the momentum they have been seeking," Keating says. "Barring an unforeseen event, such as a terrorist action, owners know [a single-digit interest rate] is coming, so it doesn't matter in which quarter it actually occurs; it's more of an attitude than a fact; most everybody has already begun by adjusting their rates up."