SEATTLE-After a year of negotiations, Rosetta Inpharmatics, a wholly-owned subsidiary of Merck & Co., has preleased one of four buildings at the planned Interurban Exchange project in the South Lake Union area. The building, Exchange III, will be built out as 133,173 sf of laboratory and office space and be completed earlier than scheduled.

The four-building, 500,000-sf redevelopment project in the South Lake Union is a joint venture between Vulcan Inc and Schnitzer Northwest. Merck will consolidate its Kirkland and Bothell, Wash. operations into Exchange III upon completion of the facility, now scheduled for early 2004 rather than 2005. Development of the three remaining buildings at Interurban Exchange is scheduled to begin in 2003 with completion expected in 2005.

Interurban Exchange is slated for Terry Avenue North between Harrison Street and Mercer Street. Paul Allen’s Vulcan Inc., operating under the LLC City Investors, has gobbled up some 50 acres in the South Lake Union area at a cost of around $100 million. Vulcan says its vision for the area is a neighborhood “that blends housing, retail, office, biotechnology, open space, public transportation, culture and education.”

Dan Ivanoff, managing partner of Schnitzer Northwest, says he believes other industry leading organizations will be attracted to the development thanks to a “unique combination of location, character and amenities.” Other research companies already in the South Lake Union neighborhood include Seattle Biomedical Research Institute, Fred Hutchinson Cancer Research Center and ZymoGenetics, Inc.

The architectural design of the project will reflect the industrial heritage of the neighborhood and will include a 14,000-sf tenant amenity building featuring video conferencing capabilities, state-of-the-art conference room, fully equipped fitness facility and an open 21,000-sf landscaped plaza accessible to the community. Exchange III will be a post-tension concrete structure with a skin of precast glass and metal panel.

NBBJ serves as the project architect and Lease Crutcher Lewis as the general contractor. Tom Erlandson of Alexander Commercial Real Estate represented Merck in the transaction and Stuart Williams, Jeff Durrell and Bill Pollard with Pacific Real Estate Partners represented Vulcan and Schnitzer Northwest.

Mike Nelson, a senior investment director with Schnitzer Northwest says construction started last month on Exchange III and building permits for Exchange II should be issued any day now. “Permits for four and five are a little further out,” he tells

In marketing the properties for lease, no asking rates have been published, and Nelson declined to put a value on the “long-term” lease. All advertisements say the rate is “negotiable.” Over the last year, class A asking rates have fallen 20% from around $40 per sf to the low $30s per sf., and net effective rates (the negotiated rate minus owner concessions) are said to bring the rate down another 15% or more.

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