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BELLEVUE, WA-Unico Properties officials had no idea what to expect when they first entered lease renewal negotiations last year with the anchor of their 400,000-sf office building in Downtown Bellevue, but they knew they had to close the deal.

General Electric’s Business Asset Funding unit was nearing the end of a 10-year lease in Skyline Tower for no less than 20% of the 24-story building, and with vacancy in the market close to 26% the options for GE were myriad, says Larry Klatt, Unico’s regional vice president.

“There was a brand new empty building right across the street and its landlord was very, very motivated to get someone in there, especially a blue-chipper like GE,” Klatt tells GlobeSt.com, referring to Bentall’s Summitt office development, which is now over 90% leased. “We didn’t know to what extremes the other landlords would go to so we didn’t know where we’d have to go or if we could.”

As GlobeSt.com reported last week, the GE unit ultimately signed another long-term lease for its 121,432 sf as well as options for an unknown amount of expansion space. The deal is said to be the biggest lease agreement in Downtown Bellevue in six months. The agreement’s financials aren’t being released by the parties involved, but other sources estimate the deal’s value at upward of $30 million, which assumes another 10-year lease and an average rate of around $27 per sf.

With that kind of money on the line, Klatt says he was quite relieved to find out early in negotiations that Unico’s extra emphasis on service over the past two years had given his company the inside track. “It came across loud and clear that they feel like they are getting a high level of service from us,” says Klatt. “So we’re stomping our feet on this one; it’s a big deal for us.”

Indeed, instead of seeing vacancy at Skyline Tower shoot up past the market’s current average of 26%, the building remains an enigma at right around 92% occupancy.

Klatt says Unico’s high occupancy is the result of leading the market down as far as rates and leading it up in terms of inducements like TIs and commissions. “The tendency in our circles is to be the eternal optimist, always expecting the steady decline will slow and you can hold onto rates,” says Klatt. “We took an approach 180-degrees off from that.”

“We grabbed deals as quick as we could that were then a little bit lower rates, allowing us to close deals and take care of vacancy,” adds Klatt. “Now the market is continuing to slide and a lot of other competitors are playing catch-up, while the rates we signed people at now look pretty good.”

Klatt says the GE lease, which “defies all normalcy,” started out as an amendment to the existing agreement and during negotiations turned into a restated lease, “which essentially is a brand new lease.” He also says the new agreement includes a “very, very small” amount of free rent and a “generous” tenant improvement allowance.

Regarding GE’s expansion options, Klatt says GE will likely be consolidating other local operations into Skyline. If that happens, it would require the relocation of other, smaller tenants in the building. In this case, with most of GE’s space on lower floors and any expansion also expected to be on lower floors, instead of tenants feeling taken advantage of it’s likely they would end up higher in the building for the same price, which most tenants would see as a good thing.

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