Dear Valued Clients and Friends,marketing.joneslanglasalle.com/PNW/websites/StateOfThe... ·...
Transcript of Dear Valued Clients and Friends,marketing.joneslanglasalle.com/PNW/websites/StateOfThe... ·...
JJLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
JLL.com
Dear Valued Clients and Friends, As we reflect on 2016 we are pleased to have experienced another strong year across the Pacific Northwest. With the sustained strength of the economy we saw many commercial developer’s dreams and plans spring to life. As we witnessed the long anticipated pipeline of new projects begin to break ground we also watched those that were already underway climb further and further into the sky.
Over the year, demand continued to outpace supply on the industrial front and we welcomed many new retailers into our storefronts and suburban malls. Housing demand has hit an all-time high, as we expect to deliver more than 10,000 new apartment units in 2017.
Although our skylines have changed over the last year, our market fundamentals have not. New development, population growth, quality of life, a highly educated workforce, demand, absorption, pre-leasing activity and rising rents are all testaments to the overall attractiveness of the Pacific Northwest region from an investment standpoint.
We were fortunate to complete several successful acquisitions in the past year and add several key members to our team, helping to further strengthen our position as a market leader in Seattle, Bellevue and Portland. In addition, we expanded our local Investor Services Platform with the addition of a highly regarded finance team.
The launch of our new brand, Achieve Ambitions, was another evolutionary step for us and we are enjoying the very positive feedback we are receiving from across the globe.
As we share our views of 2016 and turn the corner into 2017 please join us as we celebrate our 14th Annual State of the Market Event. We are honored to welcome so many familiar faces and look forward to forging strong relationships with those of you who may be joining us for the first time this year.
Thank you for your continued partnerships and we look forward to a dynamic and prosperous 2017.
- Your JLL Pacific Northwest Investment Team
CAPITAL MARKETS TEAM
Bellevue
Ann Chamberlin
Managing Director +1 425 974 4022 [email protected]
Seattle Multifamily
David Young
Managing Director +1 206 607 1719 [email protected]
Stuart Williams
Managing Director +1 206 971 7008 [email protected]
Corey Marx
Managing Director +1 206 607 1726 [email protected]
Lori Hill
Managing Director +1 206 971 7006 [email protected]
Dawn Brandenburg
Vice President +1 206 607 1785 [email protected]
Don Flanigan
Vice President +1 206 607 971 7020 [email protected]
Matt Kemper
Vice President +1 206 607 1752 [email protected]
Mark Thygesen
Retail Associate +1 206 607 1737 [email protected]
JLL Capital Markets team
Seattle & Portland 2016 Investment Overview 7
Portland PNW Finance
Buzz Ellis
Managing Director +1 503 972 8091 [email protected]
Ray Allen
Managing Director +1 206 607 1788 [email protected]
Paige Morgan
Executive Vice President +1 503 972 8098 [email protected]
Adam Taylor
Associate +1 503 972 8607 [email protected]
Zach Goodwin
Senior Associate +1 206 607 1791 [email protected]
Drew Heitstuman
Associate +1 206 971 7021 [email protected]
SEATTLE WAS RANKED THE TOP MARKET IN TERMS OF LOCAL INVESTOR DEMAND AND THE SECOND BEST MARKET FOR INVESTMENT POTENTIAL”
Seth Heikkila
Senior Vice President +1 206 607 1732 [email protected]
Northern California Finance
John Manning
Managing Director +1 415 395 4953 [email protected]
Alex Witt
Executive Vice President +1 415 395 4976 [email protected]
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JLL Capital Markets group
Leverage the expertise of a global leader
Devised from comprehensive research, pervasive market knowledge, ethical practice and superior professionalism, the JLL Capital Markets team is focused on the unique requirements of our investor clients. Our in-depth local market and global investor knowledge delivers best-in-class solutions for clients—whether a sale, financing, repositioning, advisory or recapitalization execution.
With a diverse, unified platform of shared expertise through a single point-of-entry, we help you achieve your priority capital objectives:
Investment Sales
Benefit from sales advisory services grounded in solid market analysis, sophisticated portfolio structuring support, complex valuation, thorough underwriting capabilities, reliable investor intelligence and practical marketing expertise.
Real Estate Investment Banking
Gain direct, strategic access to global money centers and real estate investment banking professionals who manage debt and equity financing across all asset types and scenarios.
Finance
Access an unmatched combination of expertise in finance, lease accounting, tax and transaction structuring with global access to capital that helps real estate occupiers and net lease investors make the best financial decisions to optimize transaction economics and maximize asset value.
Special Asset Services
Obtain transaction execution, valuation and advisory services for non-performing and sub-performing real estate assets concerning financial institutions and special servicers.
Seattle & Portland 2016 Investment Overview 9
Navigate capital solutions
As a trusted business advisor, our Finance team helps you navigate the capital markets to obtain the best capital solutions for your particular requirements. With billions of dollars in debt and equity transaction experience and deep insights into capital flows and trends around the world, we are well-qualified to advise on creative structures and innovative solutions. Clients seeking direct access to global capital also benefit from our on-the-ground access and contacts in every money center around the world.
We provide access to the lowest cost of capital on the best terms via a competitive auction process and creative structuring. Through our broad array of relationships and a proprietary database that contains hundreds of lending and equity sources—both domestic and foreign— we provide a link between our clients and opportunity, finding appropriate, prequalified groups of capital providers and investors and creating a competitive market to get the best possible pricing and deal structure. Because we don’t align with any specific capital source, we deliver objective advice and focus exclusively on your needs. Your project receives senior-level attention—the top leaders of our group are always involved on a day-to-day basis.
Our Finance professionals devise capitalization strategies and manage debt and equity placements across all asset types.
• Acquisition and permanent financing
• Bridge and mezzanine financing
• Construction financing
• Multifamily lending platform that includes Fannie Mae, Freddie Mac and HUD/GNMA
• Performing note sales
• Recapitalization strategies
• Asset advisory
JLL Finance group
SEATTLE
Seattle
OfficeIndustrialRetailMultifamily
Seattle & Portland 2016 Investment Overview 15
2016 Seattle office sales ($10M+) overview
Sales volume declines slightly in 2016, but market record for pricing is eclipsed once again
More than $4.3 billion in office sales closed in 2016, nearly matching 2015’s total and far exceeding the 10-year historical average. In total, the market saw 55 transactions over $10 million, which makes 2016 the most active year for office investment sales since 2007. A new market record for pricing was achieved in the fourth quarter, when KOMO Plaza was purchased by GI Partners for $276.0 million, or $940 per square foot. This is a 72.5 percent price increase from when Hines purchased the building for $160 million just five years ago. Prior to 2016, the region had not seen an office building trade above $800 per square foot. Urban Union, a 12-story Trophy tower that delivered in Q3, went under contract in Q4 for $268.9 million, or $924 per square foot. The largest transaction of the year occurred in Q2, when GLL and Vestas Investment Management acquired Safeco Plaza for $387.0 million, or $488 per square foot. The 50-story Seattle CBD building, which was recently renovated and 68 percent occupied by the eponymous insurance company at the time of sale, previously traded for $163.5 million in mid-2005, so the current sale represents an increase in value of more than 136 percent. Overall, the most active submarkets for sales in 2016 were Lake Union, Seattle CBD and Bellevue CBD, with total volumes of $1.3 billion, $873.8 million and $595.0 million, respectively.
Global interest in Seattle real estate has perhaps never been stronger. Seattle surpassed San Francisco and Washington D.C. in this year’s AFIRE Foreign Investment Survey. It is now the fourth most favored U.S. market amoung foreign commercial real estate
investors. 2016 saw three out of the five largest office transactions – Safeco Plaza, West 8th and Amazon Phase VIII – include foreign buyers. German company Deutsche Asset Management purchased West 8th for $370.0 million, or $716 per square foot. Mirae Asset Global Investments, a South Korean-based group, along with Metzler, acquired Amazon Phase VIII for $246.8 million, or $777 per square foot. According to ULI and PwC’s Emerging Trends in Real Estate 2017 report, Seattle was ranked the top market in terms of local investor demand and the second best market for investment potential.
The fourth quarter was by far the most active quarter in 2016, with more than $1.7 billion in office assets trading, comprising 39.8 percent of the total sales volume. This was partially due to the largest local portfolio sale of the year. Blackstone acquired the Laguna Office Complex, Daytona Office Campus and the 5th & Bell Buildings for $300.0 million. The properties within that portfolio, along with Civica Office Commons and KOMO Plaza, traded for $766.0 million, positioning Hines as the most active seller in 2016. Though the total volume didn’t quite reach 2015’s total of $4.5 billion, the average price per square foot was up 18.7 percent year-over-year, and 48.5 percent greater than the 10-year average. Market conditions will continue to favor landlords in 2017, as they remain in position to hold properties and collect steadily increasing rents or capitalize on pricing that has hit an all-time high in the market.
2016 THE MOST ACTIVE YEAR FOR OFFICE INVESTMENT SALES SINCE 2007
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New inventory is disappearing quickly, as flight to quality trend intensifies among tech tenants
Ten office buildings were delivered in the Seattle-Bellevue region in 2016, adding 2.3 million square feet of Class A inventory to the market. 97.8 percent of the space was leased at the time of completion. 5.9 million square feet of product is currently under construction, with 4.6 million square feet scheduled to deliver in 2017, 51.2 percent of which has been accounted for. This would make 2017 the most active year for deliveries since 2000. According to Rider Levett
Bucknall’s North American Crane Index, Seattle’s skyline leads the nation for most construction cranes in the central business district. Nearly 50 percent of all cranes currently in use in North America are in Seattle, Chicago and Toronto. Average asking rents for new construction space in Puget Sound are being marketed at $48.40 per square foot, representing a 17.1 percent premium over existing Class A space. Six of the 10 largest leases signed in 2016 involved new construction buildings, all of which were executed by tech tenants, including Google at Lakefront Blocks, Facebook at Arbor Blocks and Valve at 400 Lincoln Square. The 10 largest leases signed were all executed by tech tenants. All told, the tech industry accounted for more than 60 percent of all office leasing in the year. For the last five years, the sector has been responsible for approximately 45 percent of leasing annually. Office space can be a key differentiator for companies competing fiercely for local talent, and tech tenants are willing to pay the premium for new, creative space.
Average asking rates in the market increased 2.7 percent year-over-year to $34.90 per square foot, full service. While this is slightly above the national average, it is less than half the average cost of space being marketed in San Francisco. Class A asking rents stand at $41.33, a 6.0 percent increase year-over-year. At 5.3 percentage points below the national average, Seattle-Bellevue is the fourth
tightest market in the country, with a single-digit vacancy rate of 9.2 percent. Only Nashville, Salt Lake City and San Francisco currently have lower vacancy percentages. For the fourth consecutive year the market experienced more than 2.0 million square feet of positive net absorption, as nearly 2.5 million square feet of space was taken down in 2016. This impressive run should continue in 2017, as tenants take occupancy in several impending Class A deliveries. While the majority of recent leasing activity has taken place in the Lake Union and Seattle CBD submarkets, Pioneer Square/Waterfront and Bellevue CBD are also experiencing a lot of attention. Weyerhaeuser, an agricultural manufacturer that is the seventh-largest company in the state by revenue, relocated its headquarters to an 180,000 square foot build-to-suit development in Pioneer Square, becoming a new anchor tenant in the neighborhood. 450 Alaskan and Hawk Tower are other significant projects in the submarket set to deliver in the next 12-18 months, with 59.8 percent of their combined space preleased. The Bellevue CBD is gaining two Trophy towers; Centre 425 was completed in the fourth quarter of 2016 and is fully leased by a single-user tech tenant, and 400 Lincoln Square is 71.7 percent leased and expected to deliver in early 2017. The flight to quality trend in the market has intensified and buildings are expected to continue delivering with limited available space.
Tech employment in the region has grown by 77.7 percent since 2001, the fourth highest growth rate in the country. Bloomberg’s 2016 U.S. Innovation Index ranked Washington as having the third most innovative economy for the second consecutive year, behind only Massachusetts and California. This was largely due to the state’s placement as number one in STEM concentration and number two in total science and engineering degree holders. Seattle-Bellevue, offering the second highest concentration of highly-educated millennials in the country and a relatively low cost of living, was also named a top-five city for business and careers. According to American City Business Journals, Seattle-Bellevue will become the 14th largest metro area by 2040 due to a population increase of 38 percent. Seattle remains one of the most desirable markets for millennials to live, and will continue to be a place that tech companies establish and expand their presence.
Seattle office leasing
THE TECH INDUSTRY ACCOUNTED FOR MORE THAN 60 PERCENT OF ALL OFFICE LEASING IN THE YEAR
Seattle & Portland 2016 Investment Overview 17
Seattle office sales & statistics
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of Sales 119 19 6 15 25 38 39 40 48 54
Price/SF Highest $531 $425 $397 $548 $557 $642 $745 $755 $792 $940
CAP Rate Average 5.2% 6.2% 9.5% 7.2% 6.8% 5.5% 6.1% 6.2% 6.0% 6.2%
Sales Volume $9.6B $0.4B $0.4B $1.2B $1.7B $4.9B $2.8B $1.8B $4.5B $4.4B
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF
Downtown Seattle 51,796,834 7.6% $38.01 1,858,364
Eastside 26,452,255 9.2% $38.07 600,900
Northend 7,634,787 10.7% $28.70 198,124
Southend 8,645,775 16.9% $25.69 -181,328
2016 Total Market 94,529,651 9.2% $34.90 2,476,060
2015 Total Market 91,830,292 10.2% $33.98 2,461,440
Sales matrix (over $10 million)
Office market statistics
Office market statistics include Class A and B office buildings over 30,000 sf, excluding owner-occupied, medical, and government-owned buildings.
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Seattle office sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Safeco Plaza
1001 4th Ave Seattle, WA
7/14/16 793,679
1969 / 2014-2015
$387,000,000
$488
5.10% GLL Real Estate Partners / Vestas Investment Management
CalPERS / CommonWealth Partners
• 98% leased at time of sale
• 68% occupied by Safeco
West 8th
2001 8th Ave Seattle, WA
2/24/16 516,985
2009
$370,000,000
$716
4.20% Deutsche Asset Management
AEW
• 98% leased at time of sale
• 62% occupied by Amazon
KOMO Plaza
100-140 4th Ave N Seattle, WA
12/20/16 293,727
2000
$276,000,000
$940
5.50% GI Partners
Hines
• 90% leased at time of sale
Amazon Phase VIII
325 9th Ave N Seattle, WA
7/8/16 317,804
2015
$246,800,000
$777
4.35% Metzler / Mirae Asset Global Investments
Vulcan
• 100% leased to Amazon for 16 years
Amazon Phase VII
400 9th Ave N Seattle, WA
11/17/16 317,189
2015
$244,000,000
$769
4.60% Tristar Capital / RFR Realty
Vulcan
• 100% leased to Amazon for 16 years
901 Fifth
901 5th Ave Seattle, WA
6/29/16 540,589
1973 / 2014-2015
$223,300,000
$413
4.92% Schnitzer West / Investcorp
Deutsche Asset Management
• 90% leased at time of sale
• Major tenants: Cray, Milliman, PitchBook
One Twelfth @ Twelfth
1100-1120 112th Ave NE Bellevue, WA
12/13/16 480,389
2001
$217,000,000
$452
5.90% Gemini Rosemont
Principal
• 98% leased at time of sale
• Three property portfolio sale
• Properties were previously acquired for $136.4M in July 2004
Civica Office Commons
205-225 108th Ave NE Bellevue, WA
11/14/16 305,835
2001
$193,000,000
$631
6.20% AEW / Unico
Hines
• 97% leased at time of sale
• Two building portfolio sale
• Previously acquired for $205.1M in February 2015
Seattle & Portland 2016 Investment Overview 19
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap Rate
BuyerSeller
Comments
1st Hill Medical Pavilion
1124 Columbia St Seattle, WA
1/14/16 227,628
1976 / 2015
$192,341,000
$845
5.28% Heitman / NexCore Group
Trammell Crow / Washington Capital Management
• Medical office building
• 100% leased at time of sale
• Major tenants: Swedish Health Services, CellNetix, Theraclone
Symetra Center
777 108th Ave NE Bellevue, WA
5/6/16 450,359
1986 / 2015
$185,000,000
$411
6.60% Sterling Realty Organization
Walton Street Capital
• 89% leased at time of sale
Hill7
1099 Stewart St Seattle, WA
10/7/16 285,680
2015
$179,822,000
$629
4.50% Hudson Pacific Properties / CPPIB
Touchstone / Principal
• 80% leased at time of sale
• Major tenants: Redfin, HBO
• Complex includes a 222-room Hilton Garden Inn, which was not included in this transaction
Sunset North
3120-3180 139th Ave SE Bellevue, WA
3/31/16 464,062
1999-2000
$155,193,000
$334
6.60% M-M Properties
Beacon Capital Partners
• 98% leased at time of sale
• Three building portfolio sale
Alley 24
223 Yale Ave N Seattle, WA
2/10/16 215,402
2006
$129,400,000
$601
5.00% MetLife
Vulcan
• 85% leased at time of sale
WestPark
8620-8672 154th Ave NE Redmond, WA
5/10/16 778,472
1975-1992
$128,000,000
$164
6.10% KBS Realty Advisors
Bentall Kennedy
• 82% leased at time of sale
• 21 property portfolio sale includes office, industrial and flex product
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Seattle office sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Portfolio Sale
Laguna Office Complex
15011 NE 36th St Redmond, WA
11/11/16 465,000
1998
$109,991,000
$527
Blackstone
Hines
• 100% leased at time of sale
• Property includes 6 buildings
• Part of a 20-property portfolio sale including Daytona Office Campus in Redmond and 5th & Bell Building in Seattle
• Major tenants: Microsoft, Honeywell
Daytona Office Campus
14850 NE 31st Cir Redmond, WA
11/11/16 251,000
2002
$94,000,000
$444
Blackstone
Hines
• 100% leased at time of sale
• Property includes 3 buildings
• Part of a 20-property portfolio sale including Laguna Office Complex in Redmond and 5th & Bell Building in Seattle
• Major tenant: Microsoft
5th & Bell Building
2301 5th Ave Seattle, WA
11/11/16 197,136
2002
$92,959,000
$472
Blackstone
HInes
• 100% leased at time of sale
• Part of a 20-property portfolio sale including Daytona Office Campus and Laguna Office Complex in Redmond
• Major tenant: Amazon
110 Atrium
110 110th Ave NE Bellevue, WA
11/16/16 243,381
981
$81,500,000
$335
6.30% Lionstone Investments / Talon
Walton Street Capital
• 87% leased at time of sale
Lincoln Executive Center
3245-3380 146th Pl SE, 14432 SE Eastgate Way Bellevue, WA
10/6/16 292,150
1984-1986
$80,500,000
$276
7.60% Urban Renaissance Group / Miller Global Properties
Beacon Capital Partners
• 97% leased at time of sale
• Five building portfolio sale
Eastgate Office Park
15325-15395 SE 30th Pl Bellevue, WA
4/13/16 295,413
1985
$74,725,000
$253
6.90% Kennedy Wilson
Beacon Capital Partners
• Four building portfolio sale
• 92% leased at time of sale - Building 1 was 95% leased - Building 2 was 100% leased - Building 3 was 94% leased - Building 4 was 86% leased
Seattle & Portland 2016 Investment Overview 21
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap Rate
BuyerSeller
Comments
Time Square
500-800 SW 39th St Renton, WA
12/14/16 324,287
1984-1986 / 2004
$54,500,000
$168
9.60% Greenbridge Investment Partners
LBA Realty
• 95% leased at time of sale
• Five building portfolio sale
Alderwood Business Center
3400-3500 188th St SW Lynnwood, WA
12/31/16 198,508
1985
$42,050,000
$216
7.93% Alaska Electrical Pension Fund
Embarcadero Capital Partners
• 91% leased at time of sale
• Two property portfolio sale
101 Elliott Building
101 Elliott Ave W Seattle, WA
2/10/16 101,738
1986 / 2008
$40,400,000
$397
5.50% Credit Suisse
SteelWave
• 93% leased at time of sale
Meridian Medical Center
11011 Meridian Ave N Seattle, WA
3/31/16 69,700
2006
$38,300,000
$550
5.50% Healthcare Realty Trust
First Western Development
• Medical office building
Redmond Woods
5000-5020 148th Ave NE Redmond, WA
6/21/16 145,221
1982
$36,985,000
$255
7.30% Hayman Properties
Clarion Partners
• 100% leased at time of sale
• Three building portfolio sale
The Offices at Riverpark
15809 Bear Creek Pky NE Redmond, WA
3/16/16 106,281
2008
$36,900,000
$347
7.80% Colony Realty Partners
JMA Ventures
• 100% leased at time of sale
Bay Vista Office Tower
2801-2815 2nd Ave Seattle, WA
7/21/16 119,701
1982
$33,645,000
$281
5.00% Madison Marquette / Saradar
Carlyle Group
• 91% leased at time of sale
George F. Russell Jr. Hall
1414 NE 42nd St Seattle, WA
9/29/16 62,500
2009
$30,685,000
$491
6.00% Meriwether Partners
Unico
• 100% leased at time of sale
• Property consists of 44,000 sf of office space, street-level retail and two floors of apartment units
Redmond Technology Center
18300 Redmond Way Redmond, WA
5/24/16 100,978
2008
$30,250,000
$300
6.51% Ascentis Real Estate Partners
Menlo Equities
• 92% leased at time of sale
• 34% occupied by Pushpay
• Previously acquired for $15.9M in June 2012
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Seattle office sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
1411 Fourth
1411 4th Ave Seattle, WA
4/21/16 123,430
1929 / 2008
$29,725,000
$241
4.50% Onni Group
Mack Real Estate Group
• 87% leased at time of sale
One Newport
3605 132nd Ave SE Bellevue, WA
1/22/16 89,850
1985
$29,075,000
$324
N/A AAA Washington
Ivanhoe Cambridge
• 100% leased at time of sale
• Owner-user purchase
Creeksides at Centerpoint
20415-20435 72nd Ave S Kent, WA
1/13/16 218,585
1984
$26,500,000
$121
7.00% Menashe Properties
Unico
• 90% leased at time of sale
• Three building portfolio sale
Quadrant Willows - Building C and E
1121-11241 Willows Rd NE Redmond, WA
3/3/16 130,961
1998-2000 / 2007
$25,650,000
$197
7.25% Equus Capital Partners
SteelWave
• Two building portfolio sale
• Building C was 76% leased at time of sale
• Building E was 88% leased at time of sale
Broadacres Building
1601-1611 2nd Ave Seattle, WA
10/14/16 123,108
1907
$25,400,000
$206
3.50% LBA Realty
Principal
• 69% leased at time of sale
Taylor Edwards Building
1518 1st Ave S Seattle, WA
10/19/16 69,248
1918 / 1998
$25,000,000
$361
N/A WSA Properties
Henbart
• 100% leased at time of sale
• Sale included a vacant lot
Springbrook Business Park
7611 -7825 S 180th St Kent, WA
12/16/16 185,022
1982-1985
$23,500,000
$127
6.39% Stockbridge
Metzler
• 93% leased at time of sale
• Four building portfolio sale
Weyerhaeuser Campus
33663 Weyerhaeuser Way S Federal Way, WA
2/9/16 343,535
1971
$22,762,000
$66
N/A Industrial Realty Group
Weyerhaeuser Company
• Part of portfolio sale (Office + R&D Building)
• IRG plans to redevelop and lease or sell parts of the property for office or industrial use
Riverview Plaza
16000-16040 Christensen Rd Tukwila, WA
9/16/16 171,260
1981
$22,150,000
$129
8.86% Talon
Broadreach Capital Partners
• 94% leased at time of sale
• Three building portfolio sale
Seattle & Portland 2016 Investment Overview 23
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap Rate
BuyerSeller
Comments
Valley Medical Center
3915 Talbot Rd S Renton, WA
4/29/16 46,600
1983
$21,600,000
$464
5.90% Healthcare Realty Trust
Valley Medical Center
• Medical office building
• 100% leased at time of sale
Sammamish Park Place - Building A & B
22011 SE 51st St Issaquah, WA
5/2/16 202,544
1987
$21,100,000
$104
N/A Onward Investors
Midland RE Services / PNC Bank
• Two building portfolio sale
• Both buildings were 0% leased at time of sale
• REO sale
Delta Dental Building
9706 4th Ave NE Seattle, WA
11/16/16 87,552
1987 / 2002
$20,275,000
$225
5.80% Salal Credit Union
Washington Dental Service
• 97% occupied with Delta Dental vacating its space in mid-2017
• Included a 6-story garage with 308 stalls
Watermark Tower
1109 1st Ave Seattle, WA
9/16/16 71,150
1983
$20,250,000
$295
7.15% Martin Smith
Razore Enterprise
• 96% leased at time of sale
• Sale included the commercial portion only (7 stories), the condominiums (15 stories) were not part of the offering
University District Building
1107 NE 45th St Seattle, WA
7/21/16 72,000
1981 / 1995
$19,900,000
$276
7.00% Nicola Crosby
Cypress Wealth Advisors
• 100% leased at time of sale
• University of Washington occupies approximately 2/3 of the building
Q-13 Building
1813 Westlake Ave N Seattle, WA
7/8/16 65,222
1952
$19,500,000
$299
6.30% CBRE Global Investors (Allstate)
Tribune Media Company
• 100% leased to Tribune Broadcasting Company
Gateway Two
915 118th Ave SE Bellevue, WA
1/11/16 68,776
1988
$18,280,000
$266
4.60% Swift Real Estate Partners
Walton Street Capital
• 50% leased at time of sale
1550 Building
550 4th Ave S Seattle, WA
5/18/16 51,550
1974 / 2005
$18,000,000
$349
6.35% Spire General Partner US
Bruce Raskin
• 100% leased at time of sale
Delphi Building
3633 136th Pl SE Bellevue, WA
7/15/16 69,980
1981
$17,400,000
$249
7.28% Swift Real Estate Partners
Sun Life Assurance Company
• 100% leased at time of sale
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Seattle office sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Quadrant I-5 Corporate Park - Building A
728 134th St SW Everett, WA
6/30/16 74,974
1998
$14,200,000
$253
7.50% Shelby Company
Washington Capital Management
• 89% leased at time of sale
• Off-market transaction
10700 Building (Bellevue Community College)
10700 Northup Way Bellevue, WA
9/15/16 62,677
1980
$13,411,000
$214
N/A Robert Rothe
Walton Street Capital
• 38% leased at time of sale
Fairway Center
14220 Interurban Ave S Tukwila, WA
6/16/16 82,537
1990
$12,800,000
$155
7.00% Shelby Company
Schuster Group
• 95% leased at time of sale
15 Lake Bellevue
15 Lake Bellevue Dr Bellevue, WA
3/29/16 35,200
1999
$12,600,000
$358
6.40% Costacos Family LP
Taylor Development
• 100% leased at time of sale
Franciscan Medical Pavilion
205 10th St SE Auburn, WA
5/12/16 37,480
2014
$12,089,000
$323
5.88% Ling Long / Chris Wang
Donovan Brothers Commercial Construction
• Medical office building
• 95% leased at time of sale
David Evans & Associates
415 118th Ave SE Bellevue, WA
6/22/16 24,497
1991
$10,800,000
$441
5.80% Aegis Living
Macadam Forbes
• 100% leased at time of sale
• 1031 exchange
Puyallup Executive Park
929-1011 E Main Ave Puyallup, WA
3/9/16 64,382
1989-2001
$10,700,000
$166
6.75% Matthew Eldridge
Steven Brown
• 90% leased at time of sale
Seattle Veterinary Specialists
11814 115th Ave NE Kirkland, WA
3/4/16 19,283
1989
$10,400,000
$539
6.33% Michael Kinney
Puget Sound Center for Veterinary Medicine
• 100% leased at time of sale
• Seller was the anchor tenant and a 14-year sale leaseback was completed
Koll Bellefield
1745 114th Ave SE Bellevue, WA
6/24/16 66,376
1983
$10,250,000
$154
N/A Onward Investors
AAA Washington
• 0% leased at time of sale
• 1031 exchange
Seattle & Portland 2016 Investment Overview 25
Seattle
OfficeIndustrialRetailMultifamily
Seattle & Portland 2016 Investment Overview 29
Seattle industrial sales ($10M+) overview
Sales volume increases, surpassing $1.2 billion in 2016
Industrial market fundamentals continue to adapt to rapidly improving economic conditions throughout the region. Reduced vacancy rates combined with high job and population growth are contributing to the current market situation, where developers are initiating projects at record levels. The Ports of Seattle and Tacoma have remained strong economic drivers, strengthening imports and exports in the region and helping to drive the local industrial market primarily in the Aerospace, Food/Beverage and Logistics industries. The Puget Sound area continues to be one of the top markets in the nation and industrial properties are attracting investors as well as retailers, e-commerce and food and beverage companies seeking to expand their real estate footprint. There continues to be a lack of available inventory and limited new product to satiate the demand in the market.
A flurry of industrial sales closed in 2016 as institutional investors took notice of the region’s strengthening market fundamentals. 33 transactions over $10 million closed during the year, totaling nearly 9.0 million square feet and $1.2 billion, representing a 9.0 percent increase in volume compared to 2015. More than half of the transactions were portfolio sales of more than two properties, with cap rates ranging from 4.0 percent to 7.0 percent, and nearly 80 percent of the deals occurred in the Southend. Furthermore, average pricing on a per-square-foot basis increased 30 percent year-over-year to $144, and cap rates declined 20 basis points to an average of 5.5 percent. The cap rate compression in the market has been significant, as it’s currently 370 basis points below the high of 9.2 percent in 2009. There were three deals that exceeded $100 million in 2016. Two of which occurred in the fourth quarter. Prologis purchased Unified Grocers Site in Seattle from Sabey Corporation.
The eight property portfolio totaling 1.0 million square feet, traded for $136.0 million, or $133 per square foot. Clarion Partners purchased Cornerstone’s portfolio of approximately 980,000 square feet in Tukwila and Kent for $143 per square foot at an incredibly low 3.8 percent cap rate. Several other buyers including KBS Realty Advisors, LBA Realty, BKM Capital Partners, and Industrial Property Trust participated in transactions in the market that led to solid investment activity in 2016. Though quality product is becoming increasingly limited, transaction volume and activity in the Seattle-Bellevue region continues to be strong.
Puget Sound remained a top-10 market nationally for institutional grade investments, according to PWC and ULI’s recently released Emerging Trends in Real Estate 2017 report. In the West Coast, Seattle was ranked second in terms of investment prospects for the industrial sector, behind only Portland. Institutional investors have clearly taken notice of the strong market fundamentals over the last three years and have been aggressive in acquiring both existing product, typically through unsolicited offers, as well as land in order to develop new product in the near-mid-term. Given strong demand from users along diminishing available space and increasing rental rates, some owners are looking at taking advantage of current market conditions and are evaluating selling their property at relatively high prices. With the local economy continuing to strengthen, the outlook for the Puget Sound industrial market is positive. Moving into 2017, we expect the industrial market to continue to perform well, both in terms of demand from tenants and interest from institutional investors.
30
Year-end activity signaling continued growth in 2017
2016 marked another strong year for leasing activity in the Puget Sound industrial market. Vacancy in the region dropped 90 basis points year-over-year to its current rate of 2.7 percent, down 550 basis points since 2010. Every cluster in the region has seen vacancy drop in the last 12 months, with rates ranging from 4.3 percent in Pierce County down to 1.5 percent in the Seattle cluster. Though 2.8 million square feet of speculative development is underway,
and more is planned to start, the demand for industrial space is significantly outpacing the increase in inventory, with about 16.0 million square feet of active tenant requirements in the market. The growth in tenant demand and the market’s limited inventory will continue to compress vacancies and availabilities in the region. The pace of absorption and leasing activity in the Puget Sound industrial market remained strong throughout 2016. More than 6.4 million square feet of space was absorbed, the highest total since 2007, and a 3.0 percent increase over 2015. This activity was focused predominantly in the Kent Valley and Pierce County clusters, which recorded 2.4 million square feet and 2.5 million square feet of total absorption, respectively. Tenant demand, from both small and large users, has contributed to robust net absorption totals. There are currently more than 50 companies in the market seeking space options larger than 100,000 square feet and nearly 100 tenants
seeking less than 100,000 square feet. With limited available product and continued strong absorption each quarter, landlords are comfortable posting high asking rates, leaving tenants with limited options such as early renewals, and accepting smaller free rent and tenant improvement allowance packages.
More than 4.4 million square feet of new product was added to the market in 2016. With limited supply of available quality space in the region, newly-delivered product is being leased and absorbed at a strong pace. There were a total of 26 leases signed in 2016 that exceeded 100,000 square feet. All but three of these major leases took place in the Southend, where the demand and shortage of supply is notably high. The largest transaction of 2016 was Serta Simmons’ lease of 272,834 square feet at IAC Port 167 in Puyallup/Sumner submarket. Other notable transactions include Stryder Logistics’s 249,269 square foot lease at Prologis Park Kent, Amerisource’s 229,918 square foot lease at Des Moines Creek Business Park, and Regal Logistics’ 225,972 square foot lease at LogistiCenter at 167 in Fife. Given continued demand for space, coupled with the scarcity of quality available options, it is likely that absorption will remain positive and vacancy rates remain tight in the coming quarters.
Even with limited land available in the region, developers are continuing to capitalize on the Seattle market. The largest current project is Prologis’ 770,195 square foot project in the Port of Tacoma/Fife submarket. Given the escalating land prices, rising construction costs, and shortage of big-box space, the majority of developments have been projects over 100,000 square foot. Construction activity is expected to ramp up as there are additional 7 million square feet of planned and proposed projects that sit in the pipeline slated for 2017-2018.
Seattle industrial leasing
THE DEMAND FOR INDUSTRIAL SPACE IS SIGNIFICANTLY OUTPACING THE INCREASE IN INVENTORY
Seattle & Portland 2016 Investment Overview 31
Seattle industrial sales & statistics
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF
Seattle 47,085,219 1.5% $1.06 60,327
Kent Valley 110,980,828 1.9% $0.69 2,457,690
Pierce County 62,923,038 4.3% $0.58 2,530,579
Eastside 32,199,277 3.6% $1.18 782,926
Northend 28,551,474 3.1% $0.79 575,895
2016 Total Market 281,739,836 2.7% $0.79 6,407,417
2015 Total Market 277,314,316 3.6% $0.71 6,209,388
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of Sales 14 35 19 9 11 14 20 25 24 26 33
Price/SF Highest (ind) $140 $164 $151 $100 $115 $187 $125 $288 $198 $194 $312
CAP Rate Average 6.8% 5.9% 6.6% 9.2% 7.4% 7.2% 6.5% 6.3% 6.4% 5.7% 5.5%
Price/SF Highest (flex) $206 $237 $199 $207 $156 $257 $180 $190 $122 $171 $229
Sales Volume $0.6B $0.7B $0.4B $0.2B $0.2B $0.3B $0.7B $0.8B $0.4B $1.1B $1.2B
Industrial market statistics
Sales matrix (over $10 million)
Industrial market statistics include industrial and flex inventory over 10,000 sf, single-tenant, multi-tenant and owner-occupied.
32
Port of Seattle and Port of Tacoma historical total TEU’s
2016 TEU container volume
4,500,000
2,500,000
4,000,000
2,000,000
3,500,000
1,500,000
2007 2008
Seattle* Tacoma*
Tota
l TEU
’s
* In 2014 Port of Seattle and Port of Tacoma began combining their statistics
2009 2010 2011 2012 2013 2014* 2015
500,000
3,000,000
1,000,000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Seattle 1,973,504 1,704,492 1,584,596 2,153,685 2,049,733 1,885,680 1,592,753 * * *
Tacoma 1,924,929 1,861,358 1,545,853 1,412,869 1,443,550 1,678,778 1,863,408 * * *
Total TEU’s - - - - - - - 3,393,522 3,529,441 3,615,752
2016
Seattle & Portland 2016 Investment Overview 33
Seattle industrial sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Boeing Field Site
3301 S Norfolk St Seattle, WA
11/30/16 1,029,011
952
$136,000,000
$132
5.10% Prologis
Sabey Corporation
• 100% leased at time of sale
• Eight property portfolio sale including two office & six industrial buildings
Southcenter S Industrial Park / Green River Corporate Park
18201-18289 Olympic Ave S Kent, WA
12/21/16 930,433
1987-1990
$132,697,000
$143
3.80% Clarion Partners
Cornerstone Real Estate Advisers
• 100% leased at time of sale
• 11 property portfolio sale
WestPark
8620-8672 154th Ave NE Redmond, WA
5/10/16 778,472
1975-1992
$128,000,000
$170
6.10% KBS Realty Advisors
Bentall Kennedy
• 82% leased at time of sale
• 21 property portfolio sale includes Office, Industrial and Flex product
Gateway Corporate Center
12671-12687 Gateway Dr Tukwila, WA
12/21/16 371,163
1986
$78,000,000
$210
4.57% BECU
RREEF America
• 87% leased at time of sale
• Eight property portfolio sale
Des Moines Creek Business Park Phase I
2231 S 208th St Des Moines, WA
12/15/16 547,892
2015
$68,000,000
$124
4.27% LaSalle Investment Management
Panattoni
• 100% leased at time of sale
• Three property portfolio sale
Apollo / Titan Building
1801 132nd Ave E Sumner, WA
6/14/16 428,109
2014
$48,050,000
$112
4.50% LBA Realty
LaSalle Investment Management
• 100% leased at time of sale
• Two property portfolio sale
Weyerhaeuser Campus
32901 32nd Ave S Federal Way, WA
2/9/16 461,673
1981
$47,738,000
$103
N/A Industrial Realty Group
Weyerhaeuser Company
• Sale represents Industrial/Flex portion of two property portfolio sale
Tukwila Commerce Center
1001-1099 Industry Dr Tukwila, WA
8/8/16 475,517
1976
$45,200,000
$95
5.70% BKM Capital Partners
Global Logistic Properties
• 88% leased at time of sale
• 27 property portfolio sale
Springbrook 188 Distribution Center - Building 1
7811-7915 S 188th St Kent, WA
11/18/16 365,040
1965
$40,302,000
$110
5.20% Blackstone
LBA Realty
• 100% leased at time of sale
• Sales represent allocated sales price
• Part of 49 property bulk sale
34
Seattle industrial sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
711 E 11th St
711 E 11th St Tacoma, WA
11/30/16 60,000
1983
$32,376,000
$540
N/A Industrial Property Trust
Interfor
• Industrial building was unused by seller
• Sale includes 10K SF of office - 0% leased at time of sale
• Sale was based on land value
Westview 522
6525 240th St SE Woodinville, WA
4/6/16 184,260
2008
$32,200,000
$175
6.00% Pine Forest Properties
Onward Investors
• 100% leased at time of sale
• Portfolio sale include 4.96 acre pad site available for future development
1900-1938 Occidental Ave S
1900-1938 Occidental Ave S Seattle, WA
9/21/16 145,069
1941
$32,000,000
$221
N/A WSA Properties
Apollonia Kwan
• 100% leased at time of sale
• Two property porfolio sale
• Buyer intends to build a basketball arena
Kent Industrial Portfolio
18405 72nd Ave S Kent, WA
3/30/16 266,000
1975-1987
$31,602,000
$119
4.90% Industrial Property Trust
Prologis
• 100% leased at time of sale
• Three building portfolio sale
Ranch Associates Buildings
22828 68th Ave S Kent, WA
8/31/16 250,000
1968
$30,000,000
$115
5.00% Puget Sound Energy
Hill Raaum Pietromonaco
• 100% leased at time of sale
Totem Lake Commerce Center
12521 128th Ln NE Kirkland, WA
6/23/16 171,841
1996
$28,012,000
$163
5.85% NWB Totem Lake LLC
Benaroya Company
• 100% leased at time of sale
Sea King Industrial Park
9100 15th Pl S Seattle, WA
9/22/16 195,800
1975
$27,000,000
$138
4.80% RREEF America
Int’l Airport Centers
• 100% leased at time of sale
• Six property portfolio sale
Former Safeway Bakery Building
2100 120th Ave NE Bellevue, WA
11/15/16 102,714
1978
$26,500,000
$258
N/A Bellevue School District No. 405
Safeway
• 100% leased at time of sale
• Prior owner/occupant closed plant upon sale
• Purchased for use as future elementary school
The Steele Building
1565 Fryar Ave Sumner, WA
6/30/16 206,463
2015
$24,000,000
$116
4.40% Bixby Land Company
MetLife / Panattoni
• 100% leased at time of sale
• All cash deal
Seattle & Portland 2016 Investment Overview 35
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap Rate
BuyerSeller
Comments
East Valley Distribution Center
20401-20421 84th Ave S Kent, WA
9/22/16 228,300
1988
$23,900,000
$105
4.95% RREEF America
Int’l Airport Centers
• 100% leased at time of sale
Springbrook Business Park
7611-7691 S 180th St Kent, WA
12/16/16 185,092
1985
$23,200,000
$125
6.88% Stockbridge Capital Group
Metzler
• 100% leased at time of sale
• Four property portfolio sale
Opus Park 167
1604 15th St SW Auburn, WA
4/15/16 170,815
2003-2005
$22,000,000
$129
5.80% Industrial Property Trust
Beaverbrook Enterprises
• 100% leased at time of sale
• Three building portfolio sale
Emerald Corporate Park - Building E
3700-3702 C St NE Auburn, WA
2/19/16 152,155
2000
$21,900,000
$144
7.00% CenterPoint Properties
Shelby Company
• 100% leased at time of sale
• Sale included acquisition of a 1.4 AC parcel on Auburn Way N for $2.5M that will be paved and fenced for additional parking for the tenant FedEx
Redmond Heights Tech Center
4603-14833 NE 87th St Redmond, WA
5/26/16 126,545
1985
$20,400,000
$161
6.70% Wakefield Properties
Deutsche Asset Management
• 100% leased at time of sale
• Five building portfolio sale
Andover Executive Park
698-722 Industry Dr Tukwila, WA
10/25/16 171,723
1972
$19,800,000
$115
6.40% BKM Capital Partners
ScanlanKemperBard Companies
• 83% occupied at time of sale
• 10 property portfolio sale
Everett Commerce Center
6617 Associates Blvd Everett, WA
11/18/16 217,700
2008
$17,981,000
$83
10.00% Blackstone
LBA Realty
• 100% leased at time of sale
• Sales represents allocated sale price
• Part of 102 property bulk sale
Quadrant Parkside Office Park
18939 120th Ave NE Bothell, WA
11/18/16 77,629
1988-1989
$17,800,000
$229
8.25% Hill Family III LLC
Embarcadero Capital Partners
• 94% leased at time of sale
• Three property portfolio sale
• Buyer simultaneously sold a fourth building in the complex to a church
Span Alaska Transporation
3815 W Valley Hwy N Auburn, WA
3/21/16 51,250
2007
$16,000,000
$312
5.75% Realterm Global
Span-Alaska Transportation
• 100% leased at time of sale
36
Seattle industrial sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Riverfront Business Park
16110-16140 Woodinville Redmond Rd NE Woodinville, WA
2/12/16 137,916
1990
$15,450,000
$94
7.30% Harsch Investment Properties
Western America Equities
• 100% leased at time of sale
• Four property portfolio sale
Kirkland 118
11730 118th Ave NE Kirkland, WA
3/10/16 77,072
1998
$13,916,000
$181
6.05% Par 5 Park 118 LLC
Expert Drywall
• 100% leased at time of sale
• Two building portfolio sale
Airport Business Center
11323 30th Ave W Everett, WA
10/7/16 150,046
1986
$12,550,000
$84
6.70% Vaupell Industrial Plastics
Puget Sound Properties
• 85% leased at time of sale
• Owner/user sale
Kent 212 Building
21235-21255 76th Ave S Kent, WA
10/19/16 126,656
1974
$12,412,000
$98
N/A Bule Origins
John & Cynthia Baumann
• 100% leased at time of sale
• Owner/user sale; buyer to occupy
• Buyer intends to occupy the building
Red Dot Building
745 Andover Park E Tukwila, WA
5/27/16 113,980
1974
$12,300,000
$108
5.20% LBA Realty
Red Dot Corporation
• 100% leased at time of sale
Sumner West
2719 W Valley Hwy E Sumner, WA
10/18/16 117,870
2016
$12,120,000
$103
N/A John Larsen
Columbia Pacific
• 0% leased at time of sale
• Owner/user sale; buyer to occupy
Kirkland Business Center
11803 NE 116th St Kirkland, WA
5/23/16 109,180
1962
$11,150,000
$102
6.00% Razone Enterprise
TA Realty
• 100% leased at time of sale
Owl Transfer Building
3623 6th Ave S Seattle, WA
6/14/16 73,335
1961
$10,600,000
$145
5.36% John & Diane Ching
American Life
• 99% leased at time of sale
Tri-Land Industrial Park - Dania Building
1251 Andover Park W Tukwila, WA
2/26/16 100,036
1977
$10,000,000
$100
N/A Interline International / Scandinavian Design
Tri-Land Corporation
• 100% leased at time of sale
• Owner/user sale; buyer was the tenant
Seattle & Portland 2016 Investment Overview 37
Seattle
OfficeIndustrialRetailMultifamily
40
2016 Seattle retail sales ($10M+) overview
Sales volume continues to decline, but a new record for pricing is achieved
2016 was another highly active year for retail investment sales throughout the Seattle region with 22 transactions over $10 million. Much like 2015, the flurry of activity didn’t translate to higher sales volume, with only $548.9 million in assets trading hands, a drop of 15.0 percent year-over-year and the lowest level since 2011. Investors are transferring their focus to periphery markets, as approximately 75 percent of all transactions and 64 percent of total sales volume for 2016 came from outside of the Seattle-Bellevue core. We are starting to see the focus shift from the core to lower cost, long-term investments in secondary and tertiary markets. Tacoma was a particularly active segment of the market, with three of the 10 largest transactions of the year and total sales volume of $97.5 million, second only to Seattle. Tacoma also lays claim to the largest transaction of the year south of Seattle, with the purchase of the Tacoma South Shopping Center by Retail Properties of America from Sterling Realty. The 230,657 square foot neighborhood center is anchored by Bass Pro Shop and LA Fitness and was 97 percent leased at the time of the $39.4 million sale.
The largest transaction of the year occurred in the first quarter, when Vulcan Real Estate sold 2200 Westlake to Weingarten Realty Investors for $66.2 million, or $897 per square foot. The 100 percent leased, Whole Foods-anchored retail portion of 2201 Westlake in Seattle traded at a cap rate of 5.8 percent, the second lowest of the year. Seattle also saw a new market record for pricing occur when the Liberty Building, home to Hard Rock Café, sold for $1,297 per square foot. With the highest average price per square foot of $833, and the highest volume of any submarket at $131.6 million, Seattle is still the most desirable location for investment throughout the Puget Sound region. Seattle was ranked as the 3rd most desirable market in the U.S. for investment in the retail sector, up 17 spots from last year, according to PWV and ULI’s Emerging Trends in Real Estate 2017 report. 43 percent of respondents to the Emerging Trends in Real Estate survey placed a “buy” rating on retail property in Seattle. Look for further exploration of peripheral markets in 2017 as a variety of traditional anchor tenants are closing stores in shopping centers throughout the region.
SEATTLE WAS RANKED AS THE 3RD MOST DESIRABLE MARKET IN THE U.S. FOR INVESTMENT IN THE RETAIL SECTOR
Seattle & Portland 2016 Investment Overview 41
Seattle retail leasing
Market tightens further, putting landlords in the driver’s seat
2016 was a banner year for the Puget Sound retail market. Vacancy continued its rapid decline, ending the year at 3.6 percent, a drop of 50 basis points year-over-year and the lowest level in more than a decade. Subsequently, rental rates continued on the upward trajectory, finishing at $18.80 per square foot, an increase of 7.0 percent year-over-year and the highest rate since 2008. As the
market tightens even further and population density continues to increase, we have seen a number of national retailers moving to the market, including la Marzocco, Whole Foods 365, New Seasons, Filson, and Warby Parker. Net absorption for all submarkets – Downtown Seattle, Eastside, Northend, Southend, and Tacoma – was overwhelming positive, with 1.1 million square feet of space taken down in the year. The Downtown Seattle submarket remained the tightest, as vacancy dropped 50 basis points to 1.7 percent. Rental rates increased 8.1 percent year-over-year to an average of $26.93. Tacoma posted another impressive year, accounting for 62 percent of total market absorption, with rental rates increasing to a respectable $15.98, and vacancy down a staggering 36 percent to 4.7 percent overall. Development activity was minimal in 2016, with just 391,629 square feet of inventory added to the market. 588,018 square feet of space remains under construction heading into 2017.
As in 2015, technology advancement was emphasized across the retail spectrum in 2016. With delivery concepts continuing to expand their offerings in Seattle, traditional brick and mortar retailers are
using a number of approaches to drive traffic or take advantage of the emerging delivery market. Amazon Prime Now made a big splash in the Seattle market last year with guaranteed 2-hour delivery on select items sold directly from Amazon. A number of local grocers, including Uwajimaya and PCC Natural Markets, have tapped into the established delivery network this year to offer their in-store offerings in 2 hours or less. Orders are filled by personal shoppers and delivered using the existing Prime Now delivery network. Fresh off of their Amazon Books store opening in 2015, Amazon expanded their brick and mortar offerings to include Amazon Go in South Lake Union. The store incorporates a number of sensors, so unlike traditional retailers, no check stands are present and customers simply grab food from the shelves and walk out. While many traditional grocers and restaurants become congested at checkout during the lunch and after work rush, Amazon Go stores identify your Amazon account information upon entry and track each item you grab from the shelf so your account can be charged when you leave.
With the tourism sector expanding in Seattle, SeaTac International Airport announced a plan for expansion to accommodate the growing number of domestic and international visitors. The $636 million renovation will transform the existing retail and dining hub into a more modern facility that will include eight new gates, improved Wi-Fi connectivity, and 46,000 square feet of retail and dining options; more than double the existing retail space. The project aims to improve the overall traveling experience, enhance the quality of retail offerings, and fix a number of operational inefficiencies. The project is expected to break ground in early 2017, with a targeted completion sometime in 2021.
RENTAL RATES CONTINUED ON THE UPWARD TRAJECTORY
42
Seattle retail sales & statistics
Submarket Size (RSF) Vacancy Avg. Rental Rate (NNN) Net Absorption RSF
Downtown Seattle 26,365,522 1.7% $26.93 50,889
Eastside 28,036,807 2.8% $24.48 78,349
Northend 47,084,524 3.9% $18.25 101,132
Southend 31,230,541 4.0% $16.98 181,396
Tacoma 41,416,800 4.7% $15.98 666,071
2016 Total Market 174,134,194 3.6% $18.80 1,077,837
2015 Total Market 173,174,496 4.1% $17.56 1,445,654
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of Sales 28 19 4 8 7 15 16 18 22 27 22
Price/SF Highest $518 $467 $380 $404 $305 $387 $512 $509 $849 $701 $1,297
CAP Rate Average 6.4% 5.9% 7.2% 8.8% N/A 7.0% 6.4% 6.4% 6.0% 6.3% 6.4%
Sales Volume $0.5B $0.4B $0.1B $0.1B $0.1B $0.4B $0.9B $1.1B $0.8B $0.6B $0.5B
Retail market statistics
Sales matrix (over $10 million)
Seattle & Portland 2016 Investment Overview 43
Seattle retail sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
2200 Westlake - Whole Foods Market
2200-2210 Westlake Ave Seattle, WA
2/29/16 73,800
2006
$66,210,000
$897
5.76% Weingarten Realty Investors / Bouwinvest
Vulcan
• 100% leased at time of sale
• Retail portion of 2201 Westlake
• 412 parking stalls included in the sale
Bellevue Plaza
117-144 106th Ave NE Bellevue, WA
5/3/16 60,844
1962
$45,350,000
$745
N/A Vulcan
UDR
• 75% leased at time of sale
• Planned redevelopment
Alderwood Plaza
18420-18600 33rd Ave W Lynnwood, WA
5/11/16 178,734
1980 / 2003
$40,747,000
$228
5.95% Merlone Geier Partners
Barclay’s Realty
• 98% leased at time of sale
• Major tenants: Rite Aid, Big 5 Sporting Goods, Ross, HomeGoods, Buffalo Wild Wings
Tacoma South Shopping Center
7601-7941 S Hosmer St Tacoma, WA
5/5/16 230,657
1984-2015
$39,400,000
$171
6.80% Retail Properties of America
Sterling Realty
• 97% leased at time of sale
• Major tenants: Bass Pro Shop, LA Fitness
Klahanie Shopping Center
4506-4598 Klahanie Dr SE Issaquah, WA
7/15/16 66,895
1998 / 2000
$35,988,000
$538
5.18% Regency Centers
Gerrity Group
• 93% leased at time of sale
• The shopping center’s anchor, QFC, was not part of the sale
• Previously acquired for $22.0M in November 2011
Bridle Trails Shopping Center
6501-6625 132nd Ave NE Kirkland, WA
10/17/16 106,000
1981
$32,800,000
$309
4.50% ROIC
Urban Renaissance Group
• 99% leased at time of sale
• Major tenants: Bartell Drugs, Red Apple Market, Ace Hardware
James Center
6901 S 19th St Tacoma, WA
1/13/16 128,264
1978-2000
$31,400,000
$245
6.00% Vestar Development
InvenTrust Properties
• 91% leased at time of sale
• Major tenants: Fred Meyer, Rite Aid, and FedEx Office
Promenade 23
2301 S Jackson St Seattle, WA
2/17/16 96,660
1997
$30,900,000
$320
N/A Vulcan
Weingarten Realty
• 83% leased at time of sale
• Partial redevelopment project that could have approximately 570 apartments, with construction starting in mid-to-late-2017
44
Seattle retail sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Lincoln Plaza Shopping Center
2501-2505 S 38th St Tacoma, WA
4/29/16 80,922
1988 / 2007
$26,718,000
$330
6.90% MK Property Services
PASSCO Companies
• 95% leased at time of sale
• Major tenants: Big 5 Sporting Goods, Mens Wearhouse, Summit Salon Academy
Top Foods Grocery Store
15751 NE 15th St Bellevue, WA
1/15/16 70,575
2001
$21,000,000
$298
N/A Intracorp Real Estate
Merlone Geier Partners
• Vacant at time of sale
• Mixed-use redevelopment project
The Liberty Building (Hard Rock Café)
114 Pike St Seattle, WA
5/17/16 16,000
1924 / 2009
$20,750,000
$1,297
4.80% KLM Equities
Urban Visions
• 100% leased to Hard Rock Café through early-2029
• Previously acquired for $3.3M in September 2006
La Plaza Midway
23201-23325 Pacific Hwy S Kent, WA
5/10/16 75,830
1993
$19,200,000
$253
7.00% Da Li Properties
Tourmaline Capital
• 99% leased at time of sale
• Major tenants: Market at Plaza, Goodwill, and Sprint
Lake Stevens Marketplace
303 91st Ave NE Lake Stevens, WA
6/16/16 96,341
1993
$17,500,000
$182
7.15% Gerrity Group
Cimco Enterprises
• 98% leased at time of sale
• Major tenants: Ace Hardware, Rite Aid, Dollar Tree
Meeker Square
1301-1313 W Meeker St Kent, WA
6/27/16 137,138
1966 / 2004
$17,000,000
$124
7.30% Raskin Family
Prium Companies
• 86% leased at time of sale
• Planned redevelopment
• Transaction resolved a troubled situation
Renton Highlands Safeway Plaza
4110-4260 NE 4th St Renton, WA
4/14/16 54,264
1985-1998
$16,900,000
$311
6.30% Washington Investment
Henry Buys / Bart Kooyman
• 100% leased at time of sale
• Major tenants: Safeway, 24Hour Fitness, Petco
Midway Lowe’s
Shopping Center 24050 Pacific Hwy S Kent, WA
11/8/16 135,041
2006
$14,116,000
$105
5.00% Guardian Capital Management
Robertson Properties Group
• 100% leased at time of sale to Lowe’s Home Improvement
Ivar’s
401 NE Northlake Way Seattle, WA
12/15/16 16,767
1970
$13,725,000
$819
4.90% Fana Northlake LLC
Ivar’s
• 100% leased at time of sale
• 20-year single tenant net leased to Ivar’s
Seattle & Portland 2016 Investment Overview 45
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap Rate
BuyerSeller
Comments
901 Building
905 Bellevue Way NE Bellevue, WA
4/28/16 21,968
1946 / 1999
$13,400,000
$610
N/A Lakha Investments
Greenbaum Family
• 100% leased at time of sale
• Mixed-use property that includes approximately 12,000 sf of office space
• 1031 exchange
Brien Motors
5200 Evergreen Way Everett, WA
12/6/16 34,672
1965
$13,000,000
$375
N/A Swickard Corp.
P & S Properties
• 100% leased at time of sale
• Buyer intends to occupy the building
Woodinville Athletic Center
18512-18600 Woodinville Snohomish Rd NE Woodinville, WA
2/12/16 59,850
2003
$11,970,000
$200
7.37% Maverick Investments
Goodman Real Estate
• 100% leased at time of sale
• Major tenants: Gold’s Gym, Home Court
White River Junction Center
3734-4018 A St SE Auburn, WA
1/14/16 52,573
1993-1995
$10,600,000
$202
7.71% Da Li Development
Hung Nguyen
• 89% leased at time of sale
• Major tenants: Albertsons, Bartell Drugs
Twin Lakes Shopping Center
2120-2324 SW 336th St Federal Way, WA
6/30/16 33,496
1986 / 2007
$10,200,000
$305
7.40% Frank Au
Gold Investment
• 88% leased at time of sale
• 1031 exchange
Seattle
OfficeIndustrialRetailMultifamily
Seattle & Portland 2016 Investment Overview 49
2016 Seattle multifamily sales ($10M+) overview
More than $5 billion in sales closed in 2016, setting a new market record
Seattle’s strength as a multifamily market derives from unprecedented job growth, overwhelming in-migration and consistent demand in spite of record high supply. In 2016, the Seattle metro area set a new peak for sales volume, with $5.1 billion in transactions closing, significantly more than the average of $3.5 billion between 2012 and 2016, and $1.2 billion between 2007 and 2011. Investors continue to capitalize on the robust Seattle market because of its proven longevity and remarkable growth opportunities. Seattle is home to many Fortune 500 companies that have a long term commitment to Puget Sound. For this reason, it continues to lead the country in year-over-year job growth with 3.8 percent, compared to the national average of 2.1 percent. For the past seven years, an average of 61,000 jobs have been added to the Seattle market annually. In addition to the large companies that call Seattle home, like Amazon, Microsoft and Boeing, many Bay Area tech giants have grown substantially in the area, such as Facebook, Google, and Salesforce.
Rent growth in 2016 outpaced the national average at 7.5 percent year-over-year. The Northend saw an increase of 9.3 percent, and the Southend was even more impressive, at 10.7 percent. In 2016, Seattle was the only city ranked in the top ten for both rent growth and rental price. While rents have grown rapidly in each of the last five years, the Seattle area is still a significant discount to San Francisco.
Only the San Francisco Bay Area has a tighter housing market than Seattle. It is more costly than ever to own a home in Seattle,
as prices have climbed 60 percent in the last five years. In 2016, a record-low number of homes went on the market, with only 1,600 homes for sale in King County compared to 7,400 homes at the same period in 2015. Supply is dwindling at a time when demand has never been higher. Seattle’s inventory dropped 13.4 percent last year, which is the third largest decrease among the top 20 markets.
Washington saw substantial net migration in 2016, as 87,100 people moved to the state, representing 71 percent of the total population growth. This is the third consecutive year that net migration exceeded 45,000, which is the average for the previous decade.
In 2017, there will be significant multifamily unit deliveries, with 13,496 currently under construction. In 2016, a remarkable 10,387 units were delivered. This is a large increase in supply when compared to an average of 8,308 units delivered per year between 2012 and 2016, and an average of 3,436 units delivered per year between 2007 and 2011. This considerable supply is accompanied by substantial demand, as 11,639 units were absorbed in the last 12 months.
The LIV Bel-Red apartments on the Eastside achieved the largest sales price of 2016, selling for $172.0 million. The largest suburban trade was Bridges at Northcreek in Bothell, which sold for $145.0 million. Tivalli was the largest new construction suburban sale, trading for $94.3 million. Cap rates remained relatively flat throughout the year, averaging 4.4 percent for new construction core assets. The overall Puget Sound average for sales larger than $10 million was approximately 5.0 percent.
With underlying fundamentals remaining strong, the outlook for 2017 and beyond remains optimistic. As home to many noteworthy companies’ headquarters and satellite locations, Seattle’s economic drivers continue to fuel a healthy market, with robust employment growth, exponential population gain, and limited supply.
RENT GROWTH IN 2016 OUTPACED THE NATIONAL AVERAGE AT 7.5 PERCENT YEAR-OVER-YEAR
50
Seattle multifamily sales & statistics
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of Sales 121 93 57 15 36 45 17 49 84 91 108
Highest Price/Unit $285,965 $407,083 $417,391 $211,957 $321,078 $350,000 $509,800 $690,583 $606,383 $636,192 $554,745
CAP Rate Average 5.4% 5.1% 5.8% 6.4% 6.4% 5.8% 5.5% 5.1% 5.2% 4.9% 5.0%
Sales Volume $2.0B $2.9B $1.6B $0.4B $0.9B $1.5B $2.7B $2.0B $2.8B $3.9B $5.1B
Sales matrix ($10M+)
INVESTORS CONTINUE TO CAPITALIZE ON THE ROBUST SEATTLE MARKET BECAUSE OF ITS PROVEN LONGEVITY AND REMARKABLE GROWTH OPPORTUNITIES.
Seattle & Portland 2016 Investment Overview 51
Seattle multifamily sales ($10M+)Property Closing Date Sale Price
$ Per Unit$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
LIV Bel-Red
2170 Bel-Red Rd Bellevue, WA
9/13/16 $172,000,000
$381,375
$477
451
2015
4.40% Kennedy Wilson
Goodman Real Estate
Juxt
810 Dexter Ave N Seattle, WA
9/30/16 $151,400,000
$415,175
$604
361
2016
4.60% Blackstone
Holland Partner Group
Bridges at Northcreek
20225 Bothell Everett Hwy Bothell, WA
10/12/16 $145,000,000
$276,718
$331
524
1999
4.90% Griffis Residential
Grosvenor
Avalon Brandemoor
3333 164th St SW Lynnwood, WA
10/18/16 $132,000,000
$260,870
$241
506
2001
4.80% Greystar
AvalonBay Communities
Overlook at Lakemont
5305 Lakemont Blvd SE Bellevue, WA
5/26/16 $122,000,000
$305,000
$312
400
1992
4.50% Security Properties
Heitman
Campbell Run
13305 NE 171st St Woodinville, WA
9/30/16 $98,000,000
$272,222
$331
360
1989
4.40% Acacia Capital
Grosvenor
Carriages at Fairwood Downs
15030 SE 179th St Renton, WA
12/16/16 $98,000,000
$245,000
$224
400
1988
5.20% Sequoia Equities
TruAmerica Multifamily
77 Central
2630 77th Ave SE Mercer Island, WA
4/22/16 $96,831,000
$519,936
$542
171
2010
4.10% TIAA
Seco Development
Tivalli
15631 Ash Way Lynnwood, WA
3/9/16 $94,250,000
$246,084
$283
383
2014
4.95% Kennedy Wilson
Goodman Real Estate
52
Seattle multifamily sales ($10M+)Property Closing Date Sale Price
$ Per Unit$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Berkshires on Elliott
2400 Elliott Ave Seattle, WA
1/20/16 $90,750,000
$386,516
$509
233
1990
4.00% Griffis Residential
Berkshire Property Advisors
Equinox
1520 Eastlake Ave E Seattle, WA
10/11/16 $90,250,000
$433,946
$536
204
2009
4.70% Kennedy Wilson / LeFrak
JP Morgan Chase
Glen Park
952 SW Campus Dr Federal Way, WA
10/13/16 $85,000,000
$183,190
$167
464
1990
5.70% Prime Group
Fairfield Residential
Belara at Lakeland
6170 Terrace View Ln Auburn, WA
7/12/16 $80,500,000
$187,209
$196
430
2007
5.10% Kennedy Wilson
ColRich
The Heights at Bear Creek
17771 NE 90th St Redmond, WA
12/8/16 $78,750,000
$346,916
$306
227
1994
4.10% Security Properties
OHSTRS
Walton Lofts
75 Vine St Seattle, WA
8/8/16 $76,000,000
$554,745
$766
137
2015
4.00% Clarion Partners
The Schuster Group
Huntington Park
9009 W Mall Dr Everett, WA
2/22/16 $75,000,000
$197,368
$242
380
1991
4.60% Starwood Capital Group
Equity Residential
Millington at Merrill Creek
1401 Merrill Creek Pkwy Everett, WA
6/22/16 $74,500,000
$216,570
$221
344
2006
5.00% Prime Residential
Security Properties
Woodlake
11400 NE 132nd St Kirkland, WA
1/26/16 $74,211,000
$257,675
$318
288
1984
4.60% Starwood Capital Group
Equity Residential
Seattle & Portland 2016 Investment Overview 53
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
The Lodge at Peasley Canyon
32200 Military Rd S Federal Way, WA
9/21/16 $70,172,000
$206,997
$212
339
2004
5.00% Avanath Affordable Housing
UBS Realty Advisors
Bella Terra
12101 Greenhaven Mukilteo, WA
2/22/16 $70,000,000
$297,872
$283
235
2002
5.00% Starwood Capital Group
Equity Residential
MileHouse
8300 160th Ave NE Redmond, WA
11/9/16 $69,300,000
$385,806
$469
177
2016
4.40% UDR
Legacy Partners
Arcadia Townhomes
1300 SW Campus Drive Federal Way, WA
11/18/16 $68,500,000
$221,683
$181
309
1990
4.95% Priderock Capital Partners
TruAmerica Multifamily
On the Green at Harbour Pointe
12303 Harbour Pointe Blvd Mukilteo, WA
6/9/16 $65,250,000
$221,939
$239
294
1990
5.40% Intercontinental Real Estate
Security Properties
Solara
12716 Lake City Way NE Seattle, WA
12/19/16 $65,200,000
$267,347
$354
238
2002
4.70% Sares Regis Group
Simpson Housing
Olin Fields
10115 Holly Dr Everett, WA
11/1/16 $64,700,000
$183,807
$191
352
1989
5.80% Standard Property
Lowe Enterprises
The Reserve
125 SW Campus Dr Federal Way, WA
9/27/16 $63,800,000
$159,102
$179
401
1989
5.30% ConAm
Kennedy Wilson
Village at Seeley Lake
9501 59th Ave SW Lakewood, WA
10/5/16 $62,600,000
$119,923
$134
522
1989
5.80% Blackstone
Bridge Investment Group Partners
54
Seattle multifamily sales ($10M+)Property Closing Date Sale Price
$ Per Unit$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Grammercy
17425 120th Ln SE Renton, WA
6/30/16 $61,250,000
$160,340
$185
382
1985
5.00% Fairfield Residential
Fowler Property Acquisitions
Reunion at Redmond Ridge
11315 Trilogy Pkwy NE Redmond, WA
1/26/16 $60,496,000
$188,460
$195
321
2008
5.10% Starwood Capital Group
Equity Residential
Waters Edge
6305 S 238th Pl Kent, WA
11/30/16 $56,600,000
$186,184
$212
304
1987
5.00% Jackson Square Properties
Security Properties
Surprise Lake Village
2800 Queens Way Milton, WA
10/5/16 $55,300,000
$163,609
$177
338
1986
5.70% Blackstone
Bridge Investment Group Partners
Rivet
1201 Mercer St Seattle, WA
7/27/16 $55,000,000
$419,847
$640
131
2014
4.20% Capital Valley
Holland Partner Group
Heronfield Apartments
11105 NE 123rd Ln Kirkland, WA
1/26/16 $53,182,000
$263,277
$280
202
1990
5.00% Starwood Capital Group
Equity Residential
Chandler’s Bay
1020 Central Ave N Kent, WA
10/5/16 $52,550,000
$179,352
$187
293
1989
5.50% Blackstone
Bridge Investment Group Partners
Mosaic Hills
10811 SE 239th St Kent, WA
8/9/16 $51,575,000
$140,915
$169
366
1980
5.60% MG Properties
PASSCO Real Estate
Alturas @ Burien
13608 12th Ave SW Burien, WA
1/29/16 $51,450,000
$94,751
$131
543
1948
7.50% Fowler Property Acquisitions
Laramar Group
Seattle & Portland 2016 Investment Overview 55
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Ballard Public Lofts
6450 24th Ave NW Seattle, WA
12/21/16 $47,500,000
$445,773
$519
99
2015
4.80% TA Associates
William Parks
East Howe Steps
1923 Eastlake Ave E Seattle, WA
11/21/16 $47,500,000
$476,455
$793
96
2016
3.30% Bender Development
Daly Partners
Northpoint at Creekside
5601 N 37th St Tacoma, WA
10/19/16 $47,200,000
$117,413
$159
402
1985
6.50% Goodman Real Estate
Hamilton Zanze
Alara at Harbour Pointe
4500 Harbour Pointe Blvd Mukilteo, WA
2/29/16 $46,500,000
$202,174
$271
230
1998
5.10% Kennedy Wilson
American Realty Advisors
Landing at Dash Point
31004 19th Pl SW Federal Way, WA
1/27/16 $46,000,000
$118,557
$153
388
1976
5.60% Fowler Property Acquisitions
Bridge Investment Group Partners
Soren
5711 24th Ave NW Seattle, WA
8/1/16 $45,553,000
$385,630
$564
111
2015
4.40% PrivatePortfolio Group
Pryde Johnson
Waterford
2020 Lake Heights Dr Everett, WA
10/12/16 $43,200,000
$216,000
$247
200
1989
4.90% Investment Property Group
Carmel Partners
North Creek
11401 3rd Ave SE Everett, WA
7/21/16 $42,000,000
$159,091
$185
264
1986
5.30% Priderock Capital Partners
Lowe Enterprises
Retreat at Maple Hill
1901 SW 320th St Federal Way, WA
10/26/16 $42,000,000
$140,000
$160
300
1981
5.10% Fairfield Residential
Hamilton Zanze
56
Seattle multifamily sales ($10M+)Property Closing Date Sale Price
$ Per Unit$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Venue
4455 NE 12th St Renton, WA
6/7/16 $41,500,000
$146,127
$205
284
1973
5.75% New Standard Equities
Fowler Property Acquisitions
Artesia by the Lake
11225 19th Ave SE Everett, WA
12/15/16 $40,500,000
$210,938
$230
192
1990
4.70% Rise Properties
Fairfield Residential
Capri
324 Central Way Kirkland, WA
8/3/16 $40,200,000
$497,863
$59
73
2016
4.20% Calfox Real Estate Investment
Continental Properties
Cue
1525 Harvard Ave Seattle, WA
8/12/16 $39,633,000
$394,513
$654
90
2015
4.25% TIAA
Denny Onslow
Pacifica
4275 S Pine St Tacoma, WA
1/29/16 $36,250,000
$204,802
$231
177
2013
5.50% Green Leaf Partners
Rush Companies
Canterbury
13118 Meridian Ave E Puyallup, WA
11/17/16 $36,100,000
$200,556
$202
180
1995
4.90% Investment Property Group
Ray & Deanna Dally
Alderra
13507 E 99th Ave Puyallup, WA
9/8/16 $35,300,000
$176,500
$166
200
2003
5.25% Actus Capital Partners
AllianceBernstein
Anthem on 12th
103 12th Ave Seattle, WA
9/6/16 $34,700,000
$274,740
$439
120
2015
5.00% CWS Capital Partners
Spectrum Development Solution
Sunset View
2101 SW Sunset Blvd Renton, WA
11/30/16 $33,600,000
$140,000
$128
240
1970
6.20% Legacy Group Captial
Investors Management Group
Seattle & Portland 2016 Investment Overview 57
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Hamptons
2541 Meridian St Puyallup, WA
10/5/16 $33,300,000
$144,783
$168
230
1990
5.60% Blackstone
Bridge Investment Group Partners
Clock Tower Village
1584 McNeil St DuPont, WA
2/19/16 $33,000,000
$175,532
$168
188
2001
5.40% Security Properties
Carino and Associates
Creekside Village
1600 Sequalitchew Dr Dupont, WA
2/10/16 $33,000,000
$206,250
$204
160
2013
5.20% Daryl Connell
Walt Miles & Eric Cederstrand
The Park at Northgate
10735 Roosevelt Way NE Seattle, WA
8/5/16 $33,000,000
$226,027
$271
146
1967
4.90% Wallace Properties
MG Properties Group
Green Leaf at Lakewood
5406 82nd SW Tacoma, WA
8/31/16 $32,950,000
$142,641
$157
231
1990
5.30% Green Leaf Partners
Thayer Manca
Bradley Park
2323 7th St SE Puyallup, WA
10/5/16 $31,000,000
$200,000
$176
155
2000
5.60% Blackstone
Bridge Investment Group Partners
Altitude
1620 Benson Rd S Renton, WA
12/6/16 $30,300,000
$261,207
$278
116
2015
4.90% FSC Realty
Christopher Koruga
Cornelius
306 Blanchard St Seattle, WA
3/16/16 $29,650,000
$216,423
$476
137
1926
5.00% Pillar Communities
MG Properties Group
Vue 25
2368 Yakima Ave Tacoma, WA
2/5/16 $28,650,000
$175,767
$248
163
2012
4.90% ColRich
CenterSquare Investment Management
58
Seattle multifamily sales ($10M+)Property Closing Date Sale Price
$ Per Unit$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Cambridge
4727 200th St SW Lynnwood, WA
1/22/16 $27,000,000
$160,714
$172
168
1969
5.00% Grosvenor
PASSCO Real Estate
The Q
1321 Queen Anne Ave N Seattle, WA
12/30/16 $26,550,000
$305,172
$433
87
1950
5.10% Acme Realty
Acacia Capital
Packard Building
1520 12th Ave Seattle, WA
2/29/16 $25,866,000
$321,344
$365
61
2010
5.00% Equity Residential
Ederer Investment Company
Pacific Pointe
2108 N Pacific St Seattle, WA
6/6/16 $24,050,000
$340,197
$278
49
2000
5.00% Triad Investments Co Inc.
Lani, Robert and Michael Cochran
Sage
1730 112th St SW Everett, WA
2/22/16 $22,000,000
$178,862
$211
123
2002
5.00% Starwood Capital Group
Equity Residential
Chesnut Hills
209 21st Ave SW Puyallup, WA
10/5/16 $21,800,000
$138,854
$153
157
1991
5.60% Blackstone
Bridge Investment Group Partners
Trillium
4902 148th St SW Edmonds, WA
8/1/16 $21,800,000
$242,222
$296
90
2015
4.80% Pacific Development Partners
Goodman Real Estate
Martine
13850 NE 8th St Bellevue, WA
1/26/16 $21,247,000
$317,126
$342
67
1984
4.70% Starwood Capital Group
Equity Residential
Union 18
1140 18th Ave Seattle, WA
9/14/16 $20,800,000
$364,912
$454
57
1969
5.30% Pacific Development Partners
Goodman Real Estate
Seattle & Portland 2016 Investment Overview 59
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Gilman Terrace
2572 Gilman Dr W Seattle, WA
5/31/16 $20,155,000
$280,609
$324
65
1989
5.00% Tim McHugh
Gilman Terrace Holdings LLC
80 Main
80 S Main St Seattle, WA
11/22/16 $20,100,000
$446,667
$696
45
2016
4.10% Borracchini Family
Goodman Real Estate
Court 17
1717 Market St Tacoma, WA
7/29/16 $20,000,000
$156,250
$223
128
2007
5.80% The University of Washington
Lorig Associates
Orchard Ridge
3805 164th St SW Lynnwood, WA
2/22/16 $20,000,000
$192,308
$232
104
1989
4.90% Starwood Capital Group
Equity Residential
Highland Village
14510 NE 7th St Bellevue, WA
8/31/16 $19,400,000
$255,263
$257
76
1975
3.90% King County Housing Authority
Intracorp
Brightwater
31224 20th Ave S Federal Way, WA
11/7/16 $18,800,000
$138,235
$142
136
1989
5.40% FSC Realty
Daniel Lim
Whitworth
1619 E John St Seattle, WA
7/22/16 $18,230,000
$337,593
$452
54
1927
4.20% Peter Goldman
Cadence Capital LLC
Serene Village
14014 Admiralty Way Lynnwood, WA
7/21/16 $17,925,000
$148,140
$185
121
1987
5.50% Williams Investments
Pacific Coast Capital Partners / Fowler Property Acquisitions
The Summit
733 Summit Ave E Seattle, WA
12/30/16 $17,000,000
$326,923
$538
52
194
4.60% Acme Realty
Acacia Capital
60
Seattle multifamily sales ($10M+)Property Closing Date Sale Price
$ Per Unit$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Rainier Meadows
29225 Military Rd S Federal Way, WA
4/20/16 $16,921,000
$126,276
$159
134
1988
5.70% Thayer Manca
Residential Investco
Crystal Pointe
35434 25th Ave SW Federal Way, WA
10/6/16 $15,900,000
$151,429
$153
105
1991
5.20% CIM Group
Pacific Coast Capital Partners
Shoreside Village
701 75th St SE Everett, WA
12/20/16 $15,400,000
$129,412
$164
119
1968
7.00% Williams Investments
Tae-Kae Kai
Heather Ridge
20407 68th Ave W Lynnwood, WA
9/7/16 $15,350,000
$143,458
$170
107
1969
6.60% Hsiao Lin & Yu Lo Sun
Apex Properties Group
Madison Gate
2501 E Madison St Seattle, WA
11/30/16 $14,475,000
$361,875
$434
40
1990
4.60% Ron Danz / Morris Groberman / Andrew Person
Munehiro Tanaka
Studio 7
4029 7th Ave NE Seattle, WA
6/30/16 $14,450,000
$192,667
$636
75
2015
4.75% Eric Anderson
Triad Development
Wilshire Cove
19800 50th Ave W Lynnwood, WA
2/9/16 $14,300,000
$121,186
$138
118
1968
5.60% DH&G
Williams Investments
Meridian Glen
12115 Meridian Ave S Everett, WA
12/5/16 $14,100,000
$163,953
$192
86
1990
4.90% Priderock Capital Partners
Randolph Street Realty Capital
Yardhouse
1406 E Republican St Seattle, WA
2/1/16 $13,897,500
$397,071
$762
35
2014
4.00% Jerry Costacos
Revolve Development
Seattle & Portland 2016 Investment Overview 61
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Crystal Bay
1605 S 235th Pl Des Moines, WA
1/29/16 $13,730,000
$122,589
$176
112
1976
5.70% Auctus Capital Partner
Pacific Living Properties
Arterra
711 W Casino Rd Everett, WA
1/11/16 $13,350,000
$111,250
$143
120
1981
5.50% Jackson Square Properties
Holland Partners
Parkside Village
9612 SE 252nd St Kent, WA
1/13/16 $13,350,000
$136,224
$180
98
1980
5.60% Weidner Investment Services
RedHill Realty Investments
Aros & Voss
2251 NW 59th St Seattle, WA
1/29/16 $12,975,000
$341,447
$416
38
1977
4.50% Suhrco Residential Properties
Coast Equity Partner
Portofino
3815 Woodland Park Ave N Seattle, WA
4/15/16 $12,450,000
$355,889
$507
32
2009
4.00% Peter Goldman
Gerry Pigotti
Springhaven Village
9210 S Hosmer St Tacoma, WA
4/29/16 $11,592,000
$92,000
$120
126
1986
6.25% Goodman Real Estate
Pacific Living Properties
Springfield
18414 108th Ave SE Renton, WA
4/29/16 $11,312,000
$176,750
$209
64
1986
4.80% Armand Tiberio
Thomas Propst
Chameleon
3031 NE 137th St Seattle, WA
7/26/16 $11,250,000
$165,441
$213
68
1965
5.30% Bob Cryan
SR Investment Group
Clover Lake Park
4828 123rd St Sw Lakewood, WA
11/10/16 $11,000,000
$76,389
$104
144
1975
5.80% Fowler Property Acquisitions
Charles Diesing
62
Seattle multifamily sales ($10M+)Property Closing Date Sale Price
$ Per Unit$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Emerald Park
5700 23rd St E Fife, WA
11/10/16 $11,000,000
$88,000
$121
125
1981
5.30% Fowler Property Acquisitions
Charles Diesing
The Park
1205 Queen Anne Ave N Seattle, WA
12/30/16 $10,700,000
$314,706
$449
34
1948
4.50% Colin Hagstrom / Curran Hagstrom / Giovanni Napoli / Ryan Dinius
Acacia Capital
Waverly Farms
9314 S Ash St Tacoma, WA
4/29/16 $10,672,000
$92,000
$124
116
1982
5.90% Goodman Real Estate
Pacific Living Properties
Lynnview
5825 200th St SW Lynnwood, WA
12/15/16 $10,500,000
$172,131
$217
61
1968
5.10% Madison Residential
Williams Investments
Northgate Manor
818 NE 106th St Seattle, WA
9/29/16 $10,500,000
$187,500
$298
56
1978
4.80% Paul & Krista Lin
Jennifer Murphy
Queen Anne Flats
521 2nd Ave W Seattle, WA
7/22/16 $10,500,000
$318,182
$589
33
2015
3.80% Ken Williams
Isola Homes
Forest Park Estates
4632 Fowler Ct Everett, WA
10/27/16 $10,350,000
$96,729
$117
107
1949
5.30% Meter at 4632 Fowler LLC
Johnson Investment Company (Receiver)
Sheridan Beach Terrace
15530 Bothell Way NE Seattle, WA
4/8/16 $10,270,000
$201,373
$211
51
1965
5.40% Steven Lazoff / Jeremy Gustavel / Kurt Fisher
Dr. Anastasia Deliganis
Stonecreek
25124 97th Pl S Kent, WA
1/12/16 $10,000,000
$142,857
$168
70
1988
5.60% RedHill Realty Investment
Weidner Investment Services
PORTLAND
OfficeIndustrialRetailMultifamily
Portland
Title right
66
Seattle & Portland 2016 Investment Overview 67
2016 Portland office sales ($10M+) overview
Strong sales volume in the CBD pushes total to new cycle high
The number of sales in the metro climbed to 27 transactions above $10 million in 2016, totaling over $1.15 billion with an average price per square foot of $255, a 6.8 percent increase over the $1.1 billion recorded in 2015. Of the $1.15 billion, $822 million or 71 percent were assets located in the CBD (Institutional ownership has increased over 50 percent since 2005, with many investors viewing Portland as the leading transitional market that bridges the gap between traditional primary markets and secondary markets.)
The end of year sale of Pacwest center from GEPT/Ashforth to LPC Realty Advisors for $170 million was the largest sale of the year and traded at a price per square foot of $312. The 29-year-old building was only 76 percent leased at the time of sale and new owners have pledged significant investment to upgrade the building’s lobby and common areas. The sale marks one of two Portland trophy assets that traded hands in 2016, the other being the sale of Pioneer Tower from General Growth Properties to LaSalle for $121.75 million. Pioneer Tower set the year’s highwater mark at $411 per square foot and registered the lowest ever cap rate for a core CBD Class A building at 4.8 percent, signaling that investors are placing more value on Portland’s core assets and expecting more rent growth. The nod to Portland as a credible alternative to primary markets has been characterized by sharply declining cap rates in recent years, with 2016 reaching a new low; averaging 5.2 percent for core assets in the CBD.
Much of the new ownership has pledged significant investment in renovations and upgrades in an effort to modernize their newly acquired assets and fetch higher rents. Buildings such as KOIN Tower and Sixth at Yamhill underwent significant renovations in 2016 and recent acquisitions such as Pacwest, CDK Plaza, Power & Light Building and Macy’s will all be undergoing significant renovations to their lobbies and common areas in an effort to attract creative tenants.
The sale of the Evergreen Corporate Center was the most significant suburban sale of the year, trading for $45.5 million in the second quarter. The sale consisted of four buildings totaling 266,000 square feet. Following closely was the sale of South Center and the Tanasbourne Commerce Center for $44.25 million and $31.1 million respectively. These high profile suburban trades show that suburban assets are proving attractive to large institutional investors.
Office sales should remain brisk through 2017, with a number of high profile properties on the market spilling over from 2016 and institutional owners continuing to look for value and quality in less volatile markets such as Portland. Buildings set to undergo renovations in the market are evaluating their options. These investments will continue to drive rent growth in the CBD.
INSTITUTIONAL OWNERSHIP HAS INCREASED...WITH MANY INVESTORS VIEWING PORTLAND AS THE LEADING TRANSITIONAL MARKET...
68
Record development pushes market vacancy and rents up
Demand for office space remains strong, with 634,140 square feet being absorbed in 2016. Class A absorption in the CBD experienced its best yearly performance since 2000, with 321,062 square feet absorbed in 2016. A large part of the positive absorption was due to leases commencing in newly delivered buildings, indicating that tenants are increasingly taking advantage of all the quality space being brought to the market. The rest of the close-in urban submarkets also experienced strong absorption in 2016, with the Lloyd District and Close-In Eastside Class A buildings experiencing 172,652 square feet of positive absorption between the two submarkets.
For the first time in six years, supply has outpaced demand; with 1,176,643 square feet delivered in 2016 and a further 1,434,651 square feet currently under construction. After a five year construction hiatus due to the 2008 recession, the eventual delivery of Park Avenue West was the largest addition to Portland’s skyline in six years at 220,889 square feet. Together with Pearl West and 1320 Broadway, the three largest speculative developments above 100,000 square feet all delivered around 90 percent leased. Other notable deliveries included the new headquarters of Banfield Pet Hospital in Vancouver, Ankrom Moison in Block 8L and Simple in Clay Creative, which added 206,000, 91,000 and 72,000 square feet respectively. The trend of the urban core spreading out of the CBD accelerated in 2016 with new projects such as Field Office, Leland James Center and other mid-sized developments on the East Side breaking ground. Of the 1.4 million square feet currently under construction, 98.8 percent are located within the urban core. Massive developments such as Zidell Yards and further expansion into the North Waterfront and Slabtown micromarkets are also planned in the near future and will further contribute to the densification of close-in urban submarkets.
Portland has had a sub 10 percent office vacancy for the past three years, and continues to be one of the top five tightest markets in the nation, evidenced by over 85.9 percent of new deliveries in 2016 being leased at delivery. New construction rates are shattering previous records, with rents routinely being quoted above $40.00 per square foot and some as high as $46.00. This newer, higher quality product is pushing rents up significantly in the metro area, which are up 13.0 percent year-on-year, to $27.56 full service, predominantly led by CBD Class A buildings, now averaging $33.48.
While the information and technology sector continues to be the largest group of tenants looking for space in the metro area, the dominance in leasing activity is waning and being replaced by more traditional tenants looking for space in creative buildings. Demand for creative space is increasing among these non-creative companies, producing an environment where Class B and C office rents are escalating rapidly. A landscape has been formed where creative Class B office space, in specific buildings, can bring in higher rents than traditional office space in Class A buildings.
Driven by the high price of new construction, expect rental rates to continue their ascent as properties deliver to the market. Vacancy will likely bump up slightly when deliveries hit the market, but is not expected to rise beyond 10 percent for the metro area, with the CBD likely seeing vacancy modestly higher. Institutional investment in the market will continue to drive the trend of re-positioning buildings; particularly for Class A buildings with vacant space, as new owners try to capture creative demand. This will further push rental rate growth in the market.
Portland office leasing
Seattle & Portland 2016 Investment Overview 69
Portland office sales & statistics
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF
Central City 26,050,183 8.6% $31.23 250,951
Eastside 6,495,729 9.8% $24.79 31,929
Westside 20,741,646 10.6% $26.29 26,284
Vancouver Suburbs 6,537,183 8.3% $20.85 324,976
2016 Total Market 59,824,741 9.4% $27.56 634,140
2015 Total Market 58,699,534 8.9% $24.59 783,626
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of Sales 28 9 5 5 5 9 14 18 21 27
Price/SF Highest $442 $271 $159 $197 $356 $443 $399 $460 $496 $497
CAP Rate Average 6.7% 7.1% 7.6% 8.4% 7.4% 8.3% 7.3% 7.2% 5.6% 5.8%
Sales Volume $1.8B $518M $180M $200M $282M $247M $437M $638M $1.1B $1.15B
Office market statistics
Sales matrix (over $10 million)
70
Portland office sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Pacwest Center
1211 SW 5th Ave Portland, OR
12/21/16 545,000
1988
$170,000,000
$312
N/A LPC Realty Advisors
GEPT/Ashforth Company
• 76% leased at time of sale
• 413 parking stalls
• Bought for repositioning. Lobby and common areas to be renovated
• Major tenants: Schwabe, Williamson & Wyatt, Merrill Lynch and Key Bank
Pioneer Tower
Portland, OR 888 SW 5th Ave
6/30/16 296,239
1990
$121,750,000
$411
4.80% LaSalle
GGP
• 95% leased at time of sale
• 188 Parking stalls
• Major tenants: Tonkin Torp, Geffen Mesher, Bullivant Houser Bailey
Park Square Campus
100 SW Market St Portland, OR
11/8/16 295,767
1969 / 2014
$94,350,000
$319
5.30% CBRE Global Investors
CalSTRS
• 2 property portfolio
• 97% leased at time of sale
• 212 parking stalls
• Major tenants: Regence, Oregon DoJ, Ecova
Public Service Building
920 SW 6th Ave Portland, OR
9/15/16 233,607
1927 / 1999
Master Lease
N/A
N/A Beacon Capital Partners
Downtown Development Group
• Off market transaction
• Beacon took ownership of master lease
• 95% leased at time of sale
• Parking ratio: 2/1,000
• Major tenant vacating in 2017
USPS
715 NW Hoyt Street Portland, OR
8/2/16 402,936
1962
$88,000,000
$218
N/A Portland Development Commission
USPS
• Site will be redeveloped as part of Broadway Corridor Master Plan
• Purchased for land value
• USPS (single tenant – will relocate to new development in NE Columbia Corridor)
Seattle & Portland 2016 Investment Overview 71
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap Rate
BuyerSeller
Comments
Commonwealth Building
421 SW 6th Ave Portland, OR
6/16/16 218,499
1948 / 2015
$69,000,000
$316
5.50% KBS Realty Advisors
Unico Properties
• 94% leased at time of sale
Macy’s Building
621 SW 5th Ave Portland, OR
11/22/16 195,470
1908
$54,150,000
$277
N/A KBS Realty Advisors
Macy’s Department Stores
• Redevelopment from retail to creative office
• Macy’s will exit the building in Q1 2017
Evergreen Corporate Center
20500-20540 NW Evergreen Pky Portland, OR
6/16/16 266,000
1997
$45,500,000
$171
6.20% Griffin Capital
Washington Real Estate Holdings
• 100% leased at time of sale
• Rent will increase dramatically in 1.5 years
• Major tenants: Nike
South Center I-IV
7565-7995 SW Mohawk St Portland, OR
4/14/16 342,316
1991
$44,250,000
$129
7.20% Westport Capital
UBS Realty Investors
• 83% leased at time of sale
• 10 buildings
• Proforma cap rate: 7.7%
RiverEast Center
1515 SE Water Ave Portland, OR
3/16/16 99,860
1952/2006
$33,500,000
$335
4.50% ASB Real Estate Investments
RiversEast LLC
• 100% leased at time of sale
• In place rents estimated 50% below market
• 176 parking stalls
• Major tenants: Mackenzie, Viewpoint Construction Software
CDK Plaza
2525 SW 1st Ave Portland, OR
12/8/16 185,729
1981 / 1991
$33,400,000
$180
N/A Bixby Land Co.
KBS REIT
• 2 building campus and plaza
• 99% leased at time of sale
• Major lobby and plaza renovations to take place totaling $7.5m
• Major tenant: CDK Global (will vacate 20,000 SF in Q1 2017)
Fremont Place I & II
1750 NW Naito Pkwy Portland, OR
7/29/16 121,506
1987
$31,500,000
$259
5.70% Lincoln
TA Realty
• 88% leased at time of sale
• 385 parking stalls
• Major tenants: Harris Group, Legacy Health
72
Portland office sales ($10M+)
72
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap Rate
BuyerSeller
Comments
Tanasbourne Commerce Center
3188 NW Aloclek Hillsboro, OR
3/1/16 183,907
1986 / 2001
$31,100,000
$169
7.10% Westport Capital Partners
Meriwether Partners
• 4 buildings
• 100% leased at time of sale
• 804 parking stalls
• Major tenants: Nike, Kaiser Permanente, Norm Thompson, Grass Valley
Hanna Andersson Building
541 NE 20th Ave Portland, OR
3/16/16 119,948
1930 / 2015
$31,000,000
$259
6.10% Mapleton Investments
ScanlanKemperBard
• 92% leased at time of sale
• 195 parking stalls
• Renovated in 2015
• Major tenant: Hanna Andersson
The Round
4145 SW Watson Beaverton, OR
2/25/16 146,028
2003
$29,325,000
$201
7.30% SKB/Independencia
SKB
• 2 buildings and parking garage
• 99% leased at time of sale
• Parking stalls: 665 stalls
• Major tenants: 24 Hour Fitness, Exterro
Rock Creek Corporate Center
3400 NW John Olsen Pl Hillsboro, OR
1/15/16 142,661
1999
$23,000,000
$161
N/A Lone Star Funds
Blackstone
• Part of 17 building portfolio sale – price is allocation
• 84% leased at time of sale
• 4/1000 Parking
• Major tenants: Fiserv, GE Healthcare
Sunset Corporate Park
22867 NW Bennett St Hillsboro, OR
1/15/16 133,221
1998
$22,000,000
$165
N/A Lone Star Funds
Blackstone
• Part of 17 building portfolio sale – price is allocation
• 79% leased at time of sale
• 160 parking stalls (4/1000 Parking)
• Major tenant: Volkswagen
Board of Trade
306-310 SW 4th Ave Portland, OR
9/30/16 88,797
1908
$18,000,000
$203
N/A Kensington Management
New Urban Properties
• 65% leased at time of sale
• No parking
• WALT less than 1 year, most tenants on month-to-month
Seattle & Portland 2016 Investment Overview 73
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap Rate
BuyerSeller
Comments
NW Center For Orthopedics & Rehabilitation
1515 NW 18th Ave Portland, OR
8/5/16 33,290
2005
$16,530,573
$497
6.10% Olympus Ventures
Acorn NW Real Estate Fund
• 100% leased at time of sale
• Office/medical use building
• Major tenants: Pettygrove Physical Therapy & Sports Rehabilitation, Northwest ASC, The Orthopedic and Sports Medicine Center of Oregon
ODS Plaza
10505 SE 17th Ave Milwaukie, OR
5/16/16 50,800
2001
$15,231,835
$300
7.30% Columbia Investments
Oregon Dental Service
• 100% leased at time of sale
• Possible lease-back
• 150 Parking stalls
• Major tenant: ODS
1500 Plaza
1500 NE Irving St Portland, OR
12/2/16 72,572
1964 / 2013
$14,575,000
$201
7.30% Second City
Swift
• 95% leased at time of sale
• 158 stalls (2.3/1,000)
Ballou & Wright Building
1010 NW Flanders St Portland, OR
1/8/16 55,500
1992 / 1997
$14,000,000
$252
N/A ASB Real Estate Investments/Specht
Evan Denhart
• 8% leased at time of sale
• Will be redeveloped into creative office
811 @ Waterfront
811 SW Naito Pkwy Portland, OR
2/4/16 49,222
1982
$12,600,000
$256
5.00% Roscoe Nelson
Swift Realty Partners
• Off market transaction
• 91% leased at time of sale
• 45 parking stalls
• Major tenants: Ensequence, Marquam Group, CompanionLink Software
Sharp Electronic Building
5750 NW Pacific Rim Camas, WA
6/29/16 55,000
1990
$12,500,000
$227
N/A Camas School District
Sharp Electronics Corp
• 0% leased at time of sale
• Owner-user purchase
• Includes 30 acres of land for future development
74
Portland office sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Swift Portfolio
Merchant Hotel Building Captain Couch’s Square Norton House Bldg
Portland, OR
12/29/15 90,810
1875 / 1994
$12,188,000
$134.21
$6,110,267
$3,290,448
$2,787,284
5.30% Swift Real Estate Partners
Fountain Village Development Co
• 3 historic buildings
• 95% leased at time of sale
• Will be redeveloped to creative
• Renovated in 1990, 1998, 1998
Onder Portfolio
915 SW 2nd Ave Portland, OR
3/10/16 56,815
1892
$12,125,000
$213
N/A Onder Development
House Of Gold
• 3 building sale consisting of office and retail buildings
• Property will be redeveloped into Hotel tower and office building - land value
Lovejoy Medical Building
2525 NW Lovejoy St Portland, OR
6/30/16 40,000
1965
$10,000,000
$250
3.00% Killian Pacific
Ifits Equity
• 83% leased at time of sale
• Office/medical use building
• 1031 exchange
• Major tenant: Retina Northwest
Seattle & Portland 2016 Investment Overview 75
OfficeIndustrialRetailMultifamily
Portland
78
2016 Portland industrial sales ($10M+) overview
Sales velocity accelerates as institutional investors take advantage of strong tenant demand
The absence of large multimarket portfolio sales that included multiple Portland properties left 2016 industrial sales down 24 percent from 2015’s all-time high of $615 million, to $467 million. However, this is the second highest total on record and interest in Portland assets remains high with the number of deals above $10 million increasing to 16, double 2015’s velocity. Sales continue to be focused in the NE Columbia Corridor with 40 percent of sales concentrated in that submarket. Deliveries of new product remain strong and delivered 83 percent leased in 2016, 20 percent higher than 2015 and higher than any year on record.
Increased demand and competition for Portland industrial assets continues to compress cap rates with the average cap rate dropping from 2015 to 6.1 percent. With record low vacancy and surging rents, investors who own quality assets are reluctant to sell and the lack of Class A sales was noticeable, with only four Class A buildings sold in 2016 at an average cap rate of 5.3 percent. One of those sales was Rivergate Logistics Center from Principal Real Estate Investors to Dermody Properties at a cap rate of 4.7 percent, the lowest in 2016. The building was also the largest individual building sold at 527,934 square feet. Developers are also taking advantage of Portland’s hot industrial market. The newly built PDX Logistics Center, Buildings 1, 2 and 3, sold to Clarion Partners for a total of $82.8 million or $98 per square foot, with a cap rate of 5.7 percent for Buildings 1 and 2 and 5.4 percent for Building 3. The project was fully leased before delivery and had weighted average lease terms of 8.9 and 6.4 years respectively.
The crowding out of local investors and owner/users by institutional investors continued in 2016 with only one transaction above $10 million going to an owner/user and just two transactions by regional investors. By far the largest sale of the year occurred late in fourth quarter when the Commerce Parks Portfolio sold to Lincoln Property Company for $112.3 million at a cap rate of 6.0 percent. The portfolio consisted of five commerce parks totaling 1.4 million square feet and almost 70 acres of land.
Flex sales activity in 2016 was subdued at $124 million and was largely dominated by sales of Nike-occupied buildings. Of the six flex transactions in 2016, three of them were Nike-occupied totaling 522,680 square feet. The largest sale of the year was the nine property portfolio of Beaverton Creek Business Park that sold to Artemis/Cruzan for $41.55 million at a cap rate of 4.8 percent. In addition to the nine properties that Specht sold to Artemis/Cruzan, two other buildings in the business park were sold by Specht to KM Paige Associates in a separate transaction for $9.5 million, bringing the total sales price of the Beaverton Creek Business Park to $51.05 million
Taking both industrial and flex sales into account, total sales for 2016 amounted to over $591 million. The number of sales above $10 million was the most ever seen and if multimarket portfolio sales are excluded, 2016 was another record year for industrial sales in Portland. A burgeoning population and economy are the catalysts for this growth and the metro is attracting larger and higher profile tenants that are snapping up any and all larger developments in the metro. As these users continue to move to Portland, sustained pressure on vacancy rates and increasing rents will continue and attract further interest from institutional investment.
2016 WAS ANOTHER RECORD YEAR FOR INDUSTRIAL SALES IN PORTLAND
Seattle & Portland 2016 Investment Overview 79
Portland industrial leasing
E-commerce propels strong 2016 and is expected to continue through 2017
As Portland’s population continues to balloon, large e-commerce and distribution companies have expanded into new locations to service their growing customer base. 2016 saw 19 leases above 100,000 square feet, among the most notable were Amazon and DB Schenker signing 303,360 and 137,920-square-foot leases in the Sunset Corridor’s latest development, the Majestic Brookwood Business Park, indicating that the population in Portland’s western suburbs has reached a critical mass as companies move to service their customers in the traditionally underserved west. On the Eastside, UPS and Cummins both signed and moved into 234,960 and 119,993 square feet respectively at PDX Logistic Center’s Building 3, with UPS signing for another 60,000 square feet at Rivergate Logistics Center as 2016 drew to a close.
The delivery of Subaru’s new 600,000-square-foot distribution center and Amazon’s 303,360-square-foot sortation center took the absorption total to 2,971,267 square feet for 2016. While absorption is down 31.5 percent from 2015, large expansions in the fourth quarter by Bunzl, USA Warehousing and Logistics and Aosom meant Portland saw a third year in a row where absorption was above the 10-year average of 2.2 million square feet. This sustained demand in the market drove vacancy down 40 basis points year-over-year to a record low of 3.4 percent and Portland experienced its largest 12-month rent increase on record during 2016, growing 18 percent to $0.59 per square foot. Asking rents for new construction are now firmly being quoted at $0.55 with office surcharges quoted up to $0.90 per square foot, on a triple-net basis.
Deliveries in 2016 were sizeable, with over 2.4 million square feet added to the Portland metro. While completed construction was down 520,000 square feet year-over-year, industrial development remains elevated with 2.5 million square feet under construction, of which 70 percent is speculative, a sign that developers remain bullish on Portland’s industrial future. Leasing at delivery for 2016 was 83 percent, over 20 percent higher than 2015. The metro’s largest developments such as PDX Logistics Center, Vista Logistics Park – Subaru Distribution Center, Majestic Brookwood Business Park and Clackamas Distribution Center were all 100 percent leased before they were completed. In addition to larger developments, Portland is experiencing a boom in small to medium size developments of infill sites closer to the urban core. These developments are targeted as regional distribution centers with high volumes, and these buildings are pushing rents up faster than any other period in Portland’s history.
Vacancy remains at a 25-year low, fueled by strong population and job growth in the metro area. Demand has exceeded supply for the last six years, further strengthening Portland’s industrial market fundamentals. Less desirable product on the market is benefitting from the new construction, pushing rents to new highs. While there is a decent amount of new supply expected to deliver in 2017, demand remains high and vacancy is expected to remain at record lows with rents continuing to push upwards.
PORTLAND IS EXPERIENCING A BOOM IN SMALL TO MEDIUM SIZE DEVELOPMENTS OF INFILL SITES CLOSER TO THE URBAN CORE
80
Portland industrial sales & statistics
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption (RSF)
Eastside 92,306,001 2.9% $0.65 2,117,090
Westside 62,545,056 4.0% $0.55 674,832
Clark County 16,385,710 3.4% $0.48 179,345
2016 Total Market 171,236,767 3.4% $0.59 2,971,267
2015 Total Market 167,491,279 3.8% $0.50 4,339,260
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of Sales 17 5 1 1 2 5 5 15 11 22
Price/SF Highest $156 $112 $52 $59 $44 $63 $95 $133 $153 $231
CAP Rate Average 6.9% 7.0% 9.5% 9.2% N/A 7.4% 7.4% 7.1% 6.2% 6.1%
Sales Volume $377M $84M $40M $28M $32M $173M $103M $320M $732M $591M
Industrial market statistics
Sales matrix (over $10 million)
Seattle & Portland 2016 Investment Overview 81
Portland industrial sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Commerce Park & Park I-84 Portfolio
12475 SE Johnson Rd Portland, OR
12/9/16 1,392,407
1959-1993
$112,315,000
$81
6.00% Lincoln Property Group
Washington Real Estate Holdings
• Five property portfolio
• 69.7 Acres
Wilsonville Business Center
27350-27695 SW 95th Ave 9025 SW Hillman Ct 9720-9750 SW Hillman Ct Wilsonville, OR
7/1/16 530,068
1988-1992
$51,400,000
$97
5.80% LBA Realty
BIT/PNC
• Nine building portfolio
• 90% leased at time of sale
• 21% office
• Major tenants: Owens & Minor, Laminations
PDX Logistics Center (2 buildings)
9255-9555 NE Alderwood Rd Portland, OR
3/18/16 491,200
2014
$46,600,000
$95
5.70% Clarion Partners and LIT-Acquisitions
Capstone Partners/PCCP
• 100% leased at time of sale
• Major Tenant: KeHE
Wilsonville Logistics Center
27255 SW 95th Ave Wilsonville, OR
10/4/16 508,277
1986 / 1989
$43,100,000
$85
5.90% Lexington Realty Trust
CBRE Global Investors
• 100% leased at time of sale
• Major tenant: Pacific Foods (single user)
Beaverton Creek Business Park
2901-3203 SW 153rd Ter 3005 SW 154th Ter
15345-15385 SW Beaverton Creek Ct
15450 SW Milikan Way Beaverton, OR
9/15/16 311,000
1989-1997
$41,550,000
$133
4.80% Artemis / Cruzan
Specht/ASB
• Nine property portfolio
• 100% leased at time of sale
• Major tenant: Nike
• Flex property
• Under market rents
Beaverton Creek Business Park
15550-15560 SW Millikan Way Beaverton, OR
8/29/16 68,713
1997
$9,500,000
$138
4.80% KM Paige Associates
Specht/ASB
• Two property portfolio
• 100% leased at time of sale
• Major tenant: Nike
• Flex property
• Under-market rents
82
Portland industrial sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
PDX Logistics Center - Phase II – Bldg 3
9601 NE Alderwood Rd Portland, OR
10/31/16 355,200
2016
$36,200,000
$102
5.40% Clarion Partners
Capstone Partners/PCCP
• 100% leased
• Major tenants: UPS, Cummins
Rivergate Logistics Center
8929 N Ramsey Blvd Portland, OR
5/4/16 527,934
1999
$36,000,000
$68
4.70% Dermody Properties
Principal Real Estate Investors
• 82% leased at time of sale
• Property has significant lease roll in near term
• Major tenants: Ford, Terminal Transfer, Aaron Rents
SunTech Corporate Park & Tanasbourne Corporate Park I
3445 NW 211th Ter 20010 NW Tanasbourne Dr Hillsboro, OR
10/7/16 142,967
2001
$23,275,000
$163
7.50% Winkler
LBA Realty
• Two property portfolio
• 100% leased at time of sale
• Year 1 cap rate: 7.45%
• Major tenant: Nike
• Flex property
Halsey Business Center
18285-18557 NE Halsey St Portland, OR
3/17/16 423,300
1960 / 1983
$22,300,000
$53
7.10% DRA Advisors
STAG Industrial
• 100% leased at time of sale
• Major Tenant: Unisource Worldwide
Crosswhite Industrial Park
6461 SE Crosswhite Way Portland, OR
9/30/16 267,000
1980
$20,000,000
$75
7.50% Watumull Properties
Crosswhite Enterprises
• Off-market transaction
• 17 property portfolio
• 1031 exchange for buyer
• 100% leased at time of sale
• Major Tenant: Precision Castparts
Ronler Corporate Center
23235-23255 NW Evergreen Pky Portland, OR
5/4/16 159,701
2000-2001
$17,325,000
$108
N/A SWIFT
Broadreach Capital Partners
• 33% leased at time of sale
• Pro-forma Cap Rate listed at 8.5% (after stabilization)
• Flex property
Navistar Building
22638 NE Townsend Way Fairview, OR
9/22/16 210,000
2007
$17,200,000
$82
N/A RREEF Management
International Airport Centers
• Part of 19 property/35 building multimarket portfolio
• 100% leased at time of sale
• Major tenant: CTDI (single user)
Seattle & Portland 2016 Investment Overview 83
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap Rate
BuyerSeller
Comments
Twin Oaks Business Park
1800-1815 NW 169th Pl Beaverton, OR
9/29/16 162,543
1984-1988
$17,150,000
$103
7.00% PNW Properties
Graham Salisbury
• 10 Property portfolio
• Approximately 92% leased at time of sale
• Bought for renovation
Dawson Creek Corporate Park
5435-5445 NE Dawson Creek Dr Hillsboro, OR
9/23/16 126,180
1996
$15,350,000
$122
6.90% Thomas Garnier
Leavitt / Wolff Co.
• 2 Property portfolio
• 100% leased at time of sale
• Major tenants: Radisys Corp, Genentech
Southwest Industrial Park Bldg D – Lot 4
12085 SW Myslony St Tualatin, OR
1/31/16 145,136
2015
$14,520,000
$100
5.90% Lincoln Property Co.
Trammell Crow
• 100% leased at time of sale
• Major Tenant: Wineshipping.com
IMP Building
9600 SW Boeckman Rd Wilsonville, OR
9/28/16 157,038
978/1989
$12,000,000
$76
N/A DW Fritz
Inland Pacific Properties
• Owner-user
Sunrise Business Center
16277 SE 130th Ave Clackamas, OR
6/9/16 160,707
1981
$11,660,000
$73
7.70% Killian Pacific
BLT Enterprises & Majestic Asset Management
• 100% leased at time of sale
• 25% mezzanine office build out
• 1031 Exchange
• Development piece in site
• Major tenants: Labrix, Cornell Pump Company
Rockwood Corporate Center
19786 NE San Rafael St Portland, OR
2/12/16 131,037
2008
$11,250,000
$86
N/A Prologis
Allegro Corporation
• 100% leased at time of sale
• Off market transaction
• 1031 Exchange
• Sale-Leaseback
Hayden Island Business Park
2400-2723 N Hayden Island Dr Portland, OR
10/31/16 98,860
1981
$11,125,000
$113
6.40% Sixteen Segment
BKM Capital Partners
• 4 property portfolio
• 100% leased at time of sale
84
Portland industrial sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Cummins NW Building
4711 N Basin Ave Portland, OR
6/30/16 47,883
1985
$11,067,000
$231
5.90% Alta Home Properties
Swan Island Capital
• 100% leased at time of sale
• Possible 1031
• Major tenant: Cummins NW
E.J. Bartells Building
18977-19039 NE Portal Way Portland, OR
7/28/16 110,000
1999
$10,473,909
$95
5.50% Industrial Property Trust
Billings Development
• Two Property multimarket portfolio
• Portfolio cap rate 5.5%
• 100% leased at time of sale
• Major tenantt: EJ Bartels (single user)
Seattle & Portland 2016 Investment Overview 85
Seattle & Portland 2016 Investment Overview 87
Portland
OfficeIndustrialRetailMultifamily
88
2016 Portland retail sales ($10M+) overview
Investment sales decline as super-mall sales dry up
After 2015’s stellar retail sales performance, the lack of super regional mall sales weighed down sales in 2016, which fell 58 percent to $438 million. Investors are still finding value in small neighborhood centers as cap rates compressed further in 2016, averaging 5.8 percent. The largest deal of 2016 was the sale of Progress Ridge Town Square by Gramor Development to Donahue Schriber for $95.2 million at a price per square foot of $445. Gramor is focusing its efforts on their Vancouver waterfront development. The new development, which broke ground in 2016 on its first phase, reconnects 35 acres along the Columbia River to the city’s historic core and will include up to 3,300 housing units, 10 park acres, 1.25 million square feet of office space and 250,000 square feet of retail and hospitality space.
While Progress Ridge Town Square’s sale was the largest of the year, the most notable sale came from Macy’s 68 store closures. Macy’s owned the first 5 floors of the old Meier & Frank Building which total 195,470 square feet, the other 9 floors are occupied by The Nines Hotel owned by Pebblebrook Hotel Trust. Macy’s sold their portion of the building to KBS Realty Advisors for $54.15 million at $277 per square foot, and KBS plans to redevelop the building into creative office once Macy’s vacates in the spring of 2017. This shift in retail footprints is a national trend, not specific to Portland. Traditional department stores, mid-price specialty and apparel retailers are undergoing a radical shift in consumer demand. Shoppers are either flocking to discount department stores like Target and Walmart or luxury retailers. This is been especially hard on traditional department stores, which are also perceived as old-fashioned by millennial and generation Z shoppers. Some will be redeveloped with new tenants focused on experiences, like food and entertainment. Others will be redeveloped with more of a focus on discount shopping, attracting retailers that might have traditionally been in a Power Center, like discount department stores and grocers.
INVESTORS ARE STILL FINDING VALUE IN SMALL NEIGHBORHOOD CENTERS AS CAP RATES COMPRESSED FURTHER IN 2016, AVERAGING 5.8 PERCENT.
Seattle & Portland 2016 Investment Overview 89
Portland retail leasing
Portland retail fundamentals are strong
Portland’s economy remains a top performer nationally, spurring confidence in the metro’s retail sector. The metro maintains solid economic drivers; above-average population growth, job gains and household formation. These factors have resulted in strong demand and thus declining vacancy, but rent growth is still average. Moderate net operating income growth should not support outsized returns but Portland’s strong demographics make it one of the better opportunities in the region, and retail cap rates are the highest among the West Coast metros. However, the hardships afflicting large national department chains have not evaded Portland. Macy’s announced that it will close its downtown location in spring 2017 as part of a nationwide 68-store closure following a slowdown in sales. In 2015, Nordstrom vacated both its Lloyd Center and Vancouver Mall locations. Management attributed underperforming sales to the Lloyd Center’s lack of appeal to the typical Nordstrom shopper.
Demand in 2016 was strong with 773,961 square feet being absorbed, pushing Portland’s retail vacancy down to 3.9 percent, 40 basis points lower than in 2015 and significantly below the national average. 2017 won’t provide much relief, with just 431,573 square feet of retail space currently under construction and already 82.9 percent preleased. Over half of the current construction is general freestanding retail buildings with an average building size of 23,946
square feet, meaning minimal new options for larger stores. The largest project currently under construction is the 129,000 square foot expansion of Cedar Hills Crossing II in Beaverton. The addition is expected to deliver in the fourth quarter of 2017 with the bowling alley, Sunset Lanes, already signing a 44,446 square foot lease. Other large leases in the metro area include supermarket chain Fred Meyer moving into 143,000 square feet as the anchor tenant in the newly opened Happy Valley Crossroads shopping center in Clackamas/Milwaukie. Walmart also signed 48,000 square feet at Sequoia Village in the Sunset Corridor.
Big spending from a growing population contributes to strong demand. Population, employment growth and home price appreciation are well above the national average, meaning more residents with stable paychecks are purchasing goods and services in the metro area. Portland offers robust job prospects, and its reputation for high-quality yet relatively affordable living appeals to young families ready to settle down. Retail sales have been strong, but online sales could hurt demand for brick-and-mortar locations, especially in a metro that is increasingly tech-centric.
PORTLAND’S RETAIL VACANCY IS DOWN TO 3.9 PERCENT, 40 BASIS POINTS LOWER THAN IN 2015 AND SIGNIFICANTLY BELOW THE NATIONAL AVERAGE
90
Portland retail sales & statistics
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF
CBD 4,820,506 4.0% $19.14 26,404
Clark County 18,766,299 4.8% $18.42 306,058
I-5 Corridor 10,935,736 5.3% $21.50 (47,628)
Lloyd District 5,564,753 4.3% $21.92 11,903
Northeast 20,401,706 3.3% $17.12 126,192
Northwest 1,826,150 3.2% $22.40 (2,736)
Southeast 22,822,822 3.4% $16.76 263,300
Southwest 13,701,921 3.7% $18.60 (4,687)
Westside 9,637,155 3.2% $18.37 95,155
2016 Total Market 108,477,048 3.9% $18.23 773,961
2015 Total Market 107,318,284 4.60% $17.42 705,712
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Number of Sales 14 6 4 9 4 5 9 13 20 14
Price/SF Highest $633 $636 $173 $328 $209 $533 $405 $564 $643 $1,180
CAP Rate Average 6.5% 6.6% 8.5% 7.9% 9.7% 6.4% 7.4% 7.3% 6.6% 5.1%
Total sales volume ($ in millions) $383M $93M $89M $311M $70M $151M $677M $668M $1.0B $437M
Retail market statistics
Sales matrix (over $10 million)
Seattle & Portland 2016 Investment Overview 91
Portland retail sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Multi-Property Sale
Progress Ridge TownSquare
12345 SW Horizon Blvd Beaverton, OR
8/19/16 213,849
2011
$95,197,000
$445
5.20% Donahue Schriber Commercial Real Estate
Gramor Development
• 10 property portfolio
• 98% leased at time of sale
• Major tenants: New Seasons, Ace Hardware, Cinetopia, Umpqua
Gresham Station Shopping Center
1135 NW Civic Dr Gresham, OR
9/27/16 341,186
2000
$86,300,000
$253
N/A DDR
Westlake Realty Group
• 90% leased at time of sale
• Major tenants: Bed Bath & Beyond, Best Buy, Old Navy
Evergreen & Andresen Marketplace Portfolio
6711-6715 NE 63rd St 3307 NE 32nd St 3307 Evergreen Way Vancouver & Washougal, WA
4/22/16 184,610
1998-2000
$43,000,000
$233
6.70% Giustina Resources
Killian Pacific
• Eight property portfolio
• 90% leased at time of sale
• Cap rate for Andresen Marketplace was 5.6%
• Major tenants: Safeway, Rite-Aid
Multi-Property Sale
Timberland Shopping Center
12043 NW Barnes Rd Portland, OR
10/4/16 91,660
2015
$42,600,000
$465
5.20% LaSalle Investment Management
Gramor Development
• 100% leased at time of sale
• WALT: 14.1 years
• Major tenants: Market of Choice, H&R Block, Pharmaca
Toyota
3142 NE Doran Dr McMinnville, OR
8/22/16 30,924 $36,500,000
$1,180
N/A Nhi-reit of Oregon LLC
Peg LLC
• 100% leased at time of sale
• Single tenant: Toyota
Columbia Gorge Premium Outlets
450 NW 257th Way Troutdale, OR
1/7/16 164,235
1991/1998
$28,425,000
$173
N/A Time Equities
Simon Property Group
• 90% leased at time of sale
• Major tenants: Gap, Adidas, Bass, Carters, Guess
Lovejoy Square Portfolio
930 NW 14th Ave 1325 NW Kearney St Portland, OR
7/8/16 46,412
1978
$19,750,000
$426
5.10% Killian Pacific
Metro Holdings North
• 93% leased at time of sale
• 1031 Exchange
• Major tenants: Office Max, Harley Davidson Outlet, On Deck Sports Bar
92
Portland retail sales ($10M+)Property Closing
DateTotal SF
Year BuiltSale Price
$ Per SFCap
RateBuyerSeller
Comments
Kitchen Kaboodle
404 NW 23rd St Portland, OR
2/2/16 30,567
1987
$13,000,000
$425
5.00% Urban Development Partners
Alta Home Properties, LLC
• 100% leased at time of sale
• Major tenant: Kitchen Kaboodle
Arney Retail Center
3000-3060 Sprague Ln Woodburn, OR
3/1/16 38,390
2015
$12,870,979
$331
5.90% Giustina Resources
Deacon Development Group
• Major tenants: TJ Maxx, Panera, Red Robin
Rose City Center
6901 NE Sandy Blvd 7037 NE Sandy Blvd Portland, OR
9/14/16 59,685
1993
$12,750,000
$214
N/A Retail Opportunity Investments, Corp.
Estate of Earl M. Chiles
• 100% leased at time of sale
• Major tenants: Safeway, Raymond James Financial Services, Starbucks
Town & Country Chrysler/Mitsubishi
16800 SE Mcloughlin Blvd Milwaukie, OR
4/12/16 38,039
1986
$12,650,000
$332
M/A Bett Investments
Moorenouri li
• 100% leased at time of sale
• Major tenants: Dodge, Hyundai, Chrysler, Jeep
Tigard Towne Square
16200 SW Pacific Hwy Portland, OR
4/1/16 48,330
2000
$11,775,000
$244
N/A Heslin Holdings
Spirit Realty Capital
• Former Alerbertson’s
Sears
1260 Lloyd Ctr Portland, OR
8/17/16 111,645
1959
$11,500,000
$103
N/A Capref Lloyd Center East LLC
Sears Roebuck & Co
• 100% leased at time of sale
• Single tenant: Sears
New Seasons Market
6300 N Lombard St Portland, OR
3/1/16 25,050
2016
$10,620,000
$424
5.10% Ram Property Development
Deacon Development Group
• 100% leased at time of sale
• Single tenant: New Seasons
Seattle & Portland 2016 Investment Overview 93
Title right
94
OfficeIndustrialRetailMultifamily
Portland
Seattle & Portland 2016 Investment Overview 97
2016 Portland multifamily sales ($10M+) overview
Portland’s robust multifamily demand is driven by the recent influx of millennials and new employers
Portland’s multifamily strength stems from the continual increase in population and the notably high levels of employment. Portland currently has an inventory of 173,735 units, with an overall 2016 vacancy rate hovering around 4.9 percent. The average Portland rent sits at $1,297, which is a 10.2 percent rent increase from last year.
Oregon is one of the top moving destinations according to migration studies. The average income in Portland is $81,160 and the total population is 2,372,802. The Portland City Council predicts that around 260,000 more people will be living in Portland by 2035. An impressive 40.9 percent of the total population earns over $75,000. Currently, unemployment levels in Portland are 5.0 percent and the city ranks ninth in the nation for total employment increase at 5.0 percent in the last 12 months. According to apartment search website, Abodo, Portland was voted as the fourtht most desirable city for millennials. Portland is on the cutting edge of the evolution of the local food and drink scene, which includes 895 local food trucks and 69 craft breweries. Portland has the highest concentration of athletic and outdoor companies in the nation. Millennial growth in Portland is anticipated to be 5.2 percent over the next five years, predominately in the downtown area.
Investors continue to capitalize on the robust demand in the Portland market. 2016 multifamily sales dwarfed all previous years with 66 deals exceeding $10 million, totaling 13,757 units for $2.8 billion, $1.0 billion more than last year. The largest sale of the year occurred in the fourth quarter when Invesco Real Estate and Holland Partner Group purchased the 566-unit LaSalle
Apartments in Beaverton for $140 million. By far the most headline-grabbing transaction was the new high-water mark for Portland’s eastside, which was set by the sale of The Yard to a Bangkok-based investment firm Land and Houses Public Company Limited of Thailand. The 284-unit apartment building sold at just over 50 percent occupied for $446,126 per unit and $551 per square foot, totaling just under $127.0 million. The average cap rate in 2016 was 5.1 percent for all transactions over $10 million, and 4.7 percent for new construction. The market wide range for multifamily cap rates was between 3.8 and 6.1 percent.
The City of Portland recently passed new inclusionary zoning which calls for developments with 20 or more units to set aside 20 percent of those units for households making less than 80 percent of the median household income. In response to this new zoning, the city saw a surge in permit applications at the end of 2016
Looking into 2017, economic indicators point toward continued strength within the Portland metro area. The high levels of renting demand are largely due to the substantial job and population growth. Developers are anticipating a strong increase in demand for rental units as the millennial population grows. In 2016, 5,353 units delivered with 3,584 units absorbed. 5,506 units are scheduled to deliver in 2017. Portland is one of the most affordable West Coast cities that is able to draw international employee talent. In 2017, the Portland multifamily market will remain strong and experience moderate growth in rents. The supporting demographics will keep demand high and provide plenty of opportunity for development.
98
Portland multifamily sales & statistics
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total # of Sales 25 27 21 8 16 21 20 20 37 49 67
Highest Price Per Unit $146,610 $294,077 $455,340 $184,659 $285,149 $395,000 $267,241 $343,017 $456,710 425,000 $466,126
Cap Rate Average 6.1% 5.2% 5.4% 7.2% 5.9% 5.7% 5.7% 5.6% 5.6% 5.3% 5.1%
Total Sales Volume ($ in millions) $458M $1.1B $688M $266M $485M $690M $660M $702M $1.2B $1.7B $2.8B
Sales matrix ($10M+)
2016 MULTIFAMILY SALES DWARFED ALL PREVIOUS YEARS WITH 66 DEALS EXCEEDING $10 MILLION, TOTALING 13,757 UNITS FOR $2.8 BILLION, $1.0 BILLION MORE THAN LAST YEAR.
Seattle & Portland 2016 Investment Overview 99
Portland multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
LaSalle15021 SW Millikan Way
Beaverton, OR
11/14/16 $141,750,000$255,866
$239
554 1997
4.00% Holland Partners Waterton Residential
Yard22 NE 2nd Avenue
Portland, OR
12/14/16 $126,600,000 $409,536
$600
284 2016
3.80% Land & Houses Guardian Real Estate Services
Eddyline Bridgeport18049 SW Lower Boones Ferry Road
Tigard, OR
11/18/16 $118,100,000 $303,534
$349
367 2015
4.60% Sequoia Equities Mill Creek Residential Trust
Seven West at the Trails14790 SW Scholls Ferry Road
Beaverton, OR
11/30/16 $96,000,000 $226,950
$288
423 1985
4.40% LaSalle Investment ManagementHolland Partners
Waterline2080 NW Front Avenue
Portland, OR
3/31/16 $94,000,000 $385,117
$484
243 2015
4.20% Greystar The Carlyle Group
Alara Hedges Creek8900 SW Sweek Drive
Tualatin, OR
12/1/16 $93,000,000 $227,941
$274
408 1998
4.50% Kennedy Wilson American Realty Advisors
Breckenridge8150 SW Barnes Road
Portland, OR
5/20/16 $81,500,000 $228,291
$299
357 1985
4.50% Resource Real Estate Holland Partners
The Terraces19000 NW Evergreen Pkwy
Hillsboro, OR
12/2/16 $78,340,000 $210,027
$215
373 1986
4.70% Blackstone Alecta Real Estate Investment
100
Portland multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
One Jefferson Parkway1 Jefferson Pkwy
Lake Oswego, OR
10/14/16 $78,000,000 $224,784
$211
347 1986
4.90% Security Properties Friedkin Realty Group
Riverwalk at Happy Valley8640 SE Causey Avenue
Happy Valley, OR
9/29/16 $76,000,000 $194,872
$217
390 1989
5.00% MG Properties Group Green Leaf Partners
The Club2323 NW 188th Avenue
Hillsboro, OR
12/2/16 $72,980,000 $207,330
$244
352 1991
4.40% Blackstone Alecta Real Estate Investment
Cook Street107 North Cook Street
Portland, OR
5/17/16 $69,000,000 $304,284
$453
206 2016
4.50% Berkshire Property Advisors Lake Union Partners
Vue1717 SW Park Avenue
Portland, OR
7/12/16 $63,950,000 $200,163
$278
307 1951
5.40% JRK Property Holdings ColRich Group
Russellville Commons10320 SE Pine Street
Portland, OR
3/1/16 $57,850,000 $204,417
$233
283 1999
5.20% MG Properties Group The Reliant Group
Sofi at Cedar Mill11785 NW Timberview Lane
Portland, OR
10/11/16 $55,000,000 $231,092
$240
238 2009
4.80% Pacific Urban Residential Security Properties
Evergreen Park4619 NE 112th Avenue
Vancouver, WA
9/29/16 $54,200,000 $146,883
$177
369 1989
5.60% Abacus Capital Group Lone Star Funds
Seattle & Portland 2016 Investment Overview 101
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Rowlock6380 NE Cherry Dr
Hillsboro, OR
10/4/16 $70,000,000 $256,551
$347
255 2015
4.70% Blackstone Holland Partners
Vector967 NE Orenco Station Pkwy
Hillsboro, OR
10/4/16 $62,000,000 $260,175
$365
228 2016
4.70% Blackstone Holland Partners
Vista at 233181 NE 23rd Road
Gresham, OR
10/5/16 $53,300,000$191,727
$188
278 1990
5.50% LivCor Bridge Investment Group Partners
Camden Place4701 NE 72nd Avenue
Vancouver, WA
12/9/16 $49,500,000$167,230
$165
296 1988
5.60% Jackson Square Properties Security Properties
Madison Park12901 NE 28th Street
Vancouver, WA
10/5/16 $46,350,000 $137,946
$165
336 1999
5.70% LivCor Bridge Investment Group Partners
Platform 141030 NE Orenco Station Pkwy
Hillsboro, OR
2/10/16 $45,000,000 $226,285
$287
177 2012
5.00% Investco Real Estate Holland Partners
Sunfield Lakes16100 SW Century Drive
Sherwood, OR
10/31/16 $43,100,000 $215,500
$206
200 1998
5.50% Brookline Investment GroupBerkshire Property Advisors
Park 19522 NW 19th Ave
Portland, OR
3/18/16 $42,500,000 $410,891
$514
101 2009
4.00% Greystar TIAA
102
Portland multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Powell Valley Farms1500 SW Pleasant View Drive
Gresham, OR
10/28/16 $39,500,000 $173,246
$202
228 2003
5.20% Gelt Jackson Square Properties
The Linden1250 E Burnside St
Portland, OR
12/8/16 $39,000,000$272,860
$428
132 2014
4.70% Grand Peaks Properties The Foursquare Church
Sofi at Forest Heights1940 NW Miller Road
Portland, OR
12/15/16 $37,500,000$234,375
$241
160 2004
5.10% Pacific Urban Residential Security Properties
Parkside2831 SE Palmquist Road
Gresham, OR
8/23/16 $37,250,000$165,556
$184
225 1999
5.20% Sage Apartment CommunitiesKohlberg Kravis Roberts & Company
Rock Creek Commons11800 NE 124th Avenue
Vancouver, WA
9/29/16 $37,000,000$154,167
$167
240 2014
5.40% Hamilton Zanze & CompanyTimberland Framing
The Meadows at Cascade Park13314 SE 19th Street
Vancouver, WA
1/29/16 $35,250,000$178,030
$177
198 1989
5.50% Jackson Square Properties Belkorp Holdings
Hub 9980 NE Orenco Station Loop
Hillsboro, OR
10/4/16 $33,500,000$236,942
$327
124 2015
4.80% Blackstone Holland Partners
Townfair1167 NW Wallula Avenue
Gresham, OR
5/9/16 $31,000,000$116,981
$137
265 1990
5.90% Sage Apartment Communities Tokola Properties
Seattle & Portland 2016 Investment Overview 103
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
The Gables at Mountain Park2 Jefferson Pkwy
Lake Oswego, OR
12/22/16 $29,080,000$225,426
$233
129 1991
5.00% LaSalle Investment Management Sares-Regis Group
Oak Hill15800 NW West Union Road
Portland, OR
8/30/16 $29,000,000$176,829
$212
164 1991
5.50% Sage Apartment Communities Tokola Properties
Carriage House4714 NE 72nd Avenue
Vancouver, WA
12/9/16 $26,500,000$165,625
$163
160 1997
5.60% Jackson Square Properties Security Properties
The Wilmore4357 N Williams Ave
Portland, OR
10/1/16 $24,900,000$296,022
$438
75 2015
4.70% Robert Johnson LT Anctil Enterprises LLC
The Emery3155 SW Moody Ave
Portland, OR
5/24/16 $24,660,000$184,266
$343
118 2015
4.70% Front Avenue Corporation ZRZ Realty Co
Golfside Village7700 NE 72nd Avenue
Vancouver, WA
12/15/16 $24,250,000$171,986
$175
141 1990
5.50% Aukum Management Belkorp Holdings
The Cameron1500 SW 12th Avenue
Portland, OR
10/6/16 $23,450,000$282,530
$439
83 2016
4.70% Grand Peaks Properties Summit Real Estate
Terra at Murray Hill14305 SW Sexton Mountain Drive
Beaverton, OR
3/11/16 $23,350,000$169,203
$197
138 1975
5.20% Pacific Urban Residential Hamilton Zanze & Company
104
Portland multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Village at Van Mall5000 NE 72nd Avenue
Vancouver, WA
12/9/16 $22,000,000$171,875
$173
128 1995
5.50% Jackson Square Properties Security Properties
The Preserve19839 Hwy 213
Oregon City, OR
6/13/16 $21,500,000$159,259
$182
135 1994
5.60% Priderock Capital Partners OpenPath Investments
Chinook Way21933 NE Chinook Way
Fairview, OR
8/24/16 $19,900,000$160,484
$166
124 2000
5.70% Piedmont Properties Group PTLA
Maybeck at The Bend13830 SW Chinn Ln
Portland, OR
4/1/16 $18,530,000$154,417
$179
120 1998
5.30% Waldman Management GroupHamilton Zanze & Company
Lower Burnside Lofts60 SE 10th Avenue
Portland, OR
2/1/16 $18,500,000$284,637
$506
62 2015
4.30% Berkshire Property Advisors Urban Asset Advisors
Town Center Park29250 SW Parkway Court
Wilsonville, OR
9/1/16 $18,500,000$166,667
$175
111 1990
5.50% Curtis Capital Group Summit Real Estate
Boulder Gardens16751 SE 82nd Drive
Clackamas, OR
5/12/16 $18,000,000$116,129
$170
155 1972
6.00% Kleinbub, Fredrick & AngelinaSchaaf, Steven Ron
The Park at Fox Pointe3009 NE 57th Avenue
Vancouver, WA
1/11/16 $16,250,000$81,250
$110
200 1975
7.00% NFN Investments Diesing, Charles F.
Seattle & Portland 2016 Investment Overview 105
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Waverly Gardens20121 SE Stark Street
Portland, OR
1/15/16 $16,230,000$110,408
$130
147 1982
6.40% Sage Apartment CommunitiesGallegly, John R.
Mississippi Avenue Lofts4216 N Mississippi Ave
Portland, OR
4/13/16 $14,048,550$439,017
$331
32 2008
4.70% Landbank Investments, LLC Winkler Development Corporation
Parkview7806 NE 12th St
Vancouver, WA
10/31/16 $13,875,000$133,413
$160
104 1966
5.80% Transpacific Investments Foam Street Investments
Crown Plaza10117 NE 9th Avenue
Vancouver, WA
2/24/16 $13,600,000$113,333
$145
120 1982
6.40% Realvest Dernbach, Dave
The Crossings16500 SE 82nd Drive
Clackamas, OR
6/7/16 $13,450,000$140,104
$153
96 1997
5.70% Gallegly, John R. Sunnyside Construction & Development
City View3050 SW 10th Avenue
Portland, OR
1/8/16 $13,250,000$152,299
$310
87 1977
5.20% Kleinbub, Fredrick & AngelinaMatteson Companies
Village 18518380 NW Heritage Pkwy
Beaverton, OR
3/14/16 $13,100,000$140,860
$163
93 1981
5.90% Aukum Management Kurilo, Paul
Sterling Park16804 SE Powell Blvd
Portland, OR
12/7/16 $10,950,000$150,000
$139
73 1991
5.70% Michael Kilroy Gordon Irvine
106
Portland multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap Rate BuyerSeller
Hogan Woods1645 NE 20th Street
Gresham, OR
5/2/16 $10,820,000$108,200
$149
100 1998
6.30% Sage Apartment CommunitiesMcNutt, Robert
Royal Greens2000 NE 19th Street
Gresham, OR
5/31/16 $10,500,000$116,667
$121
90 1970
6.50% Waldman Management GroupGuardian Real Estate Services
601 Union Street, Suite 2800, Seattle, WA 98101 tel +1 206 607 1700 fax +1 206 607 1701
225 108th Avenue NE, Suite 550, Bellevue, WA 98004 tel +1 425 974 4000 fax+1 425 974 4020
1120 NW Couch Street, Suite 500, Portland, OR 97209 tel +1 503 972 8000 fax +1 503 972 8001
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