2Q11_Investment_Market_PDF

Puget Sound Investment Market

(425) 974-4000 www.pacif ic-re.com SEATTLE | BELLEVUE | TACOMA | PORTLAND

Founded in 1993, Pacific Real Estate Partners

(PREP) has over 35 brokers in four offices serving

the Seattle, Bellevue, Tacoma, Washington and

Portland, Oregon markets. Providing client-centered

and value-driven real estate services to clients

throughout the Pacific Northwest and beyond, we

represent tenants, landlords, and investors in the

office, industrial, investment sales, and retail sectors.

O R E G O N

W A S H I N G T O N

PORTLAND

TACOMA

BELLEVUE

SEATTLE

www.pacific-re.com | (425) 974-4000

2Q’11 PUGET SOUND MARKET REPORT

The Puget Sound investment market saw strengthening in the

second quarter of 2011 with the sale of office buildings leading

the charge.

Diminishing vacancy levels and stabilizing rental rates

contributed to the uptick in sales levels and both will continue

to be driving forces in future investment activity as we head into

the third and fourth quarters.

The Industrial and Retail sectors continue to struggle and will

most likely lag behind until the more stabilized office assets have

been traded. Although there has been healthy activity across the

region as a whole, the Downtown Seattle and Bellevue markets

have been the key markets in Puget Sound, with a multitude of

investment opportunities currently being marketed.

The highlight of the quarter was the sale of Bellevue CBD’s

Key Center. The 488,000 square foot Class A office building was

purchased by Kilroy for $217M ($444/SF). Additionally, Kilroy

also purchased the four-building, 280,000 square foot Class A

complex, Plaza Yarrow Bay for $100M ($358/SF) in April of this

year.

In the Seattle submarkets, tenants such as Amazon.com are

paving the way for investment activity, stretching from Lake

Union to the CBD. The lease-up of Seattle’s Class A towers

has investors nationally looking to the Northwest for viable

opportunities.

The vast array of office product that is currently on the market

has been closely watched by investors locally and nationally

and they are starting to make their move. Seattle Tower and

Westlake have already selected buyers and other investment

opportunities such as 505 First, 83 King, 818 Stewart and 1918

Terry are all on the market as well stabilized “core” assets.

These varying types of assets are all going to be eyed by

investors as cap rates decline and $/SF increase.

KEY INVESTMENT

PRICE/SF & CAP RATE BY PRODUCT TYPE

$700 10.0%

7.0%

4.0%$300

$500

8.0%

5.0%

1.0%

0.0%

2.0%

$/SF

$100

$600

9.0%

6.0%

3.0%$200

$400

$0

2005 2007 20092006 2008 20112010

Cap

Rate

Office Cap Rate

Industrail Cap Rate

Retail Cap Rate

Offi

ce

Indu

stria

l

Reta

il

SEATTLE:

David Abbott

Ann Chamberlin

Tony Ford

Laura Ford

Lori Hill

Erwin Park

Wyk Parker

Nate White

Stuart Williams

SOUTHEND:

Les Boudwin, SIOR

Scott Carter

Andrew Stark

Casey Trees

OUR BROKERS:

EASTSIDE:

Bill Cooper

Mark Flippo

Chris Hughes

Brent Jackson

Charlie Malley

Steve Schwartz

Daniel Seger

JJ Shephard

Gabe Smith

TACOMA:

Steve Crantz

Mike Horner

Andrew Miller

PORTLAND:

Buzz Ellis, SIOR

Mark Friel

Kristin Hammond

John Lee

Mark McFarland, SIOR

Paige Morgan

Tom Shimota

Jeff Sholian, SIOR

Josh Stohr

Joe Vaughan





2Q’11 PUGET SOUND MARKET REPORT2Q’11 PUGET SOUND MARKET REPORT

Office Sales Over $10M Class A & B

Office Sales $1M - $10M Class A & B

Industrial Sales $1M - $10M All Classes

Retail Sales $1M - $10M All Classes

Industrial Sales Over $10M All Classes

Retail Sales Over $10M All Classes

2005 2006 2007 2008 2009 2010 2011-YTD

Transactions 43 54 131 7 5 15 7

Highest Price/SF $459/SF $575/SF $575/SF $342/SF $405/SF $548/SF $444/SF

Avg Cap Rate 6.7% 6.3% 6.3% 6.1% 9.5% 7.2% 7.2%

2007 2008 2009 2010 2011-YTD

Transactions 73 52 18 18 10

Volume $384M $310M $55M $70M $30M

Average Size (SF) 27,623 SF 24,570 SF 7,798 SF 30,939 SF 44,610 SF

Average Price $5.3M $6M $3.1M $3.9M $3M

Average Price/SF $191/SF $243/SF $168/SF $126/SF $214/SF

2007 2008 2009 2010 2011-YTD


Volume $478M $299M $111M $162M $71M


Average Price $3.6M $3.3M $3.1M $3.1M $4.2M


2007 2008 2009 2010 2011-YTD


Volume $423M $351M $162M $159M $61M


Average Price $2.4M $2.7M $2.1M $2.7M $2.4M


2005 2006 2007 2008 2009 2010 2011-YTD

Transactions 22 14 35 19 9 8 9


Avg Cap Rate 6.8% 6.8% 5.8% 5.8% 9.2% 7.3% 7.0%

2005 2006 2007 2008 2009 2010 2011-YTD

Transactions 22 28 19 4 8 7 8


Avg Cap Rate 6.3% 6.4% 5.9% 7.2% 8.8% - 7.1%

INSTITUTIONAL SALES

PRIVATE CAPITAL SALES

Occupancy/Type Tenant Building SF Submarket

1 3Q 2011 Amazon.com 1918 Eighth 465,000 Lake Union

2 Renewal Amazon.com 2201 Westlake 190,000 Denny Regrade

3 3Q 2011 Dendreon Russell Investments Center 180,000 Seattle CBD

4 Blend & Extend Wells Fargo Wells Fargo Center 173,000 Seattle CBD

5 3Q 2011 Isilon Systems 505 First 138,000 Pioneer Square

6 PATH PATH 2201 Westlake 112,000 Denny Regrade

7 3Q 2011 Seattle Genetics RidgePoint at Canyon Park 81,000 Bothell

8 3Q 2011/Expansion Zillow Russell Investments Center 72,000 Seattle CBD

9 4Q 2011 KPMG 1918 Eighth 60,000 Lake Union

10 3Q 2011 Expedia Skyline Tower 54,494 Bellevue CBD

Sale Date Buyer Building SF $ & $/SF Cap

1 6/11 Kilroy Key Center 488,470 $217.22M ($444/SF) 6.2%

2 4/11 Kilroy Plaza Yarrow Bay 279,650 $100.21M ($358/SF) 6.5%

3 5/25 Principal Financial 705 Union Station 253,769 $38.29M ($150/SF) -

4 1/27/2011 Simms Commercial Dev. 1000 Denny Way 285,186 $36.00M ($126/SF) 9.0%

5 3/30/2011 Stockbridge Capital Queen Anne Square 155,766 $34.00M ($218/SF) 7.2%

6 5/05/2011 W3 Partners Legacy Corporate Center 103,176 $14.17M ($137/SF) -

7 3/21/2011 Equity Residential 51 University 96,582 $11.75M ($121/SF) -

8 6/30/2011 Stockbridge Capital 1100 Olive Way 38,346 $11.12M ($289/SF) 5.9%

TOP LEASE TRANSACTIONS YTD

TOP SALES TRANSACTIONS YTD OVER $10M

4 1000 Denny Way

8 1100 Olive Way

1 Key Center

5 Queen Anne Square 7 51 University

3 705 Union Station2 Plaza Yarrow Bay

6 Legacy Corporate Center

Documents

2Q11_Investment_Market_PDF