Kilroy Grabs Premier Life Science Property in Seattle for $106M
- Mar 17, 2014
A four-story, LEED Gold–certified life science property at 401 Terry Ave. N., in Seattle’s South Lake Union submarket, has been purchased by Kilroy Realty Corp., of Los Angeles, from the building’s developer, Vulcan Real Estate, both companies announced late Thursday.
The price of $106.1 million covers both the building itself, which is fully leased (140,600 square feet) through 2021 to the Institute for Systems Biology, and a three-level underground parking structure. The tenant, a nonprofit, is described in Jones Lang LaSalle’s 2014 Life Sciences Outlook as focusing on global health and on infectious disease in the Third World.
Developed in 2003, the building was one of Vulcan’s first buildings in South Lake Union and features 36,000-square-foot-floor-plates, floor-to-floor heights of 14 to 19 feet, augmented floor thickness, enhanced loading and seismic capabilities, and above-standard building systems, including independent air handling and redundant power systems serving the lab space.
“In today’s environment, in which core pricing has been extremely aggressive, this is another example of how our leading West Coast franchise has allowed us to acquire a fully-leased premier asset at an in-place cap rate of 6 percent and where in-place rents are approximately 20 percent below market,” John Kilroy, the buyer’s chairman, president & CEO, said in a release.
The transaction was handled by CBRE, with a team led by Kevin Shannon and supported by the local CBRE office.
Vulcan has said it intends to redeploy the funds from the sale into “continued development efforts in South Lake Union,” noting that it has delivered 5.2 million square feet in 25 new office, biotech, residential and mixed-use projects in that submarket over the past decade.
The JLL report notes that Seattle remains “one of the nation’s premier life sciences markets,” based in particular on its strength in R&D, and adds that the Institute for Systems Biology is one of Seattle’s major bioresearch institutes.
The South Lake Union area has nearly 3.2 million square feet of life sciences space, with a vacancy rate declining toward 2.0 percent, according to JLL. Although several life sciences buildings have been proposed or are under development in South Lake Union, the report states, the only one now under construction is a BTS by Vulcan for the Allen Brain Institute.
A downward vacancy trend and limited new supply have driven both tenant exploration of converting traditional office space for life science use and an escalation of rents, as high as $65 per square foot, triple net, JLL reported.