Seattle’s tallest skyscraper once bore the name of the West Coast’s biggest bank and was filled with tenants at the peak of the dot-com bubble.
But the 1.5 million-square-foot building almost went into foreclosure after the 2008 financial crisis, as big banks, law firms and other professional tenants closed or dramatically shrunk their footprint.
Now the 76-story tower, in turnaround mode for the past few years, has landed several tech firms. On a recent morning at the Columbia Tower Club, young software engineers from online music provider Rhapsody were munching on breakfast while staring at their laptops, earbuds plugged in.
Several local real-estate brokers say they believe the positive momentum — combined with rising rents and strong investor demand for Seattle properties — puts building owner Beacon Capital Partners in a strong position to sell Columbia Center in the next year. The Boston-based real-estate investment firm has sold off other buildings locally in the past year.
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“No building is more visible in Seattle than the Columbia Center,” said commercial real-estate expert Kip Spencer. “The investment sales market in Seattle is very frothy, and this would be very timely to test an asset of that magnitude.”
On a recent tour of the 29-year-old building, Andy Wattula, Beacon Capital’s vice president in charge of Pacific Northwest properties, said there were no plans “in the immediate future” to put Columbia Center on the market.
But there’s no doubt the skyscraper’s owner is doing a lot to make it an attractive buy, filling much of it with attractive tenants on long-term leases. New leases have brought the vacancy rate to about 20 percent, down from a high of almost 40 percent in 2012, according to data provider CoStar.
“With all the positive lease-up at Columbia Center, we believe they will be marketing the building for sale in the coming months,” said Matt Christian, executive director of Cushman & Wakefield/Commerce in Seattle.
The speculation comes as other downtown office properties have hit the market, including the historic Smith Tower at 506 Second Ave. and the Pacific Building at 720 Third Ave., and the overall Seattle metro office-vacancy rate has fallen to levels not seen since the last economic boom.
And, finally, it’s not just Amazon.com that is taking over office space and driving vacancy rates down.
“We anticipate that in the next 12 months it’s going to turn from a tenant’s market to a landlord’s market,” said Laura Ford, a managing director at commercial real-estate brokerage Jones Lang LaSalle (JLL). “You’re seeing growth from a lot of different companies.”
Built in 1985, Columbia Center has changed hands before. In 1989, developer Martin Selig sold it for $355 million to Seafirst Bank. The bank’s successor, Bank of America, sold it to Equity Office in 1998 for $404 million.
If leasing up Columbia Center again is a prelude to selling it, Beacon’s exit would mark the end of a roller-coaster ride.
Beacon acquired Columbia Center in 2007 for $621 million, a year before the global economic crisis.
Bank of America, which became the tower’s namesake after acquiring its original anchor tenant, Seafirst Bank, continued downsizing after Beacon became its landlord.
In 2008, a major tenant, a large law firm, dissolved.
In March 2010, Beacon defaulted on the loan it took out to acquire the 1.5 million- square-foot skyscraper. It managed to get the loan extended.
Then in 2011, Amazon.com vacated about 500,000 square feet. Beacon has been working ever since to plug that hole.
As competing spaces have filled up in South Lake Union and Pioneer Square, Columbia Center has benefitted, brokers say.
Beacon has leased big chunks of space in the past year: The tenants include tech and creative firms like Rhapsody, NBC News Digital Group and Envestnet. Other big tenants include U.S. Health and Human Services and UW Physicians.
Security Properties, a major apartment developer, is moving in later this year.
The only big blocks of contiguous space left, Wattula said, are floors 18, 19 and 20, and the 63rd and 64th floors.
Last December, Beacon sold two downtown Bellevue buildings. And a year ago, it sold Seattle’s Wells Fargo Center at 999 Third Ave.
On its website, Beacon says it assesses when to sell its investments “based on asset performance, economic and local market conditions, and the strength of prospective buyer demand.”
Dan Dahl, a senior vice president at Colliers International, said the building would attract plenty of attention if offered for sale: “There are so many institutions that would be interested in a skyscraper like that in what they consider a tier-one market.”
Office market heats up
Sales of office buildings are heating up because large blocks of office space are getting harder to find and rents are rising.
In the second quarter, the Seattle metro market saw 650,000 square feet of office leases, with Boeing responsible for 350,000 square feet of it, according to JLL.
Overall, the vacancy rate was 11.5 percent, the lowest level since 2007, though average rents are still off their 2008 peak.
“We’re on track to have a record year for the Seattle office market,” said Patricia Raicht, JLL’s vice president of research in the Pacific Northwest. “The recovery is becoming more broad-based.”
The south part of the Seattle central business district still has some large vacancies, however.
Today, high-rise landlords are competing for tech tenants by pouring money into lobby renovations, new athletic centers, secure bike storage and other amenities, Ford said.
The Columbia Tower Club, on the building’s 75th floor, underwent an extensive renovation to attract more business. Diners can access the Internet wirelessly from their tables.
Wattula said Beacon plans to spend money on new signage in the next few months to make it easier for tenants to find their way around in the building.
By the end of this year, he said he expects Columbia Center’s vacancy rate to be down to almost 10 percent.
Material from Seattle Times archives is included in this story.
Sanjay Bhatt: 206-464-3103 or firstname.lastname@example.org