Rising 40 stories above the corner of Fourth Avenue and Madison Street, IDX Tower is far from the city's tallest building. But foot-for-foot, Seattle's newest skyscraper is now...

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Rising 40 stories above the corner of Fourth Avenue and Madison Street, IDX Tower is far from the city’s tallest building.

But foot-for-foot, Seattle’s newest skyscraper is now its most expensive.

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On Tuesday, the New York-based retirement fund TIAA-CREF, closed a $368.6 million deal to buy the 3-year-old building from the Texas development company Hines. The price set a record of $411 a square foot for a Seattle office building.

“The sale represents Seattle taking its rightful place among the real vibrant downtowns of the United States,” said Rob Hollister, a Hines executive in Seattle. “You have buildings in Chicago, New York, San Francisco and Boston that hit the $400 price range a lot, and now it is Seattle’s time.”

The sale caps a year of lucrative deals that seemed to defy an office market still struggling with stubbornly high vacancy rates.

The office vacancy rate in Seattle edged up slightly to 15.35 percent during the past three months, according to a report released yesterday by the real-estate brokerage Colliers International. That’s twice the rate considered healthy. But that has done little to slow the number of deals in 2004, which include:

• Trinity Real Estate of Bellevue’s $19 million purchase of the historic Seattle Tower earlier this month.

• DIFA-GRUND of Germany’s $65.7 million purchase of two buildings on the Adobe campus in Fremont from California’s Bedford Property Investors last week.

• Beacon Capital Partners of Boston’s $100.7 million purchase of the Union Bank of California Center from Chicago’s Walton Street Capital in September.

• Health Care Property Investors of Long Beach’s $110.9 million purchase of four medical office buildings from Swedish Medical Center earlier this week.

• Principal Real Estate Investors of Iowa’s $134 million purchase of Hines’ One Twelfth @ Twelfth office complex in downtown Bellevue in June.

A combination of factors has driven the fast pace of deals this year. Real estate has a track record of providing stable returns for investors, even during economic downturns. And investors large and small have poured money into real-estate funds as a safer alternative to stocks and bonds.

Continued low interest rates also have made it easier to borrow money, propelling prices upward while fueling demand.

While companies appear increasingly willing to pay top dollar for good buildings in Seattle, few expect that any deals will pass the IDX price anytime soon.

The building’s condition is excellent, but more important, it is filled with strong tenants who signed long-term leases near the height of the office market in 2000. That will give the retirement fund a steady cash flow for the better part of the next decade.

The record-setting deal is a good sign for Seattle, said developer Ric Anderson, vice president of Washington Holdings, which owns and manages one of Seattle’s premier office towers, Two Union Square.

“It makes a statement about Seattle that institutional investors want to be here,” Anderson said.

Indeed, most of the major office buildings in Seattle and the Eastside are now owned by national investment companies, such as TIAA-CREF, which manages $325 billion in assets as one of the world’s largest retirement funds.

The trend away from local ownership has helped stabilize Seattle’s real-estate market, where many developers were forced to sell buildings or declare bankruptcy the last time vacancy rates soared in the late 1980s.

“It is generally a good thing,” Hollister said. “You are talking about owners with deep pockets that will maintain buildings well and will not go out of business.”

The retirement fund beat out 16 other suitors vying for IDX Tower, which was part of a five-building deal with Hines that included properties near San Francisco and Washington, D.C. TIAA-CREF declined to comment.

Tenants at IDX, including the law firm of Preston Gates and Ellis, will notice little change from the deal. Hines will continue managing and leasing the building.

Hines’ sale of IDX and One Twelfth @ Twelfth leaves it with one building in the region, 800 Fifth Ave. But Hollister says the company is not about to leave Seattle.

“We plan to be a very active buyer in this market, and in the next six or nine months, you will hear us announce new development proposals,” Hollister said. “We aren’t going anywhere.”

J. Martin McOmber: 206-464-2022 or mmcomber@seattletimes.com