An under-construction building with cranes and scaffolding on-site with a clear blue sky in the backdrop.
Bellevue has been going through its peak development phase for several years now. New projects have been cropping up, and developers are expanding and remodeling the existing buildings and complexes. Due to these developments, experienced Bellevue real estate agents are in high demand.
However, amid that entire local development boom, one Bellevue developer West77 Partners has decided to change or rather decrease the size and scope of its 1.8-acre complex called Washington Square.
Nearly one year ago, West 77 Partners submitted a master development plan for a four-phase project in the heart of downtown of the City of Bellevue. The project included two residential and two hotel towers at 10620 NE 8th St. However, the builder recently resubmitted a revised plan that is considerably different from the original one. This time, the proposed Washington Square project doesn’t have a residential complex since offices have replaced it.
The new building plan includes an eight-story 210-room hotel to the north and a 20-story 350,000 sq ft office tower on the southern portion of the site instead of the initially planned residential tower. If this building plan is full and final, then West77 hasn’t just changed the nature of the project but has downsized it as well.
The initial Washington Square project would have been a 4-building complex with two hotels and residential towers. Now, the project will consist of two buildings in total: one for the offices and the other for the hotel.
West77 Partners has been a reputable developer in the Bellevue real estate market for a long time now. It has been working on more than $100 million worth of projects in different parts of the state. Besides Bellevue, West77 is developing residential and commercial real estate in Tukwila, Everett, and Redmond.
In the new plan, West77 has indicated that the project will be completed by taking any one of these three approaches.
The builder also indicated that if the project’s completion takes place in two phases, then they would determine the second phase’s completion time at a later stage.
Bellevue real estate agents and investors are looking forward to the completion of West77’s Washington Square due to its prime location in the city’s downtown. As of now, the project site is a surface parking lot with a low-rise commercial building on its eastern fringe.
It is interesting to note that Washington Square’s parcel lies at the southwest corner of a building block that local real estate agents refer to as a “superblock.” It is outlined by 108th Ave NE, 106th Ave, NE 8th, and 10th St. This block features the Hilton Garden Inn Hotel, the Washington Square Residential Tower, and the Bellevue Office Tower along with a mix of some low-rise old commercial buildings.
Skanska has proposed an office building on the land lot on the eastern side of the Washington Square project. Its application is currently under review with the city. This office building project will be bigger than that of West77. As per the submitted plan, it will span 525,000 sq ft.
Bellevue's realtors and investors are trying to deduce why West77 has changed the initial development plan for Washington Square. The city’s constraints and in-demand office market seem like the only plausible reasons why West77 has switched from building residential to office complex.
The commercial real estate market in Bellevue has been doing well for the last couple of years. For instance, Class A office space across the Eastside has been at its lowest vacancy rate in the last two decades. The vacancy rate in downtown Bellevue is even lower. In the entire town, only one office block bigger than 40,000 sq ft is up for the taking.
Several tech giants, including Amazon, Google, T-Mobile, Facebook, and Microsoft, will lease around 40% of office space in Eastside in the coming years. A report released by Broderick Group suggests that Amazon alone will secure 2.85 million sq ft in downtown Bellevue within the next three and a half years.
This rising office space demand in Bellevue convinced West77 to change the course of its Washington State project from a residential building to an office complex.
The ongoing pandemic has pushed tech companies and service-based industries to reevaluate their working model. Many of them are considering making work-from-home (WFH) a permanent feature for their employees. The most prominent announcement in this regard came from Facebook CEO Mark Zuckerberg, who said that half of the company’s workforce could be working from home in the next ten years.
This means Facebook will ultimately reevaluate its current and future office requirements. If the trend catches on, other companies will also readjust and re-plan their office space needs in the coming years. This could turn out to be a setback for West77, given that it has changed its residential project into an office project.
The implications of increasing WFH can also affect West77 and other developers investing in commercial real estate. Notwithstanding the strong fundamentals, a developer has to sign considerable pre-leases to continue with projects. For now, companies ink hefty pre-leases that allow developers to work at accelerated schedules and finish projects before their proposed completion time. This won’t be possible if they have to borrow loans to complete a project and then put it on the market.
We aren’t sure how things will pan out as we leave this pandemic behind and what will be its long-term implications for the real estate market. West77 is developing the Washington Square project while keeping current and near-future office space demand in the city. So, we think its investments are safe, and its decision to turn a residential project into a commercial one will pay off.
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