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October 22, 2014

Kirkland's popularity means office space is tight

The Seattle Times

Coral Garnick

Cloud-based business-management company Acumatica came to the Puget Sound region last year for the same reason many companies do: the pool of talented technology workers here.

Rather than recruit talent from the Seattle area to its Washington D.C. office, Acumatica moved its headquarters to the middle of everything - Kirkland.

"We are happy we got here before everyone else and locked down the lease," CEO Jon Roskill said.

Acumatica is one of the 641 businesses to move into Kirkland in 2013, following 471 new businesses in 2012 and 1,475 in 2011, according to a report the city released Monday.

With companies flooding the area, office-space vacancy rates in Kirkland dropped from 8.4 percent in 2012 to 7.6 percent in 2013 - down from 30.4 percent at the end of the recession in 2009.

Kirkland now has one of the tightest office-space markets in the region, based on more recent reports from commercial real-estate brokers.

"A lot of communities are benefiting from a fairly substantial recovery in the Puget Sound region since the recession," said Ellen Miller-Wolfe, economic-development manager for the city of Kirkland. "Obviously Bellevue is the biggest winner, but we have also benefited."

Second-quarter reports from brokerages Broderick Group and Kidder Mathews differ in how they determine vacancy rates, but they agree Kirkland has one of the lowest.

The vacancy rates they calculated ranged from 7.4 to 8.8 percent for Kirkland, compared with 8.2 to 8.7 percent in downtown Bellevue, 6.2 to 11.7 percent in Redmond, 11 to 15.6 percent in Bothell and 9.5 to 11 percent in Seattle.

"Downtown Kirkland plus the Kirkland waterfront and then Bellevue are the two hottest markets on the east side," said Paul Sweeney, a principal in Broderick Group's Bellevue office. "They offer something unique in terms of amenities that other markets don't."

The quick commute from both Redmond and Seattle and more parking options than in Seattle went into Acumatica's decision. Internet-service company GoDaddy's move to Kirkland's Carillon Point last year was heavily influenced by access to the waterfront.

"We love how our employees can 'boat' to work at the Carillon Point location," said GoDaddy spokeswoman Elizabeth Driscoll. "Our CEO Blake Irving was a Microsoft vet for 18 years and knows the area well."

According to Kidder Mathews, the average annual full-service leasing cost - which includes utilities, insurance, taxes, etc. - for Bellevue was $36.15 per square foot in the second quarter, while Kirkland was only $28.91 per square foot.

To take advantage of businesses wanting to move into the Seattle area, Kirkland has also been trying to offer competitive business-license fees and reducing fees for small businesses, providing resources like the Kirkland Business Roundtable and consultants for new businesses, and making public improvements as well as increasing height restrictions on new construction in the Totem Lake area, Miller-Wolfe said.

As what little office space that is available is snatched up across Kirkland, more construction is in the works.

Downtown's Parkplace does not have an official redevelopment plan yet, but the current design is to go from 95,300 square feet of office space to 650,000 square feet.

Google has been growing since it moved into Kirkland in 2007. Its current expansion, which is scheduled to be completed in 2015, will add 180,000 square feet of space to the current campus - creating room to hire 1,000 more employees.

Kirkland wants to stay low in scale and not become a city of high rises, so it has increased height restrictions in parts of Totem Lake to draw growth in that direction. Coupled with $51 million in public improvements, that should help Totem Lake become "more of the geographic center of Kirkland."

"Totem Lake is the area where we will likely see, and have provided for, the most growth," she said.

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