Vulcan Real Estate rocked the region last week when it announced it will develop four big office buildings in the Lakefront Blocks project in South Lake Union for Google.
Two things are surprising about the deal: The speed at which development of the Lakefront Blocks came back to life and the quietness of the deal.
The tech industry drives the city's office market. While the sector is still growing, a lease the size of Google's - 607,000 square feet - wasn't something even Vulcan had in mind.
"People and companies are flocking here, but I did not think we expected to have such a large tenant come to us," said Vulcan executive Lori Mason Curran.
The Lakefront Blocks project got off to a rocky start.
Three and a half years ago, Paul Allen's Vulcan - with the backing for former Mayor Mike McGinn - proposed giving the city a large property elsewhere in South Lake Union. There affordable housing and office space for nonprofits would be built. In exchange, the city could let Vulcan build a trio of 240-foot-tall residential towers on the three blocks across Valley Street from Lake Union Park. That was 80 feet taller than what the city allowed.
But push back by the city council, which often opposed McGinn, forced Vulcan back to the drawing board.
Little had happened until last week when Vulcan said it will develop four, six-story buildings for Google on two of the blocks. That's about three times the amount of space that Google now has on its Fremont campus at the north end of the lake. In addition, Vulcan will build two apartment towers, one eight stories and the other nine.
A deal of this size typically generates some buzz in advance of the announcement, but not this time.
"I think it flew pretty well under the radar," said Kidder Mathews broker Jeff Huntington, who didn't work on the deal.
Mason Curran agreed, calling the lack of broker chatter amazing.
Turns out, Google and its real estate broker, Dan Foster of Flinn Ferguson, had reached out to Vulcan and the two sides started meeting several months ago.
Google signed leases that will run between 14 and 16 years, according to Vulcan, which did not disclose other terms. But average asking rents for new office space is $48.50 per square foot. Based on this, the deal could be worth roughly $441.6 million, excluding rent escalations.
The new Google buildings and apartments will go up on the two blocks between Mercer and Valley streets and Terry and Fairview avenues north, with construction starting by 2017. The third Lakefront Block to the west won't be developed at this time, Vulcan said.
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