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Originally published Thursday, November 9, 2006 at 12:00 AM

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Seattle area considered tops for owning office property

For the first time, real-estate professionals nationwide have named the Seattle metro area as the most desirable place to buy and own office...

Seattle Times business reporter

For the first time, real-estate professionals nationwide have named the Seattle metro area as the most desirable place to buy and own office property, a distinction likely to mean more buildings selling for top dollar in the coming year.

The No. 1 ranking is revealed in a report being distributed today by the Seattle chapter of the Urban Land Institute. It reflects the views of about 600 commercial real-estate brokers, lenders, developers, investors and consultants.

Just over half, or 51.5 percent, said they recommend buying office property in Seattle — the highest percentage among cities including San Francisco, New York and Los Angeles.

The Seattle area, which includes Bellevue, won high marks for a diversified economy, an emerging 24-hour core, connections to Asia, and its position between Puget Sound and mountain ranges.

"There are no steals in Seattle," said Jim DeLisle, a University of Washington real-estate professor who expects sellers of local office property to use the report as justification for demanding record prices.

"The sellers know Seattle ranks high. The buyers know it. You'll see some pretty intense negotiation," DeLisle said.

The report puts Seattle in the top five overall for commercial development and investment prospects, signaling interest in the area's retail outlets, hotels, warehouses, apartments and condominiums in addition to offices.

The report, done annually by PricewaterhouseCoopers and the Urban Land Institute, a nonprofit group in Washington, D.C., is widely regarded as an indicator of where individual real-estate markets are headed.

Seattle's strong showing is expected to generate significant interest from large institutional investors, who have become involved in many major commercial real-estate deals, and could help developers get money for new projects.

"We have investors knocking on our door every week, or sometimes several times a week," said Gregory Johnson, president of Seattle-based developer Wright Runstad, which recently paired with a San Francisco investor to buy the RealNetworks headquarters building in downtown Seattle and the former Safeway property in Bellevue.

"There are a lot of options for firms like us when we're out looking for capital," said Johnson, chairman of the Urban Land Institute's Seattle chapter. The 600-plus-member chapter plans to distribute the report at its meeting this morning in Seattle.

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Investors see robust returns in the area's declining office-vacancy rates and rising rents.

New York-based Brickman Associates, a real-estate investment company, turned heads in late September when it agreed to pay a record $575 a square foot for the Civica Office Commons in Bellevue.

Less than four months earlier, Market Place I and II in downtown Seattle went for $560 a square foot to New York-based Tishman Speyer. And the New York pension fund that owns a 49.9 percent stake in Seattle's tallest building, the 76-story Columbia Center, is said to be close to a deal for its portion.

Rosie Rios, managing director at MacFarlane Partners, a San Francisco-based real-estate investment-management firm, said she's looking at Seattle for new opportunities.

Rios said she's a "little gun-shy" about investing in new condo buildings, given the number due in downtown Seattle over the next couple of years, but is interested in apartments, offices and retail projects.

With so much attention on Seattle, some developers and investors are expanding their efforts to Snohomish, Pierce and Thurston counties in hopes of finding a "value buy" and less competition, said Roberta Fuhr, a Bellevue-based senior vice president at KeyBank.

"There may be five to 20 qualified bids on any good property," Fuhr said.

As investors pay more for local office buildings, they're likely to charge more for rent. That's especially true for tenants that negotiated lower rents after the dot-com bust five years ago.

"As they renew their leases, rents are going to have to be higher to substantiate investments," said Oscar Oliveira, a broker at Colliers International in Bellevue.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com

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