Capstone Partners announced that it will begin construction next week on its Block 3 office building at Esterra Park, at 15550 N.E. Turing St. in Redmond. The 2-acre site is on the northeast corner of the 29-acre development. Where five office buildings were once planned, those four other sites were previously sold to apartment developers.
The seven-story Class A building, with 245,000 square feet, was designed by ZGF. JTM will be the general contractor. CBRE’s Scott Davis, Tim Owens and Scotta Ashcraft will lease the space for Capstone.
Floor plates will average around 40,000 square feet. No tenants have been signed, and the building will start on a speculative basis.
Capstone currently calls the building One Esterra Park. It should be completed by late 2020.
Davis said in a statement, “Capstone’s timing could not be better — Esterra Park will be the only completely vacant, large floorplated building for at least a year in a market that has over one million square feet of projected demand.”
CBRE estimates that the overall Eastside vacancy rate stands at around 8%. The downtown Bellevue area, where several new office towers are planned, is tighter — around 4%, according to Broderick Group. Broderick puts the Bellevue suburban sub-market at around 5%.
A comparable example of starting a Bel-Red Corridor office building on spec is Building 16 at Wright Runstad’s Spring District. That 316,000-square-foot project broke ground in early 2018, and Facebook later claimed the whole building. That’s the only other active office project along the Bel-Red Corridor, excluding Microsoft’s new buildings on its existing campus.
Back in 2013, Capstone and financial partner Lionstone Investments purchased the former Group Health campus for $32.5 million. Capstone then took Esterra Park through permitting, with some changes during the multi-year process.
A 285-room hotel was completed by Starwood about three years ago on the northwest corner of the campus; it operates as an aLoft/Elements Hotel (both are Marriott brands). About 2,600 apartments are in varying phases of planning and development by AvalonBay Communities, Lincoln Property Co., Canadian firm Ledcor Group and Imagine Housing (with affordable units and a daycare center).
Esterra Park is a short walk west to Overlake Village Station, where light rail service will begin in 2023. Also that year, WSDOT expects to finish a new state Route 520 offramp at Esterra Park.
Capstone estimates the whole phased development is worth about $1.2 billion. About 6,000 to 7,000 people — residents, shoppers and office workers — will use the campus daily. The campus will also have a 3-acre park at its center.
Capstone said that US Bank would provide construction financing for the office project. Public records this week also show a separate but related transaction involving a prominent life insurance company worth $11.2 million.