SINGAPORE (Sept 24): The manager of Keppel-KBS US REIT is acquiring 21 buildings in a US suburban business campus for a consideration of US$169.4 million ($231.4 million).

Dubbed the Westpark portfolio, the 21 buildings have a total of 781,966 sf over 41 acres.

Located adjacent to downtown Redmond, Washington, the portfolio includes three clusters of buildings:

• Westpark Business Park, with 14 two-story office buildings totalling 583,524 sf;
• Redmond Center Court, with two industrial buildings totalling 77,510 sf; and
• Pacific Business and Technology Center, with five office buildings totalling 120,932 sf.

The Westpark portfolio is situated on grounds in a park-like setting with easy access to State Route 520/Interstate 405 and in close proximity to Redmond Town Center and Microsoft World Headquarters.

The buildings are designed for multiple business uses including office and flex. The campus is surrounded by green space and neighbourhood parks, which provide valuable outdoor amenities for tenants.

The Westpark portfolio was constructed between 1987 and 1992, and underwent extensive capital improvements following the vendor KBS SOR Westpark Portfolio’s acquisition in February 2016.

These projects include the conversion of underutilised space to an amenities centre, new signage and painting through the campus, the additional of a full-service restaurant/bar, the renovation of the common area landscape and the exterior refurbishment of some of the buildings.

Including the acquisition fee of US$1.7 million payable in units of Keppel-KBS US REIT and the professional fees and expenses incurred of US$4.6 million, the estimated total cost of the acquisition is US$175.7 million.

Redmond is a submarket within the Eastside office market in the Seattle MSA, which has benefitted from tremendous leasing demand in recent years due to the fast-growing technology sector,

Overall vacancy rate in the Eastside Suburban office has seen a downward trend, contributed by improving economic conditions and strong employment growth. As at first quarter 2018, overall vacancy rate was at a low of 9.1%, supported by strong leasing activity and a relative lack of speculative construction.

Meanwhile, asking rents in the Eastside Suburban market have historically exceeded that of other suburban office markets in the Seattle area. The overall average asking rent for space in the Eastside Suburban office market increased US$0.90 psf year-over-year and US$0.34 psf from the previous quarter to US$32.59 psf in first quarter 2018.

"The relatively low inventory of available office space and strong demand in the Seattle-Bellevue area should encourage asking rent growth in the near term, which may boost asking rents to surpass pre-recession highs," says the manager of Keppel-KBS US REIT.

Year to date, units in Keppel-KBS US REIT are down 13.2% to 79 cents on Monday morning.