Major Office Specialty (Area 280) 2015 Revaluation Department of Assessments Commercial Appraisal Office Specialty 280- 20 DENNY REGRADE - LAKE UNION - FREMONT 280- 10 SEATTLE CBD 280- 40 WATERFRONT - PILL HILL 280- 30 PIONEER SQUARE - SOUTH SEATTLE 280- 50 BELLEVUE - EASTSIDE 20 40 10 30 50 280- 60 NORTH-EAST-SOUTH 280- 60 NORTH-EAST-SOUTHC COOUNNTYTY The information included on this map has been compiled by King County staff from a variety of sources and is subject to change without notice. King County makes no representations or warranties, express or implied, as to accuracy, completeness, timeliness, or rights to the use of such information. This document is not intended for use as a survey product. King County shall not be liable for any general, special, indirect, incidental, or consequential damages including, but not limited to, lost revenues or lost profits resulting from the use or misuse of the information contained on this map. King County Any sale of this map or information on this map is prohibited except by written permission of King County. Dept. of Assessments C:\Data\data\Commercial\Commercial_Areas\Specialtyedits.mxd King County Department of Assessments King County Administration Bldg. Lloyd Hara 500 Fourth Avenue, ADM-AS-0708 Seattle, WA 98104-2384 Assessor (206) 296-5195 FAX (206) 296-0595 Email: [email protected] As we start preparations for the 2015 property assessments, it is helpful to remember that the mission and work of the Assessor’s Office sets the foundation for efficient and effective government and is vital to ensure adequate funding for services in our communities. Maintaining the public’s confidence in our property tax system requires that we build on a track record of fairness, equity, and uniformity in property assessments. Though we face ongoing economic challenges, I challenge each of us to seek out strategies for continuous improvement in our business processes. Please follow these standards as you perform your tasks. Use all appropriate mass appraisal techniques as stated in Washington State Laws, Washington State Administrative Codes, Uniform Standards of Professional Appraisal Practice (USPAP), and accepted International Association of Assessing Officers (IAAO) standards and practices. Work with your supervisor on the development of the annual valuation plan and develop the scope of work for your portion of appraisal work assigned, including physical inspections and statistical updates of properties; Where applicable, validate correctness of physical characteristics and sales of all vacant and improved properties. Appraise land as if vacant and available for development to its highest and best use. The improvements are to be valued at their contribution to the total in compliance with applicable laws, codes and DOR guidelines. The Jurisdictional Exception is applied in cases where Federal, State or local laws or regulations preclude compliance with USPAP; Develop and validate valuation models as delineated by IAAO standards: Standard on Mass Appraisal of Real Property and Standard on Ratio Studies. Apply models uniformly to sold and unsold properties, so that ratio statistics can be accurately inferred to the entire population. Prepare written reports in compliance with USPAP Standard 6 for Mass Appraisals. The intended users of your appraisals and the written reports include the public, Assessor, the Boards of Equalization and Tax Appeals, and potentially other governmental jurisdictions. The intended use of the appraisals and the written reports is the administration of ad valorem property taxation. Lloyd Hara King County Assessor Department of Assessments Accounting Division Lloyd Hara 500 Fourth Avenue, ADM-AS-0740 Seattle, WA 98104-2384 Assessor (206) 205-0444 FAX (206) 296-0106 Email: [email protected] http://www.kingcounty.gov/assessor/ Dear Property Owners: Property assessments for the 2015 assessment year are being completed by my staff throughout the year and change of value notices are being mailed as neighborhoods are completed. We value property at fee simple, reflecting property at its highest and best use and following the requirement of RCW 84.40.030 to appraise property at true and fair value. We have worked hard to implement your suggestions to place more information in an e-Environment to meet your needs for timely and accurate information. The following report summarizes the results of the 2015 assessment for this area. (See map within report). It is meant to provide you with helpful background information about the process used and basis for property assessments in your area. Fair and uniform assessments set the foundation for effective government and I am pleased that we are able to make continuous and ongoing improvements to serve you. Please feel welcome to call my staff if you have questions about the property assessment process and how it relates to your property. Sincerely, Lloyd Hara Assessor Executive Summary Report Appraisal Date 1/01/15 - 2015 Assessment Year – 2016 Tax Roll Year Specialty Name: Major Office Buildings Physical Inspection: Area 280-50 Bellevue/Eastside was physically inspected. This area included 52 major office properties, or approximately 19.5% of the population. These properties were inspected in 2014 prior to the posting of the office values. Sales - Improved Analysis Summary: Number of Sales: 55 market transactions in 2012, 2013, 2014 Range of Sale Dates: 1/1/2012 to 12/19/2014 Sales--Ratio Study Summary Mean Assessed Value Mean Sale Price Ratio COD* 2014 Value $99,835,000 $124,869,600 80.00% 12.83% 2015 Value $108,508,800 $124,869,600 89.60% 12.06% Abs. Change $8,673,800 9.60% -0.77% % Change 8.69% 12.00% -6.00% *CODis a measure ofuniformity, the lower the numberthe betterthe uniformity Sales used in Analysis: All improved sales that were verified as market sales and did not have major characteristic changes, or have been segregated or merged between the date of sale and the date of appraisal, were included in the ratio analysis. The above ratio study results for office sales in the Major Office Specialty 280 (institutional grade office buildings with a rentable area of 100,000 square feet or more) is based on a sales sample that is heavily weighted with sales of well-leased or well-located lower risk properties in the Downtown Seattle sub-markets and the Bellevue CBD. Consequently, in this instance, it may not be an entirely reliable tool for measuring the revaluation results of the overall specialty that includes properties with higher than market vacancy or less dynamic suburban locations (i.e. South King County) where values lagged behind the rest of the county. In addition, sales in the sample typically represent the Leased Fee interest while the Assessor is tasked with valuing the Fee Simple interest based on market parameters as of the valuation date. Therefore sales with older leases that are above or below current market rates do not reflect the interest the Assessor is valuing. Also in the current expansion cycle of the office market, buyers continue to purchase properties with expectations of higher future net operating incomes (NOI) from higher lease rates with fewer concessions. These sales tend to reflect higher values than the Assessor’s value by the income approach using current market parameters. Area 280 Valuation for 1/1/2015 2015 Area 280 Report 2 Total Population – Parcel Summary Data: Number of Improved Parcels in the Ratio Study Population: 267 (This figure does not include properties currently under construction) Total Population - Parcel Summary Data Land Improvements Total 2014 Value $2,912,019,500 $12,783,597,000 $15,695,616,500 2015 Value $3,095,224,800 $14,119,917,570 $17,215,142,370 % Change 6.29% 10.45% 9.68% Conclusion and Recommendation: While there were a healthy number of Major Office sales in King County during 2014, transaction volume declined versus 2013, the second year in a row, despite substantial investor interest in the local market. There are still not sufficient sales in all market segments to rely solely on the Sales Comparison Approach in the 2015 revalue. The Income Approach is relied on in the final reconciliation of value because it allows greater equalization and uniformity of values for the various stratifications of office buildings in the different submarkets. In addition, sufficient market income data was available to perform this analysis. The Seattle and Eastside office markets continue to remain near the top of national investors’ interest. As of year-end 2014, it was estimated that there was over 3.7 million square feet of office space under construction in the Downtown Seattle market with an additional 1.7 million square feet of office space under construction on the Eastside. This substantial amount of new supply is in the pipeline is in response to tight vacancy rates throughout the county and continued growth in rental rates. In addition, Amazon’s continued expansion accounts for a significant portion of the space currently under construction. The regional office market continues its growth, with nearly 2.4 million square feet of net absorption in 2014, well above the 20-year average of 1.5 million square feet per year.1 Office Market Summary Statistics Market Total Vacancy Class A Avg. Rent 2014 Net Size (SF) Vacancy % Change Asking Rate* Change Absorption (SF) Downtown Seattle 43,863,489 12.4% -11% $36.17 8% 1,259,544 Seattle Close-In 5,311,348 17.6% -3% $29.76 12% 130,636 Southend 10,082,724 19.7% -5% $21.96 0% 98,358 Bellevue CBD 7,911,531 9.3% -5% $39.16 4% 21,844 Eastside 29,984,404 11.0% -23% $31.61 4% 950,886 Source:4th Qtr 2014 CBREOffice MarketView *Full Service Vacancy rates declined in all of the King County submarkets. The Eastside market experienced the sharpest declines in vacancy, followed by the downtown Seattle submarket.