Sweden’s Skanska (SKAb.ST) is gearing up for its biggest commercial property development project to date, an office building near Seattle in the United States.
The Nordic region’s biggest builder, and one of the biggest in the United States, said on Wednesday it would invest $476 million in the project in the tech-company heavy Bellevue area east of Seattle.
“This is the biggest commercial development project in terms of invested capital,” Claes Larsson, head of Skanska’s property development operations, said.
Larsson said that with more limited offerings, the office rental market was stronger currently in Bellevue than in Seattle, with occupancy rates for completed commercial properties in Skanska’s segment close to 100%.
“It’s a very strong rental market despite the pandemic,” he said in an interview. “Bellevue actually has lower vacancy rates than Seattle, which is also a good market.”
In many other of Skanska’s markets, leasing has slowed amid uncertainty caused by COVID-19, and developers are bracing for longer-term changes in demand in office markets as more people are expected to work more from home after the pandemic.
Skanska said in a statement the construction contract for the 25-story, 50,300 square meter project in Bellevue – which is adjacent to Redmond, home to Microsoft (MSFT.O)- was worth $270 million.
Skanska’s property development operations have grown fast in recent years to account for roughly half of group profits, although the traditional construction division books the bulk of sales.
Larsson said Skanska had not yet signed any lease contracts for the building, which was scheduled to be completed in 2023.
He said investor demand to buy commercial properties remained strong, helped by low interest rates.
“(Investor) demand in all our markets is red hot. We see no particular slowdowns, there is a lot of capital around so you can sell at very good prices if you have fully let properties.”
The new project is Skanska’s sixth in the greater Seattle area.