State government's newest office and data center project is taking shape just east of the Capitol in Olympia, offering what one South Sound real estate expert describes as the most expensive rental-office space in Thurston County.
The $255 million project for the Department of Information Services includes a data center that will house many state agency computer servers previously kept elsewhere in some 40 locations. The structure also has 259,833 square feet of new office space, which is more than Information Services can use – so the Department of Personnel and some workers from the Office of Financial Management are scheduled to move in to the building next September.
The state has a 30-year lease-to-own agreement with developer Wright Runstad and a guaranteed maximum cost. But the effect of the moves is to drive up rent costs for the three agencies by about $2.7 million a year. That cost is driven by a $44-per-square-foot rental rate, and the cost is to be passed on to most other state agencies.
“Actually the agencies that are moving in are agencies that get their budgets from other agencies. So basically, the cost will be passed on to almost all state agencies who pay a fee to DIS and OFM and DOP for services,’’ Financial Management spokesman Glenn Kuper said last week. “It’s going to be absorbed throughout state government, because the rates these central service agencies charge to other agencies will go up to cover that cost.’’
The $44-per-foot rent for the agencies includes the cost for utilities and janitorial costs – well above the $28 rate that Pat Rants, a local commercial real estate expert, says he’s seen for what he calls Class A space in the county.
Rants said he would like to see the state’s calculations showing that $37.50 was the market rate against which the $44 should be judged.
Information Services did a real estate study that pegged comparable rents at $37.50, said Sally Alhadeff, project manager for the department.
“Forty-four dollars a square foot for Class A office space is more than anything I know of in this market,’’ Rants said. “The highest rent for private Class A space I know of is about $28 a square foot, including all the utilities and janitorial.”
Rants conceded there may be special circumstances driving the rents that he doesn’t know about.
And indeed, Alhadeff says there are such considerations. One is the structure’s expected “platinum” rating for green construction through the international Leadership in Energy and Environmental Design, or LEED, rating system. Information Services’ building is expected to become one of the few in the country to reach the platinum rating for both core elements and tenant improvements, she said.
It also has an underground parking garage, a $6 million roundabout for traffic, a nearby park, and interior amenities including a conference room and a deli. It also is expected to last 75 to 100 years and meet design standards in the Capitol Campus master plan, which means it will have a monument effect.
Department spokeswoman Joanne Todd said the building’s exterior walls will resemble the large blocks of stone that make up the exteriors of older structures on the Capitol Campus.
Alhadeff said that as a result of those factors the agency had no true or exact comparisons locally for cost. So it had to calculate the effect of many of those special differences when comparing the cost, say, with the Department of Social and Health Services building put up by Vine Street Associates along Cherry Street in the east downtown.
The Information Services building continues to roil public opinion in the nearby South Capitol Neighborhood Association, which butts up against the project’s southern edge. The building rises six stories and has long been a worry to neighbors both because of its visual impacts and the traffic it might bring.
The department and the City of Olympia have responded by sizing local road improvements to meet larger traffic demands than the structure itself might need, according to Information Services.
Greg Klein, president of the neighborhood association, said the neighbors also have been concerned about the building’s costs, and this has showed up in e-mails that residents of the neighborhood have been sending back and forth through a shared address list in recent weeks.
Some e-mails focused on the $44-per-square-foot cost. Others are latched onto the $70 per hour it has cost to hire a State Patrol trooper to direct traffic along 14th Avenue; the trooper is on hand during construction of the roundabout at Jefferson Street.
“It kind of reflects the frustration people feel for the project. Then they latch on to it,” Klein said. “People are concerned about their tax dollars, and they see a large building going in. There is a general skepticism by the public.’’
Todd said the trooper is a necessity driven by the public’s tendency to ignore a nonuniformed flagger. The cost to the public would be higher if an accident occurred, she said.
Klein said he was struck by just how large the building is – despite his efforts early on to examine project plans. He said the neighborhood appealed the project’s permit and ended up settling with the state in a way that addressed traffic concerns but not the building’s size.
“When it comes to that aspect, the size is alarming,” he said. “For me, and I saw many, many drafts and sketches and schematics, it’s much bigger in real life.’’
Despite the rising concerns about the project costs and size, Klein said there is no effort in the works to attack or alter the project. “I haven’t seen anybody put forward a plan to oppose it or somehow address some of these issues,” Klein said.
“We weighed in on the environmental review. There was an appeal. The appeal was settled,” he added.
The court battle that led to settlement and stipulations by Information Services included a pledge to put in a pair of traffic-calming devices that could include speed humps in the four-street square formed by Jefferson Street, Maple Park Avenue, Capitol Way and 21st Avenue.
In another year, a second traffic study will be done to see what the actual traffic patterns and volumes are in the historic neighborhood – and two more traffic-calming devices might be added, according to Todd and Alhadeff.
The project is smaller than what originally was proposed for the so-called Wheeler lot. An earlier proposal called for a second large building to house other state agencies.
But the project all along was meant to house staff from multiple agencies – in this case about 200 to 210 from Personnel, more than 450 from Information Services and about 100 from Financial Management.
Brad Shannon: 360-753-1688 email@example.com