Vulcan’s Ada Healey got a rude awakening this morning with news on the wires that Merck, one of her company’s main tenants in South Lake Union, is shutting down its Seattle research center to cut costs. Regardless, she says Paul Allen’s real estate portfolio isn’t going to take a serious hit in the neighborhood, and she even has a few prospective tenants in mind who just might be able to fill the void.
“It’s certainly disappointing, we’ll miss Merck. They’ve been a great community partner,” says Healey, Vulcan’s vice president of real estate. “But the fact is that we have a long-term financial commitment from them, and several other users looking for space. This may be an opportunity to make lemonade out of lemons.”
Merck’s shutdown of the Rosetta Inpharmatics subsidiary comes six years after it became one of the early tenants to commit to the real estate boom in South Lake Union. Vulcan, which owns more than 50 acres in the neighborhood, is protected from Merck’s decision, Healey says, because it has a long-term lease (although she wouldn’t say exactly how long it runs.) That means Merck could sub-lease the space after it winds down the Rosetta operation, or possibly negotiate a buyout of its remaining lease with Vulcan, she says.
The Rosetta offices have about 133,000 square feet, and room for 300 employees, Healey says. Vulcan has had discussions with “several prospective tenants” who are shopping for about that much space, so it’s possible that it could be filled up shortly after Merck gets out. Vulcan hasn’t had a chance to discuss Merck’s plans for the shutdown, she says.
As an aside, she mentioned that Vulcan is moving forward with the master planning for the third phase of the University of Washington’s expansion in South Lake Union, which would roughly double the university’s research capacity in the neighborhood. That new phase of construction would have room for 365,000 to 400,000 square feet of research space, or more than triple the room occupied by Merck.
Healey also notes that one of Vulcan’s competitors, Biomed Realty Trust, just scored a lease with Danish pharmaceutical giant Novo Nordisk on an immunology research center will have 80 employees by 2010 at the corner of Fairview Avenue and Mercer Street. It sounds like Vulcan may have a little competition on its hands, which might not be bad news for tenants looking to grow, and maybe even get a decent deal on rent.