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Tuesday, May 16, 2006 - Page updated at 12:00 AM

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Microsoft sold on Bellevue, 15 floors of Lincoln Square

Seattle Times technology reporter

Microsoft, whose appetite for real estate has seemed insatiable of late, took a huge bite of prime downtown Bellevue office space Monday.

The company plans to lease the top 15 floors of the Lincoln Square office tower in what real-estate professionals are calling one of the largest office deals on the Eastside in recent memory.

Microsoft has claimed all remaining office space in the 28-story tower, which, when completed next summer, will be a centerpiece of Kemper Development's 1.4?million-square-foot office, retail and residential project.

"I've been in this market for 16 years and I can't remember the last time a project of that size and scope was preleased before it was opened," said Kip Spencer, co-founder of Officespace.com, adding that developer Kemper Freeman has amassed impressive holdings in downtown Bellevue.

"He's got Boardwalk and Park Place all wrapped up," Spencer said.

Microsoft said it plans to move its North American sales headquarters group, now scattered among several buildings on its Redmond campus, into the 320,000-square-foot space in late summer 2007.

The parties did not disclose terms of the deal, but real-estate agents estimated the space would go for $31 to $35 a square foot, including operating expenses, or in the range of $9 million to $11 million a year.

The location is ideal for a sales office, real-estate agents and developers said.

"This is the 50-yard line. You're between I-90 and 520," said Jeff Jochums, senior director of office leasing in Cushman & Wakefield's Bellevue office.

He added that proximity to downtown Bellevue restaurants, hotels and other amenities is another selling point.

For Microsoft, the deal is one of several local real-estate plays this year. The company plans to lease two buildings Cingular Wireless is vacating at Redmond Town Center, said Microsoft spokesman Lou Gellos.

The software giant announced plans in February to accelerate expansion of its Redmond campus. Construction is under way on at least one of seven new buildings, Gellos said.

Microsoft will lease seven others in the area, including the former headquarters of Eddie Bauer, which coincidentally will be its downstairs neighbor at the Lincoln Square office tower.

"It's all revolving around taking care of the space needs that we have today and looking out to the future," Gellos said.

In its fiscal year ending June 30, Microsoft expects to have added between 1,600 and 2,000 employees in the U.S. — 40 percent of its global hiring.

The vast majority of its U.S. hires will be in the Puget Sound area, Gellos said.

The company had 30,255 employees here as of Sept. 30.

Microsoft is rumored to be seeking even more property on the Eastside and in Seattle. Gellos, per company policy, would not comment on rumors.

Jochums said Microsoft's Lincoln Square lease will have "major ramifications" on the Eastside real-estate market. He said developers at four other Bellevue towers in the works were getting more inquiries Monday.

Lincoln Square developer Freeman, who counts several other buildings and Bellevue Square among his holdings, said he negotiated with at least one other major tenant and had interest from several smaller tenants, for the space Microsoft took.

"The other one does not want me to mention its name," Freeman said. But there have been "all kinds of rumors about them for several months."

Microsoft rival Google was rumored to be interested in Lincoln Square last fall to supplement its Kirkland offices. The Internet search company is planning to announce a new office in Fremont later this month, but it's nowhere near the size of Microsoft's expansion.

A real-estate agent with knowledge of the Google deal pegged it at about 14,000 square feet.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2006 The Seattle Times Company

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