From the Puget Sound Business Journal:http://www.bizjournals.com/seattle/news/2013/10/30/food-trucks-the-latest-weapon-in.html

Oct 30, 2013, 2:40pm PDT

Food trucks are the latest weapon incommercial real estate industry

Marc StilesStaff Writer- Puget Sound Business JournalEmail | Twitter

It might sound odd, but food trucks are playing a role in multi-million dollar commercial realestate investments.

The operator of some suburban-style offices in the greater Seattle area are bringing in thetrucks to give their properties the urban pizzazz that tenants hunger for.

It wasn’t too long ago that the word “suburban” was an anathema to many buyers ofcommercial office space. Sprawling suburban campuses were, for the most part, considered apoor investment since tenants wanted to be in more lively central business districts, where it’seasier to attract employees.

Look at what happened in 2010, when 66 Seattle area properties sold for nearly $1.3 billion. Ofthat amount, just two downtown Bellevue properties, the Bravern and City Center Plaza officetowers, sold for a combined $720 million, accounting for more than half of that dollar volume.

The competition for urban assets drove prices up to the point that investors’ yields dropped,and the luster started to wear off.

“You started to hear the term ‘urban fatigue,’” said Greg MacDiarmid, a regional operatingpartner for Seattle-based Schnitzer West.

And real estate investors started to look outside the region's key central business districts forinvestment opportunities.

Earlier this month, Schnitzer sold 11 office buildings in suburban Bothell for $167.5 million toGrosvenor Amercias. Other recent suburban office sales include Redmond Town Center, whichsold for $185 million, and Continental Plaza, a downtown Kirkland building that sold for $24.5

million.

“I would say that overall we are seeing an increase in the number of buyers willing to look atsuburban buildings,” said commercial real estate broker Lori Hill of Jones Lang LaSalle (JLL).

The reason, in part, is the possibility of higher yields for suburban assets. The more moneyyou spend buying a property, the lower return you’re going to get.

Market Place I and II in downtown Seattle sold this summer for $71.2 million, and the buyers’projected yield is 4.3 percent, according to JLL. By contrast, Grosvenor Americas’ yield on theBothell property it bought from Schnitzer will be around 7 percent.

Even so, most investors still prefer urban core assets, because tenants do, too.

In the Puget Sound region, four large leases totaling nearly 220,000 square feet have beensigned recently, and only one of them, for 40,000, was for suburban space along the Interstate90 corridor in Bellevue. Nearly 19 percent of office space along I-90 is empty, compared to just8 percent in downtown Bellevue.

It’s odd given the discrepancy of rental rates. The average asking rental rate for Class A spacein Bellevue is $36.70 a square foot compared to nearly $32.90 along I-90, according to JLL.

“For the suburban markets to really take off, the leasing trends have to follow,” Hill said.

Seattle real estate investment and management company Talon Private Capital sees opportunityin the suburbs, but founders know it takes more bells and whistles to attract tenants.

Talon recently bought two suburban office buildings north of Seattle for $52.1 million. Theanticipated yield was not disclosed by Talon.

“We are kind of becoming believers in suburban office property that have a certain profile to it,”said Talon co-founder Bill Pollard. “There’s no doubt we want to continue to buy in the urbancore, but in addition to that we’re starting to buy select suburban assets.”

He said investors, whether investing in urban or suburban properties, still need to buy high-quality properties that are leased up to credit-worthy tenants, and make those assets attractive.This is where some untraditional strategies come in.

One of Talon’s secret weapons is food trucks, which offer the diverse, inexpensive fare thatpeople can find downtown.

Bellefield Office Park isn’t suburban, per se, but it is on the edge of downtown Bellevue, too farfor people who work there to walk to restaurants and shops in the central business district. Sosome days Talon, which manages Bellefield and other properties on the edge of downtown,brings in food trucks, such as Snout & Co. and Hallava Falafel.

In addition, Talon provides shuttle service over the lunch hour. The vans stop at specific spotsat set times. “What’s important is tenants want predictability and reliability,” Pollard said,adding it’s all about making more suburban assets more desirable.

“If an employer can keep and recruit talent at a [real estate] cost that is 30 percent less thandowntown, it’s a win-win,” he said.

Marc Stiles covers commercial real estate and government for the Puget SoundBusiness Journal.