Former Costco Offices in Issaquah Bought by KB Home

KB Home is gearing up to build townhomes on the site of a former Costco-occupied office building in the Seattle area.

The Los Angeles-based residential developer closed its purchase of the 97,000-square-foot offices at 22011 Southeast 51st Street in Issaquah for $25.6 million, the Puget Sound Business Journal reported. The seller was Newport Beach-based industrial investor Modiv.

Costco leased the 4.7-acre property starting in 2014 and referred to the property as Costco Building 7. The lease was set to expire July 31. Modiv first listed the building for sale last December. KB Home signed a purchase-and-sale agreement with Modiv in January and plunked down a $1.7 million nonrefundable deposit at the time, according to a Modiv report cited by the Business Journal. A Modiv affiliate acquired the building from Minnesota-based Onward Investors in 2018 for $29 million.

KB Home filed a work permit application in August to transform the property into a 74-unit residential community known as Park Place Townhomes. The firm plans to demolish the building early next year and wrap up construction in spring 2027, a spokesperson for KB told the Business Journal. The townhouses will range in size from 1,100 to 1,900 square feet.

Cushman & Wakefield’s Pat Mutzel represented Modiv in the transaction. The sale reflects a growing trend of suburban office building sites being turned into housing, according to Mutzel.

“The trend started post-Covid,” Mutzel told the Business Journal. “We’re seeing it in suburban office areas with high vacancy rates. There’s strong demand for new housing, and townhomes allow first-time buyers to get new construction at a price point typically seen with older homes.”

KB Home spent tens of millions on properties across the Western United States this year. In March, the developer bought a 270,000-square-foot office building in San Ramon, California, for $57.8 million. That site in the Bishop Ranch business park is slated for redevelopment into 118 townhomes and 72 single-family homes. In October, the firm bought a 115-acre vacant parcel in the Phoenix suburb of Queen Creek for $52 million with plans to build 500 homes on the site.

— Chris Malone Méndez