News
It's Getting Hot In Here
February 23, 2012
| It's not always sunny in Seattle, but panelists at our Future of Downtown event yesterday at the W Hotel gave a positively shining growth forecast for the next several years. |
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| Who needs Mardi Gras when you have stimulants like Boeing,Amazon, and biotech? Not to mention Starbucks, which likely keeps this crowd of 300 permanently bright-eyed and jittery. |
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| By 9am, the coffee was flowing, the conversation was enthusiastic, and the ties were flying across the room. (Well, our publisher Mark Bisnow threw his tie first... and then no one followed suit, typical.) As part of the relaxed atmosphere, panelists perched on barstools, "to give them their accustomed habitat," Mark joked. |
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| If Thin Lizzy re-releases The Boys are Back in Town, this should be the album cover. The all-star panelists with moderator Sandip Soli of Cairncross & Hempelmann (right): Security Properties COO Tim Overland; UrbanVisions CEO Greg Smith; RD Merrill VP for investments Billy Pettit; MLI SVP of development Scott Koppelman; and Gardner Economics principal Matthew Gardner. Matthew recalled the "hinterland years" after the economy crashed, but those times are quickly fading. "I personally consider Seattle as the premier market on the West Coast today," he said. The five-"B" reasons:Boeing, biotech, software bytes, carbon tech batteries, and benefactors. People underestimate the value of philanthropy, he said; when entities like The Bill and Melinda Gates Foundation give away $2B each year, it generates satellite businesses. Now East Coast investors are waking up to the region's possibilities. "Seattle's not southwest Alaska anymore, which they tended to think it was." |
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| Multifamily is also booming right now, with more than 3,000 units currently under construction in Belltown, Queen Anne, and SoDo and another 8,000 in the development pipeline. If Matthew's cautious about one thing, it's the possibility of a localized apartment bubble. "We're seeing income growth in our market, which is a lot better than many other markets. Will the income growth be sufficient to justify some of the rent expectations of the apartment world?" he asks. "Time will tell. I think most of the projects which are yet to start construction probably won't." |
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| Top catalysts for change, according to Tim? With its $80B market cap, $6B in cash, and 600K SF option in the Denny Triangle (in addition to the three blocks it just bought), Amazon is probably the number one driver downtown, he said. That's good for Security Properties, which is in the throes of developing a 380-unit, 40-story residential tower in the neighborhood. The promises of an open waterfront, subterranean viaduct, and perhaps a new stadium are also huge. But traffic is a continual problem, as is public safety: "You walk down 3rd Avenue, or Pike/Pine... at times it feels unsafe." More beat cops or elimination of the ride-free zone on downtown buses might alleviate the issue, he said. |
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| Although there are a numerous planned multi-family projects in and around downtown, we don't see absorption challenges, said AMLI SVP of development Scott Koppelman, whose company has projects in Ballard and South Lake Union."We see strong rent growth and occupancy even with the planned new supply," he said. While rents topped in '08 and then fell off quickly, AMLI is back at peak asking prices. "We can feel the positive impact of employment growth from Amazon, from UW, and other spinoff businesses." Cleaning up the Mercer mess should also be a boon, whether or not it actually improves traffic flow. "It will be aesthetically pleasing and connect South Lake Union to the waterfront, and all of those things are pieces of the puzzle to being a really fun, vibrant place to live. If you're a UW medical research worker, that's what you want." |
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| Companies do want to be in hip neighborhoods, but rent is also a factor, noted Billy, who pinpointed Pioneer Square as one area where rents are still comparatively affordable. "I think we're going to continue to see the development of micromarkets from a residential standpoint and also an office standpoint... as companies relocate to these re-emerging employment centers," he said. Inhibitors are the capital markets, which are placing renewed emphasis on sponsors—any project nowadays requires more equity and lower leverage, he said—and the exceedingly slow entitlement process. |
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| Where does downtown go from here? Becoming more kid-friendly would be a big leap forward, said Greg. Amenities like public restrooms, playgrounds, and a downtown elementary school are the only things Seattle is missing as a downtown. Take Vancouver, which morphed from being a hip, cool residential area to a hip, cool residential with dogs, and finally a hip, cool residential with dogs and kids. Seattle isn't quite there yet—we're only in that second phase. Greg added that downtown residents should make it clear to the city council that those things, plus more affordable housing ("It's not all about high-end housing," he said) are needed to stop young families from fleeing to the 'burbs. Greg's urban vision for the next 10 years: Anywhere from SoDo, where Greg's company is doing a 1.3M SF office tech campus, to South Lake Union, is in the sweet spot. |
