Retailers Re-Evaluate Downtown Seattle As Street Crime Raises Questions

From the cranes towering over the city to the shiny new office buildings full of well-paid workers, Seattle’s tech-fueled population boom can’t be missed.

Kidder Mathews’ 2019 Q4 Seattle Office Report reports the city added 50 residents per day since 2015. The office sector has 6.7M SF in the pipeline, 81% pre-committed.

This makes sense, as tech giants Amazon, Google, Facebook, Microsoft and Apple are all expanding their footprints in Puget Sound. The tech industry’s hunger for office space continues to fuel property value in a market that many in the commercial real estate industry consider too good to be true. 

For those in the retail sector, it may be.

The city’s fast-paced growth is causing two problems for its retail: higher rents and more crime on the streets. This problem isn’t unique to Seattle. San Francisco's downtown retail sector is also suffering from widespread street crime, sky-high rents and unsanitary conditions on some blocks.

As for retail in the Emerald City, the last decade has been strong. But rising crime rates and high rents have made commercial real estate in downtown more tempting for office space than retail.

Recently, several high-profile attacks by homeless people are making the city less appealing for pedestrians. An unprovoked attack on two people on Nov. 27, 2019, outside the King County Courthouse by a homeless person made headlines and raised questions about the area's overall safety.

Far from an isolated incident, data shows crime is on the rise in downtown Seattle. According to the city of Seattle's crime statistics, the number of aggravated assaults reported in all neighborhoods increased by 633 to 2,698 incidents between 2015 and 2018. Robberies in the same time frame grew by 147 to 1,690, while burglaries are up 479 to 8,033.

Overall, person crimes in the downtown neighborhoods of the commercial district, Pioneer Square, Belltown, the International District, South Lake Union, Harbor Island, SODO, Fremont, First Hill and Queen Anne rose 30% from 2015 to 2018. Person crimes include homicide, rape, robbery and aggravated assault.

These problems may not affect the tech industry’s decision to relocate to Seattle, but they appear to be affecting street-level brick-and-mortar retailers.

The 129-year-old Puget Sound drugstore chain Bartell Drugs closed its Third and Union location in November, which opened in 1991, after it dealt with excessive crime in the area. The local drugstore chain’s CEO, Kathi Lentzsch, told Bisnow that the decision was simple.

“Safety first,” she said. “If businesses can’t guarantee the safety of their employees and their customers, tough decisions have to be made.” 

Earlier, Bartell said that the cost of theft and armed security had become too high, according to a report by Seattle Post-Intelligencer. The PI reported that those who live and work near the store on Third and Union weren’t surprised by the decision.

Ethan Stowell Restaurants CEO and founder Ethan Stowell, who has has several restaurants in the downtown area, said that while crime seems to have improved in some parts of the city, it has been worsening in others, particularly downtown.

“I’ve seen an improvement in the Belltown neighborhood, while Ballard has gotten a little worse,” he said. “There are certain areas I wouldn’t wander around in at night. I wouldn’t be hanging out around First and Third and Pike and Pine. I’m not faulting people for being on the streets, but would I let my kids walk around downtown without me? No.”

Other parts of downtown are thriving. The Downtown Seattle Association’s retail statistics show that retail vacancy rates have dropped more than half over the last decade, while the market rent per square foot is up 44% from $24.21 in 2010 to $34.80 in 2019. Retail sales at brick-and-mortar stores has increased in Seattle by 52% since 2010, more than any other major city in the Puget Sound.

“Downtown Seattle’s retail sector overall remains strong as evidenced by a low retail vacancy rate and continued major investment in new and existing retail space,” Downtown Seattle Association’s Vice President of Advocacy and Economic Development Don Blakeney said. “With nearly 90,000 residents now living downtown, demand for goods and services continues to evolve.”

However, he added that ensuring downtown is safe and welcoming is critical to sustaining Seattle’s unique retail experience.

Whether or not the increasing homelessness and crime rates are contributing to the flight of downtown retail anchors is tough to say, said Adam Levine-Weinberg, The Motley Fool's senior industrials and consumer goods specialist.

“But it hasn’t helped,” he added.  

Meanwhile, Macy’s Department Store will close its downtown location to make way for Amazon office space. The nine-story department store, which started in 1929 as Bon Marché’s flagship, will shut its doors as part of a company-wide initiative to close its underperforming locations. Macy’s closing its downtown location trends with the closing of its downtown stores in Pittsburgh, St. Louis, Minneapolis, Portland, Miami and Cincinnati over the last decade.

Calmwater Capital Vice President Eric Jordan said Macy’s closing makes sense given the combination of the great downtown location and the shortage of office space.

“There is a lack of office space in the CBD and Bellevue,” he said. “That lack of space is driven by the tech companies coming into the downtown area and South Lake Union.”

To Jordan, downtown’s walkability is important for retail to thrive, and retail is important for the office and residential sectors.

“Until consumers feel like downtown has the retail that they want, they would rather shop online or go elsewhere to shop,” he said. “Safety is a big factor.”

In an interview last April, Downtown Seattle Association President and CEO Jon Scholes expressed concern about the long-term impact of safety issues caused by the growing homeless population.

“People want to go to cities where they feel safe, that are clean and that they can explore the city on foot,” he said. “Seattle has always been great for that. People are really drawn to the vibrancy and we need to make sure it continues to be top-notch for them.” 

Levine-Weinberg doesn’t expect Nordstrom’s, the company’s flagship store, to follow suit because it is a tourist destination. 

Seattle’s downtown shopping is anchored by Westlake Center, of which Macy’s is a part. It includes retailers like Zara, Claire’s and  Sak’s Fifth Avenue. The Downtown Seattle Association is involved with public-private partnerships with the city that includes managing Westlake Park and Occidental Square. 

When it comes to big-box retailers, some malls remain vibrant thanks to their parking advantages and lower crime rate, Levine-Weinberg said. 

“But operating a generic department store downtown just doesn’t work anymore,” he said.

CORRECTION, Jan. 14, 10:33 A.M. : An earlier version of this story incorrectly attributed a comment to Jon Scholes. The story has been updated.