What Risk? For Developers In Prime Locations, Confidence In Mixed-Use Remains Strong.

With the future of retail and hospitality up in the air, some developers have been rethinking their approach to mixed-use projects, swapping out storefronts and hotel rooms for offices and apartments — spaces they think might be safer investments in a world struggling to emerge from a pandemic. 

But not every mixed-use project is getting cold feet. At the Pivot Apartments, a mixed-use development at the downtown gateway to Seattle’s hip Capitol Hill neighborhood, construction is moving forward with a formula that is still weighted toward hospitality and retail. 

When the eight-story, 75K SF building comes to market this December, Pivot is slated to feature 4,500 SF of ground-floor retail and restaurant space. In addition to the 65 traditional apartments in the building, 30 units will be operated by short-term rental operator Sonder.

Vibrant Cities, the Seattle developer behind the Pivot Apartments, didn’t start out with hospitality in mind. In 2017, when Vibrant Cities began working with The Walsh Group, a national contractor, and Tiscareno Associates, a Seattle-based architect, the team first devised a plan for an apartment tower with 11K SF of office space. 

It was only after Sonder approached the development team that Vibrant Cities opted to replace the office space with short-term rentals. The plans for the ground level, which is set up to host a restaurant and a retailer, have not changed.

Even with the uncertainty in the retail and hospitality worlds, the teams at Vibrant Cities, Walsh and Tiscareno are all confident that Pivot will remain a winning formula.  

“We believe that the current design will work well,” Vibrant Cities CEO James Wong said. “The urban devastation that people are predicting post-COVID is exaggerated. We believe people still want to live and stay near where they work and be part of this community.”

Since Washington lifted its ban on construction in late April, construction at Pivot has been coming along quickly, according to Walsh Group Operations Manager Mike Sheeran. The company has instituted numerous safety measures to keep employees on-site safe, including daily temperature checks and a “badging” process to identify employees who are cleared for work.

Sheeran estimates that social distancing measures have only slowed the pace of construction by around 15%. While the construction process will become more challenging as Walsh transitions to working in the building’s interiors, Sheeran expects the project will still deliver on time in December. Sheeran and Wong are both hopeful that by then, the main danger of the coronavirus will have passed and that there will be tenants for the apartments, retailers interested in taking up ground-floor spaces and enough nightly guests eager to fill up Sonder’s host of rooms.

Much of what is fueling the Pivot Apartments team’s confidence comes down to location. The diamond-shaped lot where Pivot is taking shape finds itself on Pine Street, a busy corridor between downtown Seattle and Capitol Hill, a popular residential neighborhood and one of the epicenters of the city’s retail, bar, restaurant and nightlife scenes.

Plus, only a few blocks from Pivot is the Washington State Convention Center, which is undergoing a massive renovation and plans to bring in hundreds of thousands of visitors per year — visitors who will need places to eat, sleep and relax.

If it weren’t for the project’s ideal location, Wong said, he would be more hesitant about the mixed-use formula for the project.

“Hell, yes, we would be worried if it weren’t in not as prime a location as it is,” Wong said. “Post-COVID, a percentage of the restaurants in the neighborhood are not going to reopen. Hundreds of thousands of people per year are going to be walking up this street to the ‘cool’ neighborhood from downtown. That’s what we’re banking on for the take-up on our retail, and that’s what Sonder is banking on too.”

Sonder operates by taking out master leases on entire floors of new multifamily developments, meaning that Vibrant Cities would be somewhat insulated from a potential economic hit to travel and short-term stays. Wong was quick to point out that Sonder has been outperforming traditional hotels and its short-term rental competitors. Occupancy rates at Sonder are back up to pre-pandemic levels as users sign on to multiweek stays in order to facilitate social distancing, and the operator has raised a Series E funding round for $170M at a $1.3B valuation.

While Vibrant Cities has not yet signed on any retail tenants, Vibrant Cities Chief Financial Officer Ming Fung said the company was in talks with several national brands. Pivot plans to play host to a restaurant, and with gas lines and vent hoods all built, the team has no plans to change its approach.

Bob Tiscareno, the founder of Tiscareno Associates and the lead architect on the project, said that while there were no planned design changes to adapt to the coronavirus, many of the building’s amenities would aid with social distancing, including its roof deck, which will feature greenhouses and terraces. Designing the building for three different uses — short-term stay, apartments and retail — was challenging, Tiscareno said, but the demarcation of spaces in the lobby and the fact that short-term guests will be on only two floors will certainly make social distancing simpler when the property opens.

In addition to Pivot, Vibrant Cities has five other projects under construction in Seattle and Portland, all of which are mixed-use in some capacity. Wong said that in each case, the location gives him faith in his company’s high-quality approach.

“We’re not afraid to go in and pay the premium price for the best piece of land we can find and hire the best partners for the job because we know that’s what's going to create the best product,” Wong said. “We love working with Walsh because even though they’re one of the largest general contractors in the country, we get the feel and the expertise of the local office. It feels like a family-run business.”

This feature was produced in collaboration between the Bisnow Branded Content Studio and The Walsh Group. Bisnow news staff was not involved in the production of this content.