Pie in the Sky
The Building Bust Could Kill Some of Seattle's Most Ambitious Towers
On First Hill, a massive sign obscured by layers of graffiti ballyhoos the Boylston, featuring 43 luxury condominiums with slab-granite countertops, workout facilities, and valet parking. But the website on the sign no longer exists. On Ninth Avenue and Pine Street, a lot sits vacant. Records for the site show that since May of last year, the site's developer hasn't pursued a permit for a 37-story tower. Near Green Lake, promises made in 2004 to redevelop the Vitamilk dairy into hundreds of residential units have produced only an excavated maw.
Seattle's building boom has busted, despite cranes on the skyline for developments that broke ground before the economy took a dive last summer. Some projects, specifically three- and four-story apartment buildings, seem to be keeping pace, but the more ambitious towers are on hold—perhaps indefinitely.
"In terms of intake, the number of permits [is] down by about 8 percent," says Alan Justad, spokesman for the city's Department of Planning and Development (DPD). "But the value of those permits... is down about 40 percent," indicating that fewer ambitious projects are being planned. Indeed, records from DPD indicate that 35 major projects have stalled in the design-review process since this time last year. Several more whose developers have filed permit applications or submitted updated designs are in doubt.
Matthew Gardner, a land-use economist and principal of real-estate analysis firm Gardner Johnson, says, "I do not expect any new residential [towers] to break ground this year." While Seattle's economy is faring better than parts of the country that have a glut of condos and few buyers (like Miami), the strained national market is forcing developers to prove they can presell many of the units before they get financing. Buyers, meanwhile, have a hard time getting loans to buy the presale units. Gardner adds: "Unless you are digging a hole, I'm not quite sure it's going to happen."
Even a hole in the ground is no guarantee. Last August, construction halted at Second Avenue and Pine Street, the site of the extravagant 1 Hotel & Residences. And last week, developer Paul Brenneke sold his share of the 1 Hotel project, leaving Starwood Capital Group literally and figuratively in the hole. Also last week, plans for a 37-story luxury condominium tower on Eighth Avenue and Pine Street were shelved until at least next year.
But next year may not look much better for condo developers, says downtown realtor James Stroupe. "Right now, if you don't see a crane for new [condo] construction, it's not getting built until 2011," he says. Stroupe says developers will probably build the project on Second Avenue—eventually—but not others. "Just look at the ones that look ridiculous," he says. "They probably won't get built."
Perhaps the most ambitious project in town is the Heron and Pagoda Towers, two 550-foot skyscrapers containing condos, a hotel, and a shopping mall. Although developer Alec Carlin says a master use permit application was filed this month, he's not sure it can break ground in this economy. "Timing is everything," Carlin says.
Carlin was one of the few developers who even returned calls. Nitze-Stagen, which is planning a 38-story office building, and Schnitzer West, planning a 40-story office tower, both on Fifth Avenue, didn't return calls about their projects. Realtors cite the potential implosion of Washington Mutual (its stock dropped from $45 to $5 in the last year), which is estimated to hold about a million square feet of downtown office space. If WaMu were to abandon its two downtown towers, demand for new office space would plummet.
The paradox in the doom-and-gloom forecast, however, is that demand is expected to resume at roughly the same moment supply disappears. "For year-to-date, we're effectively balanced for total condo sales as the past years," says Dean Jones, president of Realogics, one of Seattle's preeminent development consultants. But, he says, "We'll have a real dearth of condos by 2010."