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The New Construction Boom

Seattle's New Development Cycle Will Be Friendly to Renters—and Lavish for Landlords

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Olson Kundig Architects
A proposed 35-story tower at Second Avenue and Pike Street.
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Weinstein A|U
A six-story building proposed at 22nd Avenue and East Madison Street.

The awning of USA Nails at 22nd Avenue and East Madison Street is red, white, blue—and mostly green with a carpet of moss. For years, the nail salon and adjoining bar (the former Twilight Exit) have stood vacant, waiting to be demolished and redeveloped. A weathered sign in the window remains from the last tenant: "We will be moving beginning August 2008." That was, by no coincidence, the summer that mortgage-lending scandals crippled the global economy, slammed the door on bank financing that had fueled the nation's multiyear building boom, and froze construction throughout Seattle, including the two projects planned at this intersection.

But nearly three years later, the ice is thawing. "We are hoping to get started this year," says developer Jim Mueller of his proposal to build 96 apartments at the USA Nails site and another 222 apartments across the street. While banks search for investments, Mueller says, "The stars line up for transit-served, close-in, mixed-use residential projects."

West along Madison Street, down the Pike/Pine corridor, into downtown, and at outlying light-rail stations, four- to six-­story construction projects like Mueller's that have been stuck in limbo are beginning to secure financing and break ground. But unlike the last boom, developers are not planning condos, but thousands of apartments. On Madison Street alone, seven large projects are making headway this year. Many developers are scrambling to turn dirt quickly, trying to catch the crest of the next construction wave before the next bust.

"We are on the cusp right now of the largest boom market for apartments since the 1980s," says Matthew Gardner, a land-use economist and principal of real estate analysis firm Gardner Economics. "If you are a landlord, you are looking good. And the most important thing from a developer's perspective: There is money to borrow to build apartments. It is very unlikely we will see a condo tower break ground in the city."

Downtown, this means apartment towers: At Sixth Avenue and Lenora Street, twin 24-story towers that waited in the wings during the bust finally have capital to break ground "in the next 30 days," says Pine Street Group managing partner Matt Griffin. His investment partner, Bentall Kennedy, "agrees it's time to go," Griffin says. That project will contain 652 apartments. To the south, on Second Avenue and Pine Street, sources close to a previously stalled hotel-condo hybrid project foresee action soon—now as a 296-unit, 35-story apartment building. And developer Kevin Daniels said in March that he will break ground this summer in the massive parking lot north of Qwest Field to build two apartment towers, part of a 1.5-million-square-foot development project that's been in the works for years.

Technically, construction permits are up by only 15 percent compared to this time last year, says city Department of Planning and Development spokesman Bryan Stevens. But overwhelmingly, the projects making headway this spring were designed at the end of the last boom and already have permits (but were too late to get financing and are now being repurposed as rentals).

"You have folks who were trapped by the end of the last cycle, but they were able to fence up their properties and now they get to be at the top of the market, which is good. But it's also scary, because we don't know what this next cycle looks like," says Sally Clark, Seattle City Council's chair of the development committee. Among those fenced projects: Murray Franklyn has finally excavated a block-long chasm and is laying concrete where a gravel lot sat for years on Belmont Avenue and East Pine Street. Again, apartments.

"The stigma behind renting rather than owning doesn't exist anymore," says Gardner. There are several reasons for this, he says. Buyers are wary of signing mortgages on properties that may lose value. More baby boomers are retiring in the city. And younger generations are favoring smaller, urban quarters to sprawling suburbs. But Gardner adds, the apartment boom comes with some risk: "We are going to be delivering a lot of units in 2013 and 2014, but we could be oversupplied at that time." recommended

 

Comments (24) RSS

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1
"But nearly three years later, the ice is thawing. "We are hoping to get started this year," says developer Jim Mueller of his proposal to build 96 apartments at the USA Nails site and another 222 apartments across the street."

Stop it. just...fucking stop. Seattleites don't share your east coast dream of living cheek by jowl. Cut your losses and go home.
Posted by sonder on April 6, 2011 at 2:48 PM · Report this
2
Mainly because these monstrous eyesores will undoubtedly drive rents up a hundredfold. "Hey who WOULDN'T want to live in an efficiency advertised as a one bedroom for 1400 a month?"
Posted by sonder on April 6, 2011 at 2:53 PM · Report this
3
@1, yes we do. I was born and raised on the quiet single-family side of Capitol Hill, but ever since I was old enough to get my own apartment I have always loved living cheek by jowl.
Posted by gloomy gus on April 6, 2011 at 4:57 PM · Report this
4 Comment Pulled (Spam) Comment Policy
5
@2 - How does adding supply jack up prices? The prices of these new places will probably be crazy high, and then either nobody will live there (like the condos after people came to their senses) or nutty people will move in and leave other apartments/houses/whatever for others to move into.

It is going to be a tenant-driven market in Seattle until wages increase. Rents are driven by people's ability to pay the rent.
Posted by Vesuvius Hambone on April 7, 2011 at 11:53 PM · Report this
Dougsf 6
As home ownership becomes out of reach for more people, the rental market heats up, and vice versa. It's the way it's always been.

600+ vacant units flooding the market should serve stabilize rents in Seattle for a while, but it will be interesting to see what becomes of that property in the future. It's possible it will be a lovely market-rate building for decades to come, but buildings that size are notoriously difficult to manage.

It's also important to remember, real estate isn't simply a matter of supply and demand; real estate is controlled by the banks willingness to lend—which in turn has a direct impact on the rental market.
Posted by Dougsf on April 8, 2011 at 12:20 PM · Report this
Cato the Younger Younger 7
Fucking shit...I wonder how high rents in Seattle are going to skyrocket up to? Is $2500 too high for a one bedroom "near" downtown Seattle? I'm going to guess not.
Posted by Cato the Younger Younger on April 8, 2011 at 12:29 PM · Report this
Will in Seattle 8
@6 has a point.

Basically, when housing ownership gets above 2-3 times annual salary, the market shifts towards renters.

Either the market will force down housing ownership prices, or wages will rise (unlikely if our Corporations Are People governments continue), or more likely people will move away from home ownership to renting.

The market cares nothing for your ideology, it just reacts to the stimuli and the supply demand curves.
Posted by Will in Seattle http://www.facebook.com/WillSeattle on April 8, 2011 at 1:15 PM · Report this
9
@7, take heart - as newer stock gets added, those landlords will have to price at the top of what the market will bear, the space where existing stock currently competes for renters.

Accordingly, owners of that existing stock will be devalued and have to lower its rents, either nominally or by offering months free, in order to maintain good occupancy and cash flow. And so on down the rental food chain.

Really, if there must be a boom (sigh) it's MUCH better for locals that it be in rentals rather than mortgaged units.

Tim Ellis at Seattlebubble (who's been covering the local housing market's weirdness since before the Stranger realized there even was any) had an interesting post, with good commenters as well, a couple weeks ago:
http://seattlebubble.com/blog/2011/03/16…
Posted by gloomy gus on April 8, 2011 at 1:27 PM · Report this
10
For the love of god, YES! More rental stock, finally! Get some more units on the market so we can get some competition going and I can stop paying %75 of my pay on rent.
Posted by Lack Thereof on April 9, 2011 at 3:21 AM · Report this
emor 11
Finally, some kind-of good news! I have not enjoyed rents out pacing my income for the past few years.
Posted by emor on April 9, 2011 at 9:14 PM · Report this
12
Well it's good and bad news. Good news because supply does help reduce pricing. Bad because this wouldn't be happening unless a round of rent increases was being predicted.

What we really need are policies in place that encourage low and moderate income housing.
Posted by Austerlitz sky on April 10, 2011 at 11:13 AM · Report this
13 Comment Pulled (Spam) Comment Policy
14
Is15's spam post is basically the equivalent of the real estate industry flack-ery that a typical Gardner Economics "study" typically provides for his clients.

Posted by Mr. X on April 10, 2011 at 9:52 PM · Report this
15
Ack, replace that second "typical" with "usually"
Posted by Mr. X on April 10, 2011 at 9:56 PM · Report this
16
If they're gonna be as ugly as the new buildings on Broadway with the chains Q'dobas and tanning salons and shit, than that sucks.
Posted by nurse-nancy-boy on April 11, 2011 at 2:22 PM · Report this
17
@16: That's the nature of new development. Wait for those new buildings to mature a bit. Then rents will go down and non-chain stores will be able to move in.
Posted by broyan on April 12, 2011 at 1:10 PM · Report this
18
Sonder begins their "argument" with claims that all of Seattle think the way they do then moves on to display a level of ignorance in economics on par with this guy.

http://scholarlywritingreviewed.com/wp-c…

How do they figure out how to turn their computer on?
Posted by Cynickal on April 12, 2011 at 2:38 PM · Report this
19
I'll tell you what this means. It means rents will fall like a rock ... in Kent.

So if you own a little sports bar out in a strip mall, you're chewing your nails up to your elbows over this.

But if you own a bar in Belltown? Sweet.
Posted by Paddy Mac on April 12, 2011 at 5:24 PM · Report this
20
Is anybody building accomodation for those who are chronically underpaid and overtaxed?Or will the wage slaves be forced to commute ninety or more minutes in each direction?
Posted by 5th Columnist on April 14, 2011 at 6:40 PM · Report this
21
Tenant's unions and rent-control laws.
Posted by 5th Columnist on April 15, 2011 at 2:14 PM · Report this
22
4-6 floors of cardboard-wood apartments near light rail?! Really?! While building steel-concrete 20-30 floor towers in South Lake Union/Belltown where light rail isn't even planned. This just proves that rapid transit is not popular here...
Posted by mikey on April 16, 2011 at 11:39 PM · Report this
23
@22 -- I agree that the 22nd and Madison building doesn't make sense. It is an ugly bread loaf where a pencil would make a lot more sense. But South Lake Union and Belltown aren't very far from mass and rapid transportation. Since you are close to downtown, you can take a bus practically anywhere (or a ferry for that matter) and it isn't that far of a walk to a railway station. I'm sure that is one of the big selling points to apartments and condos in that area.
Posted by Ross on April 20, 2011 at 5:21 PM · Report this
24
The best selling point in SLU and Belltown is a unit with with parking space, grocery store below, and easy freeway access. People who make that much money are not interested in walking through mentally sick crowds and mad gangbangers to get to regional transit, and especially not into riding a slow bus that stops at every block. By the time you get to Westlake Mall, you could already be on the Eastside if you drove.
Posted by mikey on October 6, 2011 at 8:05 PM · Report this

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