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Downtown Seattle Association’s 2018 Development Guide Highlights Active Time For the City of Seattle

Seattle, Downtown Seattle Association, 2018 Mid-Year Update Development Guide, Center City Connector, First Hill, Central Business District
Image courtesy of Downtown Seattle Association

By Jack Stubbs

“To help give color, a theme-setter for what’s happening downtown is that if you look at the city’s 2035 population growth projection, we’re on pace to hit that mark around 2022,” said James Sido, public relations manager with the Downtown Seattle Association. “We’re experiencing a growth and influx that’s well beyond what the city had planned for. That in and of itself is really eye opening and gives a jumping off point for the kind of investment we’re seeing in downtown.”

Downtown Seattle is growing at an unprecedented rate and the growth in the city’s Central Business District continues to be shaped by new commercial and residential projects coming online. Downtown Seattle Association (DSA) recently released its report called the “2018 Mid-Year Update Development Guide,” which explores how investment and development activity in downtown Seattle continues to impact the city.

Some of the key findings were that downtown Seattle is seeing a historic level of investment—a record $5.6 billion worth of projects were under construction in downtown Seattle at the end of second quarter 2018, topping a previous high of $5 billion one year ago. The value of current construction is 27 percent higher than at this point last year and nearly five times higher than in 2010, which was the decade’s lowest point. Locally, downtown Seattle—which DSA defines as the area ranging from South Lake Union to the SoDo neighborhood—also represents 58 percent of the construction value for permits issued in Seattle from June 2017 to June 2018.

Additionally, residential construction continues to dominate the skyline, with 60 percent of projects under construction including some residential component. On the commercial side, in 2017 downtown Seattle saw more office construction than any other central business district (CBD) in the U.S., according to the report, and Seattle represented 20 percent of all CBD office construction in the U.S.

On the development site, downtown Seattle currently has 224 projects in the pipeline and 65 are currently under construction. From 2018 to 2020, an average of 52 projects are slated for completion each year, which is slightly higher than the average of 44 projects that have been delivered each year since 2005, according to the report.

Another of the main findings highlighted in the report is the extensive amount of residential development occurring. In 2017, developers completed 5,672 residential units downtown (5,549 of which were apartments), which is the highest figure since DSA began tracking data in 2005. There are currently 6,883 apartment units under construction compared to 8,880 at the same point last year.

According to data provided by CoStar, first quarter 2018 did not see year-over-year growth in average rents, but did reveal higher vacancy rates and more landlords offering concessions. This finding “suggests that additional housing supply can reduce pressure in a heated housing market,” DSA’s report states. “While challenges related to housing affordability remain, this dampening of a heated rental market is welcome news to renters.”

In spite of the growth occurring on the residential side in downtown Seattle, there remains a greater need for a wider variety housing supply in other areas of the city as well, according to Sido. “This underscores the idea that we need more multifamily housing in other parts of the city. It doesn’t all have to be high-rise necessarily; it can be mid-rise or townhome, but I think we’re seeing the demand for that housing elsewhere,” he said. “Downtown shoulders a lot of that burden, but in order to have a more stable housing market, we do need those choices elsewhere.”

One of the factors that will continue to determine effective growth over time in Seattle is the city’s land-use policies, which could have wider-ranging impacts throughout the rest of the city—most notably rising housing costs. Current regulations allow just 20 percent of Seattle’s residential zones to accommodate multi-family homes, according to the report, which states that “these constricted zones will face enormous pressure to absorb hundreds of thousands of newcomers in coming years. Confining development will have a direct impact on the cost of land and increasing rents.”

There are some concerns that the rapid growth occurring in Seattle could have a negative impact on the trajectory of the city looking forward if the land-use codes favoring single-family homes are not altered. “If you look at current regulations allowing just 20 percent of Seattle’s residential zones to accommodate multifamily, that percentage needs to increase. We’ve been pretty consistent in our messaging around that,” Sido said. “We need more space in more areas for multifamily housing within the city of Seattle,” he added.

Since 2000, Seattle urban center and urban village density has increased from 2,664 residents per square mile to 9,508 residents per square mile. During the same period of time, Seattle population density grew 22 percent city-wide but only 13 percent in single-family neighborhoods.

In the wider regional context, there are lessons that can be learned from other cities along the West Coast, notable San Francisco. “A look at San Francisco tells a cautionary tale. San Francisco is well known for a shortage of housing driving up prices. Many fear Seattle is headed in a similar direction,” the report states. From 2006 to 2017, Seattle saw the delivery of 62,000 new housing units, which is double what San Francisco added during the same period, according to data provided by Seattle Department of Construction and Inspections and San Francisco Department of Building Inspection.

And Seattle has room for further expansion, but only if that positive progress is continued in the longer-term, according to Sido. “It’s a circumstance where we were ahead of San Francisco when it came to housing unit generation; we’ve been able to produce a lot more. But we have to continue to go in that direction to allow that growth,” he added.

With Seattle in particular, there is an emphasis on the city’s urban centers which are zoned for multi-family. In 2017, nearly 90 percent of new housing in Seattle was built on 18 percent of land zoned for residential, and more more than half of all residential development in Seattle occurred in the urban villages that make up greater downtown Seattle, according to the report. “Something like two-thirds of the city is zoned single-family residential; so all that growth is directed towards downtown urban villages,” said Elliott Krivenko, research and data manager with DSA.

On the commercial side, seventy million square feet of commercial office space currently supports Seattle’s downtown economy, and the downtown core has added 12 million net square feet of commercial space since 2010, during which time downtown occupancy increased from 86 to 92 percent, according to the report. There are currently 6.5 million square feet currently under construction, which is 61 percent more than the 4 million square feet that were under construction during the previous cycle in 2008.

Looking ahead, Seattle is set for further growth on the commercial side, heading into third quarter 2018, over the next couple of years: including space currently under construction, there is a total of 14 million square feet of office space currently in the pipeline, and more than 10 million of that is slated for delivery by the end of 2020.

Demand in the hospitality sector, also, indicates that downtown Seattle continues to be viewed as a desirable place to locate. “There’s a lot of demand; it just keeps going up every year,” Krivenko said. Downtown Seattle is currently home to 15,000 rooms, which is the highest hotel capacity in the city. A record 2,192 rooms are currently under construction and scheduled for completion in 2018, according to the report, which is three times as many as the previous 10-year average.

A large portion of this current figure is due to the LMN-designed, 1,264-room Hyatt Regency Hotel located at 808 Howell St. near the city’s $1.7 billion planned expansion to the Washington State Convention Center. When complete in 2018, the R.C. Hedreen Co.-developed project—which will also include 105,000 square feet of meeting and ballroom space—will be the city’s largest hotel and will occupy an entire city block. Looking ahead, a total of 6,414 new rooms are in the hotel pipeline, which is enough to increase the hotel inventory in downtown Seattle by 43 percent, according to DSA’s report.

Looking ahead over the next few years, one of the factors that a will continue to impact demand across all of the market sectors in downtown Seattle—commercial, residential and hospitality—is the city’s continued ability to provide the necessary transportation infrastructure in a growing region, thinks Sido.

As one example, DSA is currently working on the Center City Connector—on which construction began in 2017—which will have an anticipated daily ridership of 20,000 and ultimately connect the existing South Lake Union and First Hill streetcar lines. “The Center City Connector is the only high-capacity downtown transit enhancement that will be delivered before 2035,” Sido said. “We’re no doubt trying to play catchup on the transportation side. It does underscore the importance of getting that public transportation piece right to make sure we’ve got the network built out to have more capacity the ability to move people downtown during this period of growth as well.”

As public infrastructure and transportation projects like the Center City Connector become realized—and new commercial and residential developments continue to come online—the extensive period of growth and expansion occurring in Seattle ultimately bodes well for the future of the city, thinks Sido. “We’ve got some issues and complex scenarios facing us, but there are good problems to be presented with because they’re coming from a place of growth. And cities that don’t experience growth are not places where people or investors necessarily want to be.”