Home Commercial “Placemaking” in Renton: Economic Drivers Shaping the City on the Edge of...

“Placemaking” in Renton: Economic Drivers Shaping the City on the Edge of Lake Washington

SHARE
Seattle, SECO Development, Renton Chamber of Commerce, Colliers International, Kidder Mathews, Renton Technical College, Boeing
Southport Office Campus. Rendering courtesy of SECO Development

By Jack Stubbs

“Renton is definitely changing, we’re seeing new schools being built, and the whole Kennydale area of Renton is really changing as well…being around the lake is a desirable thing. Anytime there’s a body of water, people want to live around it,” said Vicky Baxter, CEO of the Renton Chamber of Commerce.

Renton, a city located on the southernmost edge of Lake Washington, is changing: a growing tech sector, a healthy industrial market and a housing market on an upward trajectory are all components that indicate an active city. A growing medical industry, increasing demand for office space, promising educational programs and a desire of tech workers to be able to live more affordably outside of the downtown core in Seattle, are all factors driving the economic engine of the up-and-coming city.

According to Baxter, much of the growth occurring in Renton over the last few years has been due to the creation of jobs across multiple sectors, with the medical industry leading the way and several companies choosing to locate in the city. “I took this position four years ago, and I have seen Renton really popping [since]. Kaiser has moved [here] with its Corporate campus [at 1200 SW 27th St.] which is creating jobs,” she said. “And Valley Medical is expanding with its new cancer center. The Swedish Hospital is also moving in and expanding their footprint here as well,” she said. The presence of Boeing in the city—the company’s factory is located at N 6th St. on the edge of Lake Washington—is another factor driving economic growth, according to Baxter, and the company now has around 50,000 employees at the plant.

In terms of demographic patterns, Baxter is seeing a broader shift to Renton as the younger generation is seeing it as an increasingly viable place to settle down. “Renton has always been known as a blue collar town, but I think we’re going to really start seeing a huge economic impact with young millennials moving in and demanding a downtown that has music and flavor,” she said. “I think Renton was historically thought of as an older community, people retired here and thought of it that way… but we’re seeing it becoming a younger city,” Baxter added. Places like The Landing, an outdoor shopping plaza with retail stores, restaurants and a movie theater, are adding to the attraction of Renton.

Looking forward, growth in the technology sector will be one of the economic drivers in the city. And even though Renton will increasingly be looking to attract tech talent from Seattle—which is approximately 15 miles to the north via I-5—the hope is that Renton retains its unique history in relation to its neighboring cities to the north. “There’s been more interest in putting technology here in Renton so that [employees] don’t have to live in Seattle, Redmond or Bellevue,” Baxter said. But even with this emphasis on technology, Baxter thinks that Renton will look to retain its unique history. “It’s a storytelling city with lots of diversity. I think Renton might embrace art and the historical side as well,” she said.

In an effort to help the city to maintain its identity, the city and the mayor have been planning for longer than the last 4 to 5 years for the evolution that the city is now experiencing. “I think the city has been planning for years, long before I came, for this growth, knowing that people would eventually discover Renton,” Baxter said. She also added that the city is working to ensure that it is not just viewed as a suburb of Seattle, with the variety of employment opportunities available in Renton setting the city apart from its neighbor to the north. “I think we’re going to be a much different city that can actually support blue and white collar jobs. There will be more opportunities for the talents of people just starting out in their careers to work in a plant or in manufacturing,” she said.

The educational platform in the city will also influence its future trajectory, according to Baxter. “Renton Technical college is working very hard to offer a step up for our kids who choose to stay here…they’re also working with Boeing to create jobs in the future that maybe won’t require a four-year degree but will still [lead to] very good jobs,” she said. Renton Technical College is also working to help fill hospitality jobs at the Hyatt Regency Hotel, which is part of SECO Development’s Southport Office Campus, a development that Baxter thinks will be a game-changer for the city.

The Southport Office Campus, which is being developed by SECO Development and set for delivery in first quarter 2019, is an in-the-works office complex that will be comprised of three 9-story office buildings that will include 683,000 square feet of Class A office space along the edge of Lake Washington. The project will also include 30,000 square feet of on-campus retail space—with direct proximity to 600,000 more square feet of retail at The Landing—multiple indoor/outdoor meeting and collaboration spaces and access to 16 outdoor spaces and rooftop terraces, according to the project’s web site.

Southport is located at 1133 Lake Washington Blvd. N. on the edge of Lake Washington, and SECO originally broke ground on the project in early 2016. The 17-acre mixed-use office campus—which sits on the site of an old power plant—is part of a longer-term multi-phase project that started several years ago, according to Kip Spencer, director of leasing and marketing at SECO Development. Michael Christ, CEO of SECO Development, purchased the land 18 years ago and embarked on the multi-stage process: the five story, 383-unit Bristol Apartments were built in 2008, and the 347-room Hyatt Regency Hotel—which offers 60,000 square feet of indoor/outdoor meeting space—was completed in July 2017. The office campus is about 55 percent complete, and SECO aims to top off on the first two buildings in summer 2018, according to Spencer.

In the longer-term, the idea is that Southport will impact the way that people view Renton in relation to the rest of the Eastside. “We consider this project to be an Eastside project [as well as a Renton project]. It’s extending how people perceive the boundary of the Eastside and bringing a different complexion to how people perceive Renton,” Spencer said.

In terms of drawing potential employees, the hope is that Southport will attract the younger demographic down from Seattle due to the cheaper cost of living. “I also think people recognize the fact that [Renton] is one of the few Eastside communities that has relatively affordable housing…there’s also a lot of land left to develop here,” Spencer added.

With an emphasis on larger floor plates, the target audience for the in-the-works office campus will be predominantly tech, according to Spencer. “We built this project really to attract tech firms. These next-gen buildings like Southport have technology built in with large floor plates…tech firms like that, because they can fit entire divisions on single floors,” he said. “We were also able to address some of the issues facing these tech workers…one of which is a healthy stock of affordable housing,” he said.

And affordability issues across the board will continue to play a role as well, according to Giovanni Napoli, senior vice president on the multifamily team in Kidder Mathews’ Seattle office, who offered another perspective on the relative cost of housing in Renton. “As the region grows and becomes more expensive in these core markets, the suburban areas are going to grow at a faster rates than the core markets because of the affordability factor,” Napoli said. In particular, he thinks that the Kennydale neighborhood in particular—where SECO Development’s Southport campus is located—is set to experience growth moving forward. “Kennydale is seeing a lot of chance because it’s close to the water,” he said.

From a multifamily perspective, the price of new construction has been rising, indicating the increasing desirability of areas like Kennydale. “In the Kennydale area, you’re starting to see new construction homes sell for $1.4 million to $1.5 million right now…in Renton you never saw 7 figures for new-construction single-family housing…so there’s no question that the growth in the core markets are impacting Renton,” Napoli said.

And while there are currently no specific multifamily sales in particular that shed light on the residential market in Renton, Napoli thinks that investor confidence in the city has been increasing in recent years. “I don’t know that there are any key sales that have occurred there recently or any that we see coming up…but from an institutional [perspective], in this past cycle, institutions who wanted to be in A or solid B-plus locations have tended to bear away from Renton,” he’s said. “Now, the city is a more acceptable submarket for a lot of these investors to purchase in. I think it’s become more of a target market.”

However, all of the change that has been occurring in the city over the last several decades—and the increasing desirability of the city—is not always viewed as a positive prospect, according to Baxter. “The change is good and bad. Some people love change and embrace it, but some people who have lived here for 30 years with a view of the lake now have housing going up around them might not view the change as favorably. The city is in transition,” she said. The population growth that has been occurring in the city over the last decade is representative of this change. According to Baxter, in 2006 there were 57,000 people living in Renton; currently, there are 117,000. “That’s a huge amount of growth for a city this size,” she said.

And as part of the growing city, the hope is that Southport’s specific location right on the waterfront will help to change the long-standing ethos of Renton, according to Spencer. “Historically, Renton has been known as an industrial town and kind of blue collar with Boeing, warehouses, that’s been the identity or almost stigma. But Southport has a true waterfront orientation. So people are viewing this area as a waterfront community rather than an industrial neighborhood,” he said.

However, while there are shifts occurring in Renton away from the industrial character of times past—with the increasing influence of technology companies and medical groups like Kaiser Permanente and Valley Medical Center—Renton still has a healthy industrial market, according to Matt McGregor, executive vice president and industrial corporate real estate consultant in Colliers International’s Seattle office. Rising rents further north mean that potential tenants are viewing Renton as a more viable alternative. “What Renton is seeing is significant rent hikes, and the South Seattle market is the tightest in the country. The rents in Seattle have escalated to the point where some of the tenants can’t afford the rents or need more space,” McGregor said. “We are seeing a lot of uses that would have gone in South Seattle now coming into Renton, because [tenants] don’t want to pay those higher rates.”

From an industrial perspective, Renton’s location makes it a strategic choice, according to McGregor. “Renton has really become a logistics hub, because it is the first stop in the industrial valley, which includes Kent, Auburn, Pacific, Sumner, Puyallup and Fife,” he said. “From a logistics perspective, you can get product up to Bellevue and Seattle or the airport all very quickly, so Renton has a lot of benefits.”

However, McGregor also highlighted that Renton’s industrial market is saturated due to the lack of any new development coming online. Currently, there are 6.3 million square feet under construction in the entire industrial valley. Of that, there is only one industrial building under construction in Renton: DCT Industrial’s 163,000 square foot Monster Road Distribution Center, which is located at 601 Monster SW Rd. According to McGregor, the industrial vacancy rate in Renton is currently 1.8 percent, contrasted with the average national vacancy rate of 6.5 percent.

McGregor believes that this vacancy rate will continue to drop—and rents will continue to rise— with the shortage of new product coming online. And another factor contributing to the dearth of available inventory in Renton is due to the lack of different product types being built in the valley. “Out of the 6.3 million square feet, 100 percent of that construction is big-box distribution space, while Renton is home to smaller distribution spaces, which means that these smaller spaces will see the biggest jump in rents,” McGregor said, also adding that he believes developers are choosing to build big-box spaces because land is at a premium, developers are confident the spaces will lease, and the construction of big-box is more efficient than smaller product.

In the longer term, also, the city stands to gain from its geographical location. Currently, there is a significant rent discount between Seattle and Renton; however, this gap might be bridged over time, according to McGregor. “I think the gap between rents in Seattle and Renton will begin to close…which doesn’t mean Seattle’s going down; it means Renton is going up,” he added.

In line with this dynamic—where the relationship between Seattle and Renton is being increasingly scrutinized as the city by the lake continues to flourish—Renton’s geographical locale stands to benefit from the growth and densification occurring in Seattle, according to Napoli. “I think Renton, like a lot of these close-in first-ring cities, will be a natural beneficiary from all the growth we’re seeing right now,” Napoli said. “What’s unique about Renton is that it sits right on the south shores of Lake Washington. So you get push-down from Seattle on the west side of the lake and push-down from Bellevue on the Eastside as well,” he said.

The geographical locale of Renton makes the city an even more attractive proposition for those looking to invest in the region. “The counterpart market to Renton would be Lynnwood to the north…six years ago, Lynnwood and Renton weren’t necessarily big institutional markets on people’s radar… but there was a period in this cycle where the two submarkets experienced the highest percentage rent growth in the region for a certain amount of time because they’re so close to the major metro market,” Napoli said.

With all of the densification occurring in Seattle and throughout the greater Puget Sound region, Renton’s location will continue to bode well for the long-term prospects for the city, which Napoli considers a first-ring market. “Because our region is so dense, there aren’t a lot of markets where you can go 10 to 15 miles outside the city and have pretty big affordability differences,” he said. “I think the suburban markets will have longer legs than than the core [markets] in terms of rent growth because of the affordability. Because of the infrastructure and employers, Renton should be able to sustain a longer run as a first-ring market.”