By Meghan Hall
In terms of development, downtown Seattle has historically received the most attention in terms of large-scale urban development projects as local companies honed in on its access to public transportation and walkable amenities. However, a new special report released by Colliers International this month has predicted that Bel Red — a transit corridor stretching east from Downtown Bellevue to Microsoft’s Campus in blank — will be the region’s next major development hub as Seattle becomes increasingly land constrained. Traditionally, Bel Red is the location of some of the Eastside’s oldest single-family neighborhoods and has been home to small businesses with a few larger multifamily and commercial developments sprinkled throughout.
However, that is soon to change, as Colliers states that business activity will continue to spill out of downtown Bellevue and Seattle to prompt a wave of new infrastructure, multifamily and commercial development that will change the face of Bel Red.
“There’s so much demand for Seattle office space and as that market becomes much, much more expensive, you’re seeing a lot of tenants look to Bellevue for similar high -quality options,” explained Denin Grcic, Senior Research Associate at Colliers International. “You’re getting all of the demand from big tech companies that continue to church out start-ups and migrations from other overpriced-markets. IT all stems from the tech demand which fuels this whole region.”
Employment on the Eastside is expected to grow by 28 percent by 2035, in part due to the expansion of major tech firms such as Microsoft, Amazon and T-Mobile. Recent expansions by Google and Amazon in Bellevue’s Central Business District are expected to bring 4,500 new employees to the area in the coming years. Facebook has close to 190 jobs listed for its office in Redmond as well.
The City of Bellevue has been actively preparing and embracing development in the area for more than a decade, when it adopted a masterplan for Bel Red known as the “Bel Red Vision.” The masterplan seeks to spearhead development in the area through two main initiatives: widespread investment in infrastructure to allow residents to traverse the area with ease and a rezone that gives developers greater flexibility when proposing projects.
“I looked to downtown Bellevue, and I saw it was filling up,” said Jeff Kaiser, a Colliers broker who specializes in Bel Red. “The City, when they created this upzone in 2009 had the foresight to create a great canvas and a great template to expand upon the growth that is happening in downtown Bellevue and what Microsoft has already built on the Eastside. The opportunities bookend by what is going on in downtown Bellevue and Redmond, so it’s a natural extension.”
Both initiatives are well underway. In 2009, a major rezone of the Bel Red Corridor was approved, allowing for the construction of 12- to 15-story buildings with a maximum height of 150 feet. This, states Colliers, has given developers the opportunity to pursue additional multifamily and mixed-use developments that create a more urban neighborhood.
Additionally, the City of Bellevue secured a $99.6 million TIFIA loan in June 2017, which will be used to produce major transportation products. The loan is expected to aid in the development of 10 new miles of roadway, 25,000 feet of sidewalk, 21,000 feet of bike lanes and water treatment facilities. Sound Transit’s Light Rail will also expand to the Eastside in the coming years, providing easier access without the need for a car. Two of the 10 new Eastside stations planned will be in the Bel Red Corridor, and the light rail will be utilized by about 50,000 daily riders by 2030.
While no new office product will hit the market in downtown Bellevue over the next three years, Bel Red currently has more than 1.8 million square feet of new office space in the pipeline, of which 668,000 is already under construction. However, just 60 percent of that space is currently available for lease as large single-user tenants have quickly leased the rest, as seen by companies such as Seattle-based REI committing to 350,000 square feet and Facebook snapping up 338,000 square feet in the Spring District. Redmond-based Microsoft is also undertaking a massive renovation of its headquarters and is expected to add 17 buildings and 2.5 million square feet to its campus.
“If you look at the proximity to the Bellevue CBD, and how that is becoming so interconnected, it’s almost as if you’re nearly there,” said Grcic. “Housing demand, tech demand, transit-oriented development, rates, vacancy, these are all reasons why [office] demand exists.”
The Bel Red housing and office markets are already seeing rapid expansion, and the desire for housing is already pressing given job growth in the region. Colliers reports that the Bel Red market will see 77 townhomes and 3,473 apartments delivered by 2022; 1,467 of those are already under construction. Average asking apartment rents reached $1,885 per month and a 5.5 percent vacancy rate during the fourth quarter in East Bellevue, where Bel Red is located. Colliers predicts that rates will only increase as new construction projects come to fruition and charge high premiums for space.
“There won’t be another downtown Bellevue just like there won’t be another downtown Seattle,” said Kaiser. “But South Lake Union did really well adjacent to downtown Seattle and Bel Red has got the opportunity.”
However, high levels of development in Bel Red have also caused land values to skyrocket, greatly impacting the area’s small businesses. Many of these businesses, states Colliers, must choose between cashing out their properties or losing their long-existing, local customer base as the business environment changes to stores that include high-end and national brands.
“The changes Bel Red will experience in the coming years are significant to say the least, but will bring prosperity to the corridor,” states Colliers. “Bel Red will become a connected, vibrant, and accommodating area attracting top talent to work and live. While growth and development in Seattle may be at its peak, Bellevue offers opportunities for more sustainable growth and is on its way to becoming the Puget Sound’s next boom town.”