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State of Downtown Seattle Report Reveals Record-Breaking Numbers for Economic Activity, Increased Need for Space

California Public Employees Retirement System, Pacific Northwest, Seattle, Rubicon Point Partners, Sack Properties, Canyon Partners Real Estate, CalPERS

By Rebekka Wiedenmeyer

The Downtown Seattle Association held its 15th Annual State of Downtown event Feb. 8, where attendees had the opportunity to listen to featured speakers and attend breakout sessions regarding issues pertinent to the Downtown Seattle market, including details of the 2019 State of Downtown Economic Report. According to the report, downtown Seattle is experiencing record-high rates of job activity, investment and construction. As one of the fastest-growing cities in America, Seattle has ranked No. 1 in the “Top Expansion Markets for Bay Area Tech Companies” (CBRE) and “Largest Number of Cranes” (Rider Levett Bucknall). More specifically, however, downtown Seattle has contributed more than 300,000 jobs to the Seattle market alone, with a 39 percent increase since 2010. According to the DSA’s Development Guide 2018 Year-End Update, downtown also represents nearly $13.5 billion in new development in the downtown construction pipeline.

“If you look back to the start of this decade, we are probably at a level we would not have predicted back then,” said James Sido, senior manager of media relations and issues management at DSA.

The report states that downtown jobs account for nearly half of all employment in Seattle. Nearly 30 jobs were added per day from 2010 to 2018, with an average annual rate of nearly 11,000 jobs per year.

“Even just taking a look at the relationship where we are over the last three years, we’re really heavily slanted toward the amount of jobs that are coming into this market,” Sido said.

While accelerated job growth has helped make Downtown Seattle the hub for economic activity, Sido said it has also forced the city to face challenges when it comes to meeting those levels of job creation with adequate office and residential space. According to commercial real estate services company Cushman & Wakefield’s Marketbeat Seattle CBD Office Q4 2018 Report, vacancy is on a downtrend with big-name companies like Amazon, Google, Facebook and others expanding their footprint in the region, and office rents have risen over the last five years by $0.44 per square feet to an average of $41.60 per square foot in the fourth quarter of 2018.

“The root of [the problem] is the imbalance between the number of jobs that are coming into the city versus the housing that has been produced,” he said.

Downtown Seattle had a record-breaking number of projects in the pipeline, according to the year-end update, with 227 projects currently on the docket, almost as many as were completed in the previous eight years combined. Moving forward over the next two years, 68 projects are scheduled for completion, and according to the update, even if half of those hypothetically are delayed or cancelled, Downtown Seattle will still experience construction activity above its historic average through at least 2021.

In terms of commercial space, 6.4 million square feet of office space is under construction, to add to the 500,000 square feet of office space added in 2018.

The city has set a goal of 70,000 housing units and 115,000 jobs added to the market by 2035, but Sido confirmed data in the year-end report indicates Seattle will reach these milestones five to 10 years ahead of schedule, making the need for more space a critical factor in the city’s development moving forward.

Sido listed some of the solutions under consideration, including upzoning parts of the city and redevelopment based on parcel data.

“Finding extra space of where we’re going to absorb more of the jobs and residential growth, that certainly applies to the commercial space, as well, because we’ve had a really limited amount of space left in the downtown core in which we can really build sufficiently to absorb the new jobs coming into the market,” Sido said. “So that is going to be finding more space, more locations so we can build these offices.”

Part of what makes downtown attractive to companies and therefore so pressed for viable space is transportation, including public options like the light rail and the ferry. Sido mentioned cultural attractions, amenities and transportation as factors that draw employers to downtown.

“Our system really favors getting in and out of downtown Seattle, for better or worse, than other parts of the region,” Sido said. “Part of that is geographic constraints, because of where the hills and roads have to go. We do have kind of an all-roads-lead-to-downtown situation.”

Investment in the Downtown Seattle market is also at a record-high, with $4.8 billion actively under construction. Since 2010, Downtown Seattle has represented 49 percent of the declared value on construction permits issued in the city, according to the year-end report. Despite the shrinking amount of available space for development downtown, experts do not expect investment activity to wane or for investors to begin looking elsewhere.

“I don’t think that we’re going to see an end to historically high levels of activity for at least a few years,” said Elliott Krivenko, economic development research manager at DSA. “At some point there will be another cycle, but we’re also looking ahead to what that looks like. What’s left for the next upcycle, as well.”

Krivenko also mentioned details of several projects for Downtown Seattle moving forward, including six new light rail stations, the Washington State Convention Center, a free waterfront shuttle and the new Colman dock.

“There’s a lot of forward-looking projects that will create some great public spaces downtown that various companies will enjoy,” Krivenko said.

The city will have to face the challenges of finding more viable space for construction, both for residential and commercial buildings, as the market continues to grow and lean in the direction of more job creation.

“I don’t know how it’s exactly going to play out in terms of new jobs and housing in the next 10 years or so, but we do need to think about capacity,” Krivenko said.

The DSA will continue to bring this information yearly to the public, however, through its Annual State of Downtown events where Sido said the public can have a voice and be part of the solution moving forward.

“Our president and CEO [Jon Scholes] was also forthright in that we have challenges we need to tackle in order to make sure that this place keeps being this place that we love so much,” Sido said. “It helps our membership and the rest of downtown at large be part of the solution moving forward, and feel like they have a voice in making downtown be what it is.”