Development Guide June 2015 Update

Transcription

1 Development Guide June 2015 Update Overview: The Downtown Seattle Association (DSA) publishes two development guides each year to quantify development activity taking place within Downtown Seattle. The first, published in February, is an annual summary of all development activity for the previous calendar year. This is followed by a midyear update each June. An explanation of criteria used in this analysis and a glossary of terms is included at end of this document. Image Credit: James Sido Key Findings: With 106 projects currently under construction, about to break ground or completed since January 2014, there are more active projects Downtown since tracking began in 2005*. Although residential projects continue to dominate the construction landscape, commercial projects are starting to see a surge as well. There is four times as much office space under construction Downtown compared to two years ago and more office space under construction than any time since tracking began. There are three times the number of apartment units and nearly twice as many total residential units under construction compared to the height of the previous development cycle (in 2007) * An Active project refers to those under construction, permitted and ready to begin, or those completed in the most recent calendar year. Mid-year updates include completions year-to-date as well as from the previous calendar year.

2 Construction Costs (in Billions) Summary of Development Activity Downtown Seattle s construction boom continues, with the highest level of activity seen since tracking began in There are currently 48 projects under construction totaling $4 billion of investment. This is 18% more than at the end of 2014 and 35% more than the previous peak in (inflation adjusted). Current development activity is four times what it was at the lowest point of the recession in 2010* and above the average for the past ten years. Figure 1 below shows the ten-year trend, with a green line indicating average cost of under construction projects between 2005 and 2015 (adjusted for inflation). *While there was no mid-year update conducted in 2010, year-end statistics showed construction costs dipping to $1 billion that year. Figure 1. Construction costs for projects under construction, (mid-year figures). Green line indicates the average. All figures are inflation adjusted to 2015 dollars. $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 Average Inflation adjusted, 2015 dollars Both the total construction expenditures Downtown and the number of projects are on the rise. The average cost per project is also the highest it has been for the past decade, even when adjusted for inflation. This is largely a reflection of the large size of many current developments. These include: Seattle s largest condominium development, the nearly completed Insignia Tower; The Mark, a 660-foot tower in the heart of Downtown that will be the fifth largest building in Seattle; A 278-room hotel as the next phase of the Stadium Place development project; The Troy Block, another 800,000 square feet of office space for Amazon.com, located in South Lake Union; and Amazon s development of four blocks in Denny Triangle into more than 4 million square feet of office space (with the first tower opening this year). This is just a sampling of some of the large projects under way. Even larger projects are still in the design phase (not included in these statistics), including an expansion of the Washington State Convention Center, a redevelopment of the Rainier Square property and a potential new arena in SoDo. Page 2 of 9

3 Completed Projects Figure 2. Number of projects under construction and average project cost each year In the first six months of 2015, 20 projects broke ground and 24 finished construction. With 36 projects projected for completion by the end of the year, Downtown Seattle is on track to see the largest number of completed projects in the past decade. Figure 2. Number of construction projects completed by year Project Mix The mix of project types has changed over time. While the majority of projects under development have typically been residential, toward the end of the recession a larger share of active development was in other project types. About a third was in office, a third residential and a third in other types such as retail and medical/biotechnology projects. Currently, about two-thirds (63 percent) of building projects have residential components, while about one in five have an office component. On the following page, figure 4 shows the number of non-residential compared to total residential projects permitted, under construction or completed that year. The stippled portion of the green shaded area indicates the portion of residential projects that were mixed use (residential with major office or hotel Page 3 of 9

4 components). From 2008 through 2010, more than half of projects were without a residential component. Residential projects once again assumed a majority position in A dozen non-residential projects have 2015 construction start dates. This largely reflects an increase in the number of office projects under construction. However, there are 20 residential projects Downtown with 2015 start dates, leading to a project mix similar to Figure 4. Number of Active residential versus non-residential projects (year-end statistics) Mixed-Use Residential Residential Non-Residential Image Credit: James Sido Page 4 of 9

5 Residential The Downtown apartment market is on track to see 3,487 units delivered in That is more deliveries than any year since tracking began in Downtown Seattle saw the delivery of more than 9,000 units in the last 3.5 years. With vacancy rates staying below 4% and the local economy still in high gear (potentially supporting further increases in occupancy), approximately 8,500 additional units are scheduled for completion by the end of At the end of 2010, three apartment projects were under construction in Downtown Seattle with a total of 409 units between them. In 2011, however, residential projects led a new surge in Downtown development. By the end of 2011, 17 projects were under construction. Each year since, the number of projects and units increased. Now there are 28 residential projects under construction representing 6,428 units (5,552 apartment and 876 condominium units). Proposed projects, most of which currently have no set completion date, could add more than 15,000 additional units. This does not include an undetermined number of units in the Yesler-Terrace projects beyond the initial phases of that development (the overall project may ultimately add as many as 5,000 additional units). Photo Christopher Nelson Figure 5. Historic and Projected Residential Unit Deliveries Downtown, Project Status as of June Completed Currently Under Construction Planned, Permitted and Scheduled Page 5 of 9

6 Square Feet Under Construction (in Millions) Office As of June 2015, 7.1 million square feet of office space was under construction, up from 3.2 million square feet in June of This is more than the 5.4 million square feet of office space that came online during the last construction cycle between 2005 and The current level of construction is the highest since tracking began in Office construction last peaked in the second half of 2008 with 4.8 million square feet of office space under construction. The current wave of construction activity includes approximately 4 million square feet of space for the continuing expansion of Amazon in South Lake Union and Denny Triangle. Amazon has been a major driver of office activity in recent years. Amazon occupies several office buildings Downtown for a total of 4.1 million square feet. Currently, the company has plans to lease or build an additional 5.9 million square feet of space for a total possible footprint of about 10 million. Image Credit: James Sido The current wave of development is not all Amazon. Several other projects have broken ground, including office space that will be occupied by Weyerhaeuser, Facebook and others. Other projects recently broke ground without announced tenants. These include The Mark, a tower with 530,000 square feet of office in addition to a hotel; Madison Centre, an office tower with 750,000 square feet of office space; and Midtown 21 with 365,000 square feet of office space. Figure 6. Downtown office space under construction (mid-year update) Page 6 of 9

7 Hotel With more than 14,000 rooms, Downtown already has the highest concentration of hotel rooms in the region. With a growing tourist industry and a major convention center expansion in the works that could double convention capacity, hotel demand in Downtown Seattle is strong. Developers are recognizing this. After several years with no new development, hotel space is beginning to grow once more. In 2014, Motif Seattle (formerly the Red Lion Hotel) completed renovation of its 296-room hotel, adding 22 new rooms in addition to improvements to restaurant, outdoor entertainment and lobby spaces. In addition, Kimpton Hotels completed a conversion of an apartment building into the 97-room boutique Palladian Hotel. In the first half of 2015, two more hotel projects completed construction. Hyatt House opened near the Seattle Center with 172 new hotel rooms. Hill7, with both office and hotel components, added an additional 222 rooms to the Downtown Seattle inventory. Photo Christopher Nelson Three other hotel projects representing 622 rooms are currently under construction: Daniels Development s The Mark project includes plans for a 184-room SLS brand hotel, in addition to office space, with expected completion in Stadium Place East Phase 1 includes a hotel component with 279 rooms scheduled for completion in The 1st and Stewart Hotel and Apartments project will add 160 new hotel rooms Downtown when completed in More proposed projects are in the works. There are currently 17 hotel projects in earlier stages of development, including seven with residential components in addition to the hotel. This includes an additional phase of Stadium Place, a new Marriott, and a hotel component in the redevelopment of Rainier Square. The largest proposed project in the pipeline is a 1,270-room hotel/residential project under development by R.C. Hedreen in Denny Triangle, 8th & Howell. Once permitted, these 17 projects could add 4,166 rooms to the Downtown hotel pipeline. Page 7 of 9

8 Conclusion The current cycle of development, which started in 2011, continues to accelerate. This development, supported by strong job and residential growth in Seattle, is taking place across several sectors. While apartments led this wave of residential developments, condominiums are now part of the mix. With the completion of Insignia Towers nearing completion, Downtown will soon see its first major condominium complex to open since Another condominium project, Luma, is under way on on First Hill and dozens more condominium projects are still in the planning stages. Office development is rapidly becoming a major part of the current development cycle as well. Originally dominated by Amazon s many projects throughout South Lake Union and Denny Triangle, several other projects are now under construction for other tenants such as Weyerhaeuser s new Pioneer Square headquarters. Some other office projects recently started construction without announced tenants. There are projects in smaller sectors as well. For example, retail is typically a smaller component in Downtown office or residential projects. However, there were some notable developments over the past year, including the opening of a new Starbucks Roastery on Capitol Hill and a new Honda dealership in SoDo in In the first half of 2015, Ivar s completed a renovation of their space on Pier 54 and a new space was completed at 2121 Westlake Ave, which will house a Sugar Mountain Bakery, office space for Sugar Mountain Capital and a restaurant from the proprietor of the famous Maximus/Miniumus food truck. Catalyzed by a strong economy with companies like Amazon, Expedia, Facebook, Weyerhaeuser and others moving to Downtown or growing their Downtown Seattle workforce, the current growth in population and jobs and the development that comes with that shows no signs of slowing down. A full list including those who have applied for permits or otherwise indicated plans for Downtown development is available at Page 8 of 9

9 Notes on Criteria Included are Downtown Seattle projects with structural components that have construction costs of $1 million or more (occasional exceptions to this criteria are made for some high profile projects). Transportation projects are only included if they involve a building structure (infrastructure such as rail and roads are not included). Projects must have building construction permits issued to be placed on the active list (permitted, currently under construction or recently completed). Active projects are the only projects that appear in DSA publications. The geography used for this analysis is the area within Downtown Seattle. This area is defined as the area around South Lake Union in the north to South Lander Street in the south and Elliott Bay in the west to Broadway in the east. Definitions for Development Project Status Project status is determined by level of completion: Permitted used when there are building construction permits issued by the Seattle Department of Planning and Development but the project has yet to begin construction. If there are only land use, excavation or demolition permits, project is not included. Currently Under Construction used when project construction is underway, but before project is completed. Completed project completed since January 1 st of the most recent full calendar year. Please note that when comparing mid-year updates to year end updates, this category represents a different span of time (16 months versus 12 months). Therefore, completed projects are only used in yearover year comparisons. Active project an active project is one that is formally permitted, currently under construction or recently completed. The Downtown Seattle Association Development Guide, including a web based map and project listings, is available at Page 9 of 9