There’s been much news lately that residential construction is roaring back! But is there too much going on too quickly—and will all these projects really materialize? And what is this telling us about the condominium market? Here are some of the latest projects in the pipeline:
311 Cedar St: The former Musician’s Building is now gone, with work underway on The Alto, a 17-story, 184-unit high-rise with 2,700 sq ft of retail space. The project is scheduled for completion in early 2012.
504 Terry Ave & 1106 East Jefferson St: The once-proposed Harbor Vista project from now-bankrupt Mastro Properties just got a new owner– an LLC out of San Francisco. Rumors are that the property will be developed into a residential/retail complex.
888 Western Ave: Goodman Real Estate’s original plans for an office building have changed to a 16-story residential building with 208 units with 9,907 sq ft of retail, plus 8,300 sq ft of recreation/public plaza space.
1430 Second Ave (Second & Pike): Urban Visions’ hotel and condominium plan have changed to a 440 foot, 35-story LEED-certified building of 290 apartments and 14,850 sq ft of retail and restaurant space, which includes a “Sky Bar” and restaurant overlooking Pike Place Market.
1623 Bellevue Ave: Proposed is a six-story building with 23 residential units and 1,000 sq ft of retail.
2116 Fourth Ave – located next to the Cinerama, the proposed tower will have 357 units, 2,700 sq ft of ground-level retail.
2625 Third Ave – The current site of the American Lung Association is slated to make way for a 19-story building with 204 units above 4,000 sq ft of retail space.
Second and Bell – Bell 206, a 122-unit apartment complex, is expected to break ground in January.
Eighth and Seneca – A recent financial deal has been reached to hang onto this site, where a twin tower project containing 280 units is in development.
Market Street and 14th Ave (Ballard): Replacing Sunset Bowl will be Avalon Ballard, a 271-unit apartment complex. Construction scheduled to begin in Summer 2011.
Market Street Landing (15th Ave NW and NW Market, Ballard): Equity Residential, an S&P 500 company specializing in apartments, condominiums and corporate housing, purchased the 1.4 acre site in October 2010.
5711 24th Ave NW, Ballard: Replacing the old Ballard Library will be Ballard West. Currently scheduled to start construction in the summer, it’s planned to have 107 apartments, three live-work units and 6,500 sq ft of retail.
200 – 106th Ave NE (Bellevue): Soma Towers is a proposed two-tower project – Tower One at 23 stories high with 142 units, and Tower Two at 17 stories high with 124 units.
With few construction events over the past several years, current vacancies are lower and rents are higher, making residential construction promising again. Recently reported was Dupre + Scott Apartment Advisors’ latest forecast that 2,500 units will open in the tri-county area in 2011, with an additional 14,600 units possibly opening between 2012 and 2015. This concurs with opinions recently reported from Apartment Insights. They predict a tight market from mid-2011 into 2012, bringing on significant rent increases.
However, just because start or completion dates are announced doesn’t mean they’ll actually happen. One of the items on our residential list first hit the presses in 2007. After inactivity since 2008, another project is now up and running, but still needs to apply for building permits. We listed a property which sources tell us is a go, but is currently stalled and looking shaky for a start anytime soon.
The glitch? Money. Lending institutions now require a project’s net operating income to be profitable based on current, not projected, rents. Plus, developers have to put up more of their own money. Before the recession, developers only needed to contribute 15 percent equity. Debt coverage ratios (net operating income divided by debt services) of 1.25 or better are now required. This pushes equity contributions to rates between 25 to 35, even up to 40 percent. A number of developers now need to seek equity partners – if they can find them. Equity partners were recession victims, too.
The Outlook for Condominium Development?
With current debt coverage ratios applying here as well, there’s nothing in the pipeline regarding new construction. But as apartment development explodes, we predict that if the condo market picks up as well, they’ll look at apartment buildings to fill demand. We’ve seen this pattern in the Seattle housing market before. Both Belltown Court and The Klee Lofts started out as apartment complexes. And, as condo demand increases, former condo projects which converted to apartments over the past couple of years may return to being condos again. We think one of the first to turn back may be Bellevue’s The Bravern, which announced that intent when they converted both towers from condos into apartments in 2010. Equinox and Rollin Street Flats were once condominiums, too.
However, the recession has made for reluctant homebuyers. What will the potential glut of rentals really do for the conversion market this time around? Will more potential buyers simply remain permanent renters? We think it’ll depend on what a buyer wants in the long run. Predictions are that a renter’s market won’t resurface until well after 2015, and maybe beyond if the conversion market takes off. In the meantime, rents should continue to rise and keep pace with the same costs it would take to own a home.
All indicators seem to point to the real estate market heating up again. With record-low home prices, plus interest rates the lowest they’ve been in 60 years, buying a home is not only more affordable but is also an investment that could pay off big over time. You don’t get that option with a rental. There is a lot to think about but if you’d like to discuss your options further, just contact us at our Stroupe Group link.
An exclusive listing agreement was signed last week with developer RC Hedreen Company to sell all of Olive 8‘s remaining inventory, now starting from the 27th floor and up. Olive 8 is a 39-story, 229 unit mixed-use condominium and hotel ( Hyatt at Olive 8 ) high-rise located at 8th Avenue and Olive Way in downtown Seattle.
In order to maintain 50% project sales as required by Fannie Mae lending guidelines, 32 units at Olive 8 were recently sold at auction to replace mostly investor presales that were unable to close in today’s credit environment. The auction helped establish a base for current market values, enabling RC Hedreen to restructure its construction debt with US Bank, providing a long term runway to sell into an improving marketplace.
“We’ve eliminated many of the pressures that we faced, so it’s now time to realign values for today’s market,” said Dick Hedreen, RC Hedreen’s chairman. “2011 represents a new beginning for Olive 8 and Realogics Sotheby’s International Realty is uniquely positioned to lead us through a successful sellout.”
Dean Jones, Principal of Realogics Sotheby’s International Realty, added that there is a finite supply of new construction condominiums in downtown Seattle. No new developments have broken ground since the credit crunch in 2007 and since that time, several condo projects reverted to apartments and sold to REIT’s, reducing inventory.
According to Jones, fewer than 450 new condominiums remaining unsold in the city center and most pundits agree it could be many years before any new condominiums are developed. RC Hedreen and Realogics Sotheby’s are researching home values by retaining appraisers and meeting with real estate brokers and potential homebuyers to reassess the marketplace. Olive 8 is expected to be reintroduced to the public in 2011 with new lower pricing.
“I’m confident that our business philosophy will make perfect sense to those homebuyers that have been waiting on the sidelines for an opportunity,” says Hedreen. “And considering that our available inventory now starts on the 27th floor, we saved the best for last.”
We are in the process of retooling our own websites for the new Olive 8 opportunities. If you would like to stay in touch on news or private tours when Olive 8’s new releases come on market, please contact us at this Stroupe Group link.
MarketWatch, part of The Wall Street Journal Digital Network, released its annual rankings of the best cities in the U.S. for business this week. Out of 102 major metro areas covered, guess which city climbed from No. 31 in 2009 to No. 10 in 2010?
MarketWatch uses a variety of measures to break down data into two categories: “Company Score,” the concentration of businesses within a metro area, and “Economic Score,” which takes into account unemployment, job growth, population growth, personal income and local gross domestic product. More metric categories were used in this year’s rankings, in part to better reflect tourism business and the economic impact of military bases.
Based on these calculations, Seattle’s No. 10 ranking had a total score of 932, with a Company Score of 501 and an Economic Score of 431. Ranked No. 1 is Washington, D.C., then Omaha; Boston; Des Moines, Iowa; Minneapolis; Denver; Richmond, Va.; New York City and Harrisburg, Pa. Other West Coast city rankings include San Francisco at 33, Portland at 52 and Los Angeles at 61. At the No. 102 position? Fresno.
What made the difference this year? Employment. Whereas Seattle’s sad showing in 2009 was due to poor statistics in job creation, its jobless rate dropped by a third of a percentage point to 8.7 percent in September 2010. MarketWatch also notes that Seattle did well in jobless comparisons between 2006 and 2010, and in keeping the percentages down over that period. It also hits the upper ranks in creating jobs relative to its population.
However, MarketWatch noted that Seattle is lacking in the number of major private companies. No businesses from Forbes Private Companies’ list reside in Seattle, and we are the largest U.S. city without one. But while the Seattle area may be amiss in that sector, it is home to a diverse selection of large S&P corporations such as amazon.com, Boeing, Costco, Microsoft, Nordstrom and Starbucks. Plum Creek, the largest publicly-held timber REIT in the country, is based in Seattle. And last week, The Fred Hutchinson Cancer Research Center announced its purchase of the 1100 Eastlake building, expanding its South Lake Union footprint to 15.2 acres.
Add a Pacific Rim gateway, the natural beauty of the Puget Sound area, plus a diverse culture, and we’re confident that Seattle will continue to remain high in “Best” rankings for years to come.(Photo by Marmaduke Percy, Wikimedia Commons)
If you and your guests are thinking of visiting Pike Place Market over the holiday season, you may be in for a few surprises when visiting your favorite spots. Well into Phase 2 of its $68.6 million, four-year renovation project, a number of businesses are now undergoing relocation and in a few cases, closure within the Market. This part of the renovation will run into the spring of 2011.
However, construction is now in “slowdown” mode for the rest of the year. Business is currently brisk, with the vendors in full holiday mode. Shopping is always a fun and festive event at Pike Place Market, and their website now has a link where you can get the latest news about your favorite shops and restaurants. Click on this construction summary site for more details. You can also sign up for an online feed to keep you abreast of the latest Market news.
For example, five portable containers fitted with power, ramps, and water supply will be in operation in front of the Market and in place until springtime. Choice Produce and El Mercado Latino are currently located in these containers, with Quality Produce to follow. Quality Cheese and Pike Place Market Creamery will also share a container.
Public Restrooms received a makeover too. Rebuilding the designated women’s room in the First and Pine building is nearing completion, and a new unisex restroom on the First Avenue floor of the Corner Market should now be open. New restroom transformation of the Rummage Hall has also been completed. You can find the Rummage Hall’s inside location at the rear of the Soames Dunn building for the winter, and its Western Avenue location will remain open until springtime.
The focus of the renovation work is to upgrade the Market’s core infrastructure. This includes all mechanical, electrical and plumbing (MEP) systems, installing a four-pipe system serving each of its eight buildings, and implementing new main switch gear. Leading the renovations is Turner Construction, which is also in charge of all seismic work, adding three new elevators serving all Market floors, and upgrading the Market’s exterior skin to now withstand salt air and UV rays.
The Pike Place Market Preservation & Development Authority (PDA) is working with all affected tenants on everything from packing up to temporary relocation, as well as arrangements to keep business activity going in each venue. PDA is determined to keep the Market fully operational to vendors, residents and tourists during renovation.
The Market will be closed on Christmas and New Years Day. And, when construction gets back into full swing on January 3rd, a number of businesses will be affected. Keep tabs on construction with the construction summary link above, and you can also check out the entire website at http://www.pikeplacemarket.org/
Open 1-4 pm
Concord – 2929 1st Avenue, Unit 600
Situated on the NW corner of the Concord, this unit boasts exceptional unobstructed views of Olympic Sculpture Park, Elliott Bay, Olympic Mountains and Alki point. This bright unit features maple cabinets, slab granite counters, stainless steel appliances, gas cooking, new hardwoods and A/C. The Concord features concierge service, fitness center, spa, terraces and a business suite. All of this, in the heart of Belltown!
Hosted by James Stroupe– (206) 910-5000, email@example.com