The Central Business District of downtown Seattle is evolving and changing with the advent of the $1.3 billion development of the new Convention and Trade Center. That is the good news. The bad news is that it will throw about 750 bus trips a day onto city streets. But wait, the city is restricting traffic lanes and creating bicycle pathways on the soon-to-be more crowded city streets, and now, the latest from the city, is consideration of a tax for the use of downtown streets during prime rush and business hours. Seattle already has the distinction of being in the top seven cities in the US for the cost of owning a car. The parking cost alone is calculated at $2,778 per year and the total ownership cost at $11,848. Bicycle ownership and use is a key element to making the existing capacities work.
The impact on commercial real estate is potentially staggering. Tourism and particularly the Alaska tour trade and existing conventions and the use of the expanded convention center all require access and access means cars. We are already at a peak in terms of multi-family with rents going lower and costs going higher. The city is actively promoting developments with no allowance for parking. Seattle Commercial Real Estate represents a hotel chain looking for a site in downtown with no thought to parking. The same chain is looking east of Lake Washington and is recognizing the need for parking. Office developments are struggling for housing for their employees let alone spaces for parking. Retail real estate is facing a disaster which can only be offset by more people having easier access by building in-city. “Affordable” multi-family is running $800-1,000 per month for a multi-family unit of 200-150 square feet… and the rents are rising.
The multi-family housing market is on the down part of the cycle. Approved projects (defined as projects having a Master Use Permit “MUP”) are being sold. The projects’ costs against a declining rent market and new projects under construction are dictating poor economics. The impact on multi-family land is clearly to decrease the value, with or without approvals in place.
Seattle Commercial Real Estate has seen this coming for at least the last two years and the projections for getting back to another rising cycle look like 2020 to 2022. Time to ride our bicycles.