Development Guide Mid-Year 2016 Update

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Development Guide

Overview:

The Downtown Seattle Association (DSA) publishes two development guides each year to quantify development activity taking place within Downtown Seattle. The first, published each February, is an annual summary of all development activity for the previous calendar year. This is followed by a mid-year update each June. The investments developers make Downtown act as a barometer, showing a level of confidence in the local economy. DSA has been consistently tracking this since 2005. An explanation of criteria used in this analysis and a glossary of terms is included at end of this document.

Key Findings:

 As of June 2016, there are 65 buildings under construction. This is more than any time since tracking began in 2005.

 Residential projects continue to dominate. Including the 708 units already completed this year, there are 8,661 more scheduled for completion in 2016 through 2017.

 Office space is also rebounding. Projects completed over the past 18 months included nearly 3 million square feet of new office space. An additional 6 million square feet of office space is currently under construction.

 Hotel development is also starting to pick up. While Downtown added fewer than 700 rooms

Mid-Year 2016 Update

Image Credit: James Sido

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Note: charts in this report related to mid-year construction status will not include the year 2010 since there was no mid-year update conducted in 2010.

Summary of Development Activity

Downtown continues to see unprecedented levels of development. While hotels and office developments have seen resurgence recently, residential development continues to dominate. Currently two-thirds of all buildings under construction are residential.

The past two years have seen investment levels higher than at any point since tracking began. In mid-2015, more than $4 billion of construction projects were under construction. Construction expenditures for projects under construction are currently at $3.5 billion. This is more than double the $1.6 billion under way five years ago.

Figures are in 2016 dollars. Construction cost does not include land or soft costs such as permitting and design work.

33 36 42 46 ₄₀ 20 37 44 50 49 65 20 24 24 24 11 ₁₀ 21 27 32 ₂₉ 43 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016

Buildings Under Construction (mid-year)

Total Buildings Residential Buildings

$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 B ill ion s Construction Cost

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In 2015 developers completed 37 buildings Downtown, the largest number to date. The current pipeline sets Downtown up to beat that number. There are 64 projects scheduled for delivery in 2017. Forty-five of these are currently under construction. This is more than the number delivered in any prior year.

13 22 27 31 23 24 7 25 26 30 37 24 64 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Buildings - by current status and completion year

Completed Currently Under Construction

Demolition, Shoring and Excavation Land Use Issued Predevelopment

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Residential

The Downtown residential market set a new record with the delivery of 3,600 residential units in 2015.

Downtown added more than 12,000 units since 2010. There are 7,558 units still under construction. Together, these represent about a 44 percent increase in the Downtown housing stock since 2010.

Including the 708 units already completed so far this year, there are 8,661 additional units scheduled for completion in 2016 and 2017. Nearly 7,000 of these are under construction and just over 1,000 are in pre-construction stages (demolition, excavation, land use process or design phases). There are more than 20,000 units scheduled for completion after 2017, most of those in the predevelopment phase.

The numbers above each bar indicate the total completed or scheduled for completion that year. 610 1,447 2,045 1,602 2,044 829 202 1,875 2,446 3,292 3,600 2,404 6,257 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Residential Unit Deliveries

Completed or scheduled for completion in Downtown Seattle

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Office

Office development is also accelerating. As of June 2016, 5.7 million square feet of office space is under construction. Although down from the more than 7 million square feet that was under construction in June 2015, this is up slightly from the 5.4 million square feet of office space that was under construction at the end of 2015. Aside from 2015, it is also more than the amount of office space under construction for any mid-year update since we began tracking in 2005.

In 2015, Downtown saw 2.7 million square feet of office space delivered. This is more than any year since tracking began in 2005. The previous peak year for office space delivery was in 2009 with 1.8 million square feet delivered that year. When construction in predevelopment is included, there are more than 14 million square feet in the office development pipeline. For comparison, developers built just over 12 million square feet of office space Downtown between 2005 and 2016.

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 M ill ion s

Office Square Footage Under Construction 0.0 2.0 4.0 6.0 8.0 10.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 and later M ill io n s

Office square footage by status and completion date

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More than 2 million square feet of space is under construction for Amazon’s continuing expansion in the South Lake Union and Denny Triangle neighborhoods. This includes the second block of a group of new towers spanning several blocks in Denny Triangle. This block is unique in that it includes a five-story building formed by three interconnecting “biospheres.” Amazon has been a major driver of office activity in recent years. Amazon’s Downtown footprint now totals more than 8 million square feet. When planned and under construction projects are complete, Amazon may occupy more than 12 million square feet of Downtown office space.

The current wave of development is not entirely attributable to Amazon. Several other projects are under construction, including Madison Centre (746,000 square feet), The Mark (528,000 square feet of office plus a hotel), and Midtown 21 (365,000 square feet). In total, there are 5.3 million square feet of office under construction, with 9.2 million square feet more in predevelopment or demolition, shoring and excavation stages.

Office Square footage by status and completion year

2015 2016 2017 2018 and

later

Total

Completed 2,569,200 275,000 0 0 2,844,200

Currently Under Construction 0 2,161,000 3,222,263 0 5,383,263

Demolition, Shoring and Excavation

0 0 485,000 1,326,000 1,811,000

Predevelopment 0 0 150,000 7,266,000 7,416,000

As companies flock to Seattle, demand for office space remains strong. With companies such as Facebook, F5 and Amazon expanding their presence and new to Downtown companies like Expedia, Google and Weyerhaeuser adding their workforces to the mix, demand is poised to continue to be robust.

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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, which could double convention capacity, hotel demand in Downtown Seattle is strong. Developers are recognizing this and after several years with no new development, hotel space is beginning to grow once more.

In the past three years, developers completed five hotels, adding 671 rooms to the Downtown hotel inventory. More than 5 thousand rooms are in the hotel pipeline. Currently, 608 rooms are under construction, including a 278-room Embassy Suites at Stadium Place East; a 184-room hotel as part of The Mark and a 146-room “Moxy,” which is a new Marriott brand hotel.

Hotel rooms by status and completion year

2016 2017 2018 and later Total

Completed 158 158

Currently Under Construction 0 608 0 608

Demolition, Shoring and Excavation 0 302 1,260 1,562

Land Use Issued 0 518 208 726

Predevelopment 0 43 2,134 2,177

Total 158 1,471 3,602 5,231

The hotel with the most rooms in the pipeline is R.C. Hedreen’s 8th & Howell project. This 1,260-room convention hotel is currently in the demolition, shoring and excavation phase. The next largest hotel under construction (by number of rooms) is a Residence Inn by Marriott at 924 Howell St. with 302 hotel rooms. Two of largest mixed-use projects also include a hotel component. The redevelopment of Rainier Square includes a 198-room hotel and the 4/C tower includes 100 rooms. The scheduled completion dates for both of these are in 2019.

285 1,324 1,152 906 488 408 119 394 158 1,471 3,602 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 and later

Hotel rooms by completion date

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Conclusion

The pace of Downtown development continues to rise. This development, supported by strong job and residential growth in Seattle, is taking place across several sectors.

When thinking about development in Seattle, residential growth is often top of mind. This is for good reason. Downtown residential construction continues to set records and more units are in the pipeline than ever before. Downtown saw the addition of Seattle’s largest condominium complex in 2015. In the pipeline are several projects that will compete to be Seattle’s largest apartment complex over the next few years.

In addition to incredible residential development, Downtown is experiencing record levels of office investment. Originally dominated by Amazon’s many projects throughout the South Lake Union and Denny Triangle neighborhoods, several other projects are now under construction for other tenants such as Weyerhaeuser’s new Pioneer Square headquarters and Google’s move to South Lake Union. In addition, the Downtown office market has strengthened enough that developers are once again beginning construction projects without announced tenants.

Hotels are another sector that is ramping up. While not in record territory yet, there are more than 5 thousand rooms in the pipeline, including what will be Seattle’s largest hotel to date. Hotel occupancy, bolstered by a robust and growing tourism industry, remains high. According to Visit Seattle, visitor volume and related expenditures, tax contributions and employment in Seattle hit record levels for the third year in a row in 2015.

With a strong and growing economy, a large anchor office tenant and a portfolio of companies that is both diversifying and expanding, demand for space remains high. Downtown Seattle development is poised to continue delivering new inventory in a number of sectors at a solid pace.

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For a full list including those who have applied for permits or otherwise indicated plans for Downtown development, contact [email protected].

Notes on Criteria

Included in this report 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).

The geography used for this analysis is the area within Downtown Seattle. The Downtown Seattle Association uses the following boundaries for Downtown: 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

Permit activity determines project status. Note that the criteria changed in 2016 to allow for a more refined examination of projects by status. In order to ensure accurate reporting, please contact the

Downtown Seattle Association before comparing this report’s numbers to reports from previous years.

Predevelopment – project has no land use or construction permits issued related to a planned new

building construction.

Land Use Issued – project has land use permits issued but not building construction permits. Shoring and Excavation – project has construction permits issued related to shoring and

excavation to prepare for construction of a new building.

Currently Under Construction – project has building construction permits issued. Completed – final inspections related to the building permits are completed.