Slowing in Seattle: Amazon holds up office demand as construction activities drop most in a decade
Nearly half of the projects underway are set to wrap up by the end of 2018
Seattle’s record construction boom may have peaked: Development activity across the central part of the city is declining at the fastest rate in at least 12 years.
At the end of this past year, there were 57 active projects underway in the area that stretches from South Lake Union to Sodo, according to a report released Monday by the Downtown Seattle Association. That’s down from a record high of 74 projects six months prior.
The 23 per cent decline amounts to the biggest six-month drop since the downtown association began its twice-a-year construction counts in 2005.
It comes after a recent survey found Seattle’s crane count had dipped for the first time in years.
Of course, the slowdown is all relative: Even with the recent decrease, the development activity going on now surpasses anything seen before 2015 – even beating out the surge from this past decade before the recession hit. And Seattle’s falling crane count is still good enough to lead the country.
Will the slowing trend continue? On one hand, nearly half of the projects underway now are set to wrap up by the end of the year, and the downtown group expects fewer apartments to open in the next few years than in 2017.
But there are still 220 potential future projects in the pipeline for the greater downtown region. Not all of them will be built – some will be delayed for many years, even though several are in the final planning stages.
The construction frenzy that began half a decade ago has remade the skyline and added density to areas once filled with parking lots, as new apartments and offices sprout up to transform the city.
The surge has also caused headaches: It’s tough to travel even a few blocks without hitting a closed street, a blocked sidewalk or closed-off street parking, and jackhammering noise has become an unofficial soundtrack to city life.
About two-thirds of the projects getting built now have a residential component, and almost all of those are apartment buildings.
About 5,700 new apartments opened just in the past year across the greater downtown region, and an additional 3,600 are set to be completed this year.
Rents downtown have begun dropping for the first time since last decade amid the construction boom, as some of the new luxury apartments opening in the city’s hottest neighbourhoods have sat empty. Altogether, the area has added more than 20,000 new housing units in the past decade.
There are up to 30,000 apartments still left in the pipeline, though developers recently have reported a pullback in new apartment plans now that rents are no longer keeping up with rising construction costs.
The second-most common type of development – new office buildings – is also on the decline.
After peaking with about 5 million square feet of office underway at the end of 2015 and 2016, office construction fell to 3.6 million square feet at the end of 2017. The downtown association has about 10 million square feet identified in the pipeline for the next three years.
Amazon continues to drive the office market – and through its employees, the apartment market – as it looks to add several million square feet through the next few years. It recently has begun expanding beyond South Lake Union and the Denny Triangle and into the downtown core. But huge projects for Google and Facebook are also underway, and some developers are building offices without tenants already lined up.
Hotel-room openings, which fell off a cliff during the recession, are set to boom this year because of the planned opening of the 1,260-room Hyatt Regency at Eighth and Howell. It will be the biggest hotel in the Pacific Northwest when it opens this fall.
The downtown association’s report covers South Lake Union, Lower Queen Anne, Capitol Hill, First Hill, the downtown core, the central waterfront, Denny Triangle, Belltown, Pioneer Square, the Chinatown/International District and Sodo.
The hottest neighbourhood for development continues to be South Lake Union – the area has 15 active projects right now. The downtown core and First Hill also have an outsized number of projects.