Late last year, the owner of the 1928-built Austin Apartments near 10th and Harrison made a big decision that is being echoed in many of Capitol Hill’s great old apartment buildings as the neighborhood tries its best to make room for more and more neighbors. In April the Department of Planning and Development approved the plan — the building’s old laundry room and basement storage area will be transformed into two new subterranean units and will bump the building up to 22 apartments.
That 10% boost in rentable area is on the minds of many apartment owners on the Hill and joins the development trends across Central Seattle to squeeze more room to live into the neighborhood as rents continue to climb and vacancies continue to dwindle – and owning a Capitol Hill home is increasingly out of reach.
The construction projects also come amidst increasing restrictions on so-called “small lot” development and a push to regulate new forms of density-friendly development like microhousing. The result is developers moving quickly to address the market opportunities, often in waves and, sometimes, with some creative reimagining.
Meanwhile, regulation advocates will appreciate that the projects generate a greater paper trail than dormitory-style microhousing — here’s the “Land Use Bulletin” for the Austin project.
The trend is playing out just off 15th Ave E on E Mercer — one block from where construction will soon start on a new, four-story apartment building. When the owner of the Wellington Apartments at 16th and Mercer discovered its old alley garage structure needed to be replaced, the project architect submitted plans for a new parking structure — with three new apartments above. That’s half as many as Hamilton Urban Partners added in its 2011 upgrade that created six new apartments in the building’s basement. Soon, the building that once featured only 16 apartments will top out at 25.
In another example, the garage conversion strategy will play out in a much smaller scale at the tiny Royhill Apartments at 620 E Roy. In April, the building’s owner was granted a permit to create a 13th unit in the building by taking over the structure’s parking garage.
It’s a strategy that seems to be paying off. Not only are rents soaring — in new and old buildings, alike — and the prices for real estate primed for development weighing in at impressive levels but existing apartment buildings are a hot commodity for investors.
Earlier this year, one Capitol Hill transaction made headlines as the building’s owners clocked a 60% gain on their two-year investment when they sold the Union Manor building for $15.2 million to a Japanese investment firm. What the news outlets didn’t report is the 604 E Union building came with a recently installed bonus — three new apartment units constructed in the 1925-built building’s 44,000 square-foot basement.
UPDATE 4/6/14: CHS spoke with Morris Groberman, part of the ownership behind the Austin building and a frequent contact in our coverage of real estate in the neighborhood. We also spoke to him recently about the replacement of the Harvard Market escalator with steps, for example.
Groberman said the marketplace is definitely pushing the improvements — especially, he said, as the prospect for a higher minimum wage puts more money in his potential tenants’ pockets.
“What drives everything that we do is economics,” he said.
Groberman said he believes units in his old buildings are 30 to 40% cheaper than what people will find in new construction. The opportunity to suddenly unlock more space in the old buildings also, Groberman said, means more affordable housing on the Hill.
This kind of conversion is also underway in Groberman’s Tuscany Apartments at 1215 Seneca. After the Northwest School moved its cafeteria facilities from the building to its new facility at E Pike and Bellevue, contractors began a process to transform the open area into seven new apartments. The project, Groberman said, is about three-quarters complete.
Groberman said, in his buildings, what is being replaced is mostly cluttered, under-utilized basement space.
“These are old building storage rooms that get cluttered and full of crap,” Groberman said. “For example, one building I have.. it’s filled with like 50 old toilets.”
“What we do is repurpose those rooms and make it affordable.”