In 2014, the continued massive investment in Capitol Hill’s built environment — from groundbreakings to building overhauls to acquisitions to splashy openings — seemed to indicate that there is more to this market than supply and demand.
As new buildings go up and new units replace underused spaces like parking lots and laundry rooms, rents continued to soar on Capitol Hill and across the region.
It may not make for easy livin’ but it’s making investors excited. In 2014, investors bought just over $3 billion worth of apartment properties around the Puget Sound, a record level of investment according to a report from analysts Dupre+Scott. According to the analysts, a long-held rule of thumb was that an apartment property sells for roughly 100 times its monthly income. In 2014, apartment properties were selling for roughly 139 times their monthly income as strong buyer demand coupled with low interest rates throughout the year. Overall, rents rose 9.1% in the county, but analysts said some of that is distorted by the large number of new units that are leasing-up. “This year is just the tip of the iceberg,” said the report. “New construction is going to have an even larger impact in on rents in 2015 and 2016.” You can thank Amazon. But don’t forget Generation Y. There are 573,000 20-34 year olds in the region.
Below is our look at 2014 in development on Capitol Hill. You can also check out these previous Year in Review reports to see how we got here.
CHS YIR 2013 — Capitol Hill development and the quest for affordability
CHS YIR 2012 — The re-development of Capitol Hill
In spring, CHS did its usual eyeballing of the major construction projects underway on Capitol Hill. We found 26 with more than 20 set to begin. It’s a similar pace to recent years but even as new buildings open one by one, rents continued to rise faster in Seattle than anywhere in the country — and even faster on Capitol Hill. The rush to build more continued. There were six buildings under construction or in planning along three blocks of 11th Ave. Owners of existing buildings did everything they could to cash in, creatively squeezing in new units by converting parking and laundry rooms into new apartments. Other investors put as many pennies as they could gather into acquiring the land even if it meant skimping on the final product.
There were signs of hope. The 12th Ave Arts building from Capitol Hill Housing opened with six stories of theaters, restaurants, offices and affordable housing (here’s what happened when its 88 affordable units joined the market) rising above a former barbed wire-ringed parking lot. There were also rumbles of dissent. By the end of the year, Mayor Ed Murray had convened a committee charged with producing an affordability plan for Seattle by spring 2015. One of the Capitol Hill representatives in the process sounded hopeful the market was starting to sort itself out before intervention. “We’ve started to see a cap on what people are willing to pay, there’s a lot more supply for people,” developer Maria Barrientos told CHS in November. “I don’t think rents will continue to grow in the next year.”
With big demand as a backdrop, 2014 saw some massive financial transactions and big deals go down. Some investments were about acquiring more land to build on. A $10.3 million deal brought an end to decades of pizza on E Madison. Madison also saw deals to make space for 16 stories and a Whole Foods at Broadway and a 17-story project to replace the First Hill McDonald’s. Another type of sale was the apartment project flip as developers sold off recently completed Capitol Hill projects to the highest bidders. Here’s a $36.1 million flip on E Pine. Other times, the deals targeted existing buildings leaving longtime residents in the lurch as improvements and rent hikes followed. Some acquisitions put the properties in good hands like this $5.4 million transaction to acquire the Baker Linen building at 11th and Pike by preservation-minded developer Liz Dunn. The biggest deal on Capitol Hill, in the meanwhile, won’t be completed until 2015 as the transit oriented development negotiations around Capitol Hill Station move into their final stages.
For all the push forward, there were also those pushing back on the rapid rate of development. A Capitol Hill forum on lowering building heights in midrise zones drew more than 200 people to debate a plan to limit large projects on the edge of traditionally single-family home areas of the city. A judge’s decision on a Capitol Hill microhousing project brought aPodment-style development to a halt across the city, if only temporarily. This group of neighbors were able to hold a developer accountable to the city’s design review process over — of all things — the building’s color. Along the way, City Hall found some new ways to help make the wave after wave of construction at least bearable for people and customers trying to walk and drive through it all.
The past will not be entirely wiped away. As concerns rose over the remaining stock of Capitol Hill’s auto row structures and the value of the old buildings was studied and documented, there was new energy around preservation — both the developer incentive-laden kind and the kind that keeps a building standing without ripping it apart and putting only its front wall back together brick by brick. With eight projects already underway in the neighborhood including this one at Melrose and Pine and the groundbreaking at Hunters Capital’s Dunn Automotive project, the City Council added additional requirements for developers seeking to win Pike/Pine Conservation District incentives in their projects. The Council also opened the door to future incentives based on cultural importance and value to the arts community. Meanwhile, the first of Pike/Pine’s preservation projects opened for new residents at 11th and Pine.
Across the street, a community effort to win landmarks protection for two auto row-era structures at 11th and Pine with a history rich in truck companies, REI’s early years, and alt-weekly The Stranger ended the year with success in the early rounds of the process.
What does preservation sometimes look like? The Central Agency Building opened in December, completing the transformation of an E Seneca warehouse into a new home for “grown-up” longtime Capitol Hill restaurant and its new projects. The Harvard Exit, we learned late in 2014, is slated for a similar new life.
And, believe it or not, preservation sometimes looks like this: a $20 to $32 million, depending on who you ask — cathedral to coffee built inside an old auto row showroom at the base of Capitol Hill.