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Why they’re building a hotel and apartment building on Harvard Ave

screen-shot-2016-11-07-at-4-13-49-pmAdding some hotel space and apartments to Capitol Hill was an easy decision for Jon Coulter and his business partners Rod McClaskey and Terry Boyle.

In spite of the common perception of soaring rents and developers making money hand over fist, Coulter says they are running up against some softness in the market, at least in the higher-end range where they build.

“The pressure of the rents is downward,” Coulter said. “We’re testing the top of the food chain.”

Design review: 1818 Harvard Ave

And he’s expecting that downward pressure to keep up, with hundreds, if not thousands of new units coming online over the next few years.

“We’re not sure what 380 square feet will get us in Capitol Hill in three years when it’s done,” Coulter said.

McClaskey echoed that idea. While he doesn’t expect rents to starts coming down, they may stabilize, or not go up as quickly.

Partly as a hedge against that uncertainty, the group decided to enter a different, relatively untapped market in the neighborhood – hotels – with a project at 1818 Harvard Ave.

“It’s a harder business model, but it can also produce a greater cash flow if you have high occupancy,“ McClaskey said.

That plan, however, ran up against city regulations which seem to discourage hotels in the area, a 45-foot height cap. There’s other regulations which limit the overall density of hotels, but that bit was at least partly cancelled by the extra density afforded by proximity to the light rail station. If not for the height cap, Coulter said, the building may very well have gone all hotel.

Instead the project will have four stories of hotel on the bottom floors, with three floors of residential on top. The plan calls for 69 hotel rooms and 42 apartments, though Rod McClaskey, one of the partners developing the project, notes those numbers could change.

Those upper floors will be micro units, with sizes ranging from 380 to 425 square feet but they’ll be more fully featured than what most consider microhousing. Coulter said they’d never been too excited about going the microhousing route, because it makes running the place more complex.

“Just build nice efficiency units. It keeps it clean and it’s easy to maintain,” he said.

It’s unclear what impact the city regulations on affordable housing mandates will have on the project, but Coulter said they don’t intend to let it change their design. If they’re required to include affordable units, they’ll do so, but it would likely mean designating a couple units as affordable, without changing anything.

“It wouldn’t be any different or smaller,” Coulter said.

screen-shot-2016-11-07-at-4-15-37-pmThe hotel helps them check multiple boxes. Coulter notes that other than the Silver Cloud at Madison and Broadway, there’s not hotel space on Capitol Hill, so he thinks there’s a market for it. In particular, Coulter said they expect to have smaller rooms, with fewer amenities, at a correspondingly lower price point. The idea would be to cater to business travelers who might want to spend a couple nights in town near the neighborhood’s hotspots.

“People want to stay within easy walking distance of the action,” Coulter said.

The building will have 19 parking spaces, though McClaskey said they have yet to determine the mix of how may will be for tenants vs. hotel guests, though they hope most people will opt to use the nearby light rail station or ride sharing options.

“Our hope is to get as many people out of cars as we can,” he said.

Beyond that, the building is in a mixed-use area, and would be required to have some sort of commercial space on the ground floor. Rather than the Capitol Hill tradition of a craft cocktail/Asian fusion/pizza route, the hotel takes a different path: its lobby will count as the required commercial space.

Coulter notes that stretch of Harvard, with a relative dearth of foot traffic, makes a more traditional retailer challenging, so this ensures there won’t just be an empty storefront.

They also expect to run the hotel themselves, boutique-style, rather than outsourcing it to a larger company. McClaskey and another partner, Terry Boyle, met while working for Red Lion Inns, and they bring decades of experience in the industry to the project.

The business model for a hotel requires that the place be staffed all the time, so with a smaller place like this, the larger chains won’t have a high enough profit margin to be interested.

“Only a boutique can really do it, and do it well,” Coulter said.

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12 thoughts on “Why they’re building a hotel and apartment building on Harvard Ave

  1. This is a very interesting concept. There are a few hotels in Seattle (mainly downtown) which combine hotel rooms and high-end permanent residences, but this will be the only one which has both hotel rooms and small apartments (presumably relatively affordable).

    I’m not sure there is a market for a hotel on Capitol Hill….wouldn’t most business travelers, and the majority of tourists, prefer to stay downtown? Or, if they want to stay in a neighborhood, wouldn’t they more likely stay at a B&B (several very nice ones on Capitol Hill!) or an ArBnB? Nevertheless, I wish the developer-owners the best of luck in making this work….it’s great that they are so personally invested in our neighborhood!

    • I believe there is a significant appetite for another hotel option on Capitol Hill. Some prefer to not stay in central business districts while on vacation. I’m one of those people.

      They also enjoy services like daily housekeeping, onsite manager, not having to track down keys, wait for a homeowner etc. All of those can be problematic or unavailable when staying at an AirBnB.

    • First off I wish these guys the best of luck but am inclined to agree that they will have a tough go of it in the current hospitality climate.

      Why? Because of airbnb. Last time I checked there were 600 or so listings on Capitol Hill priced as low as $39 a night. Many of these are apartments which the young airbnb crowd seem to prefer over a hotel room anywhere at any price. They do not want interaction with hosts or staff. They want the key code to get in and the wireless password and then to be left alone. And without a doubt they want a WHOLE apartment and NOT just a room.

      I run one of the beautiful bed and breakfasts on Capitol Hill and have been in the business for 30 years. I will be closing after Christmas of this year because the business has absolutely been killed by airbnb since 2014. My $148 room in a historic house including a lovely breakfast simply cannot compete with airbnb. I have read that small properties like mine as well as small boutique hotels would be the first to go because of airbnb and my dwindling business proves that to be true.

      Right now the number 1 bed and breakfast in Seattle is for sale. I have sold mine (to developers) and other innkeepers are rumbling about bailing out too. All because of airbnb. This business is dying and fast! Never would I suggest to someone that they should open a bed and breakfast or small hotel on Capitol Hill now. There is no money in it anymore.

      So best of luck but unless the city reigns in airbnb there will be no need for traditional albeit boutique hotels or traditional bed and breakfasts. And good luck finding an apartment to rent.

    • Maximum Return, your comment makes me very sad. Are we really going to lose the beautiful B&Bs in our neighborhood, and the historic homes they inhabit? All because of the huge profits made by a multinational business (AirBnB)? If so, it sucks.

  2. i think this is a good idea. being in an industry where many of my business partners fly in to see me, i know of many who’d love to stay a few blocks from the pike/pine corridor. i can also see this as being beneficial for those in the neighborhood, like me (i’m 2 blocks away), who don’t have the space to put up out-of-town guests.

    this, though, i don’t agree with: “…its lobby will count as the required commercial space.”

    the developer needs to be held to actually making a retail space on the ground floor. think about what hotel guests, residents and people in the neighborhood might want. i don’t think we need another bar or coffee shop (or even restaurant) but what about a convenience-type store for sandwiches, snacks, wine, etc? kind of like thomas st. market.

    • I agree with you if there were not located on Harvard. If it were on an arterial, retail space would be preferred. But given this is on side street, I don’t think it should be required to have a traditional retail store.

      There are convenience and grocery stores just a couple blocks away. And I don’t think you want the city dictating exactly what type of retail business has to be in any one location. That is quite dangerous.

    • @timmy73

      i never said the city should dictate the type of retail. but a hotel lobby doesn’t strike me as being in the spirit of the requirement for a mixed use building. i don’t think there’s anything wrong with asking the developer to put more thought into the space.

      the convenience store angle was my thought on the matter given that the convenience store that you reference, that’s 2 blocks away, isn’t very good and likely will be torn down along with the redwood one day.

    • This is a fantastic question, and it would be great if someone would do the actual analysis to figure out how many offerings are offered 365 days a year, or even those that are offered for 300 days, where the actual renter or owner is only using it occasionally. I suspect that in seattle as a whole, it is a minority of offerings that being withheld from the rental market, but how small or large that minority is might make a significant difference in a city facing the rental pressures we are.

  3. I think another hotel is fantastic. While I can understand how a bed & breakfast and air bnbs compete more directly, there are people who don’t want to stay in other people’s houses, or in historic old buildings, or deal with any of the things that come along with both air bnb and other kinds of bnbs. Many people want to stay in a hotel, where they can read reviews of the rooms and amenities and know with a high degree of certainty that what they have reserved is what they are going to get, from the bed to the bathroom, to lock on the door. I wish there were more hotel options on the hill.

    I’m sorry that Bed and Breakfasts and Inns on capitol hill or anywhere are suffering at the hands of Air BnB, this is, yet again, another unintended casualty of “distrupters” like Air BnB and probably the unfair and unequal regulatory environment where professionally run Inns have to pay greater taxes and meet certain code requirements that people renting out a spare bedroom by the night don’t have to meet.

  4. With looming regulation on Airbnb coming soon from the City Council, there timing couldn’t be better. Also, being contiguous to Light Rail means hotel guests can get to the new hotel from the airport efficiently and at low cost. Once at the hotel, all the amenities that Capitol Hill has to offer becomes available. When guests need to go downtown, its back to the train station or Uber. It all seems to make perfect sense.

  5. I have one rental unit that I rent to a couple at 2100 per month. I had considered when it was empty a year ago or so making it into an Air BnB. But I went on their site and saw many units that were frequently vacant. I did the math including valuing my time and consider the hassle of dealing with lost strangers regularly and concluded that I would be better of economically and work wise by renting it out. The regular B & B owner speaks from real experience on the impact of Air BnB on his/her business. Personally when I travel I do not want to risk a marginal Air BnB experience but I am fortunate to be able to afford hotels with minor flinching. All this said, I am in favor of Air BnB since people want them and it does not seem right to ban them any more than banning Uber because of Taxis hurting. They should however pay the same taxes as hotels.
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