REAL ESTATE
Too Big for Its Niches
BELLEVUE SQUARE DEVELOPER KEMPER FREEMAN FR., the unflappable godfather of Eastside real estate, survived the 1970 Boeing Bust, the dot-com meltdown, and other dark chapters in this region’s economic saga. But he confesses he’s “never seen anything like” the current real estate meltdown. “It is almost impossible to find a lender,” he says. “This is not the time to launch megaprojects.”
Still, the Eastside’s outlook may be brighter than Seattle’s, for reasons summed up in a single name: Microsoft. Office vacancy rates on both sides of the lake rose in the second half of 2008. But Seattle faces the prospect of WaMu’s 1.6 million square feet of office space flooding the market all at once, pushing vacancies in the financial district to around 20 percent. By contrast, nearly all Bellevue’s new office space has been preleased to the software giant. “Microsoft is kind of the whole story,” says Greg Johnson, president of the commercial development powerhouse Wright Runstad, whose half-million-square-foot City Center Plaza on 110th Avenue is entirely leased to Microsoft. So is Advanta Office Commons off I-90 and the office space in the Bravern, a huge mixed-use project in downtown Bellevue. “There might be a falloff in demand, but there’s no overhang of new empty space,” says Johnson—meaning Bellevue expects to avoid the 25 to 30 percent vacancies that followed the tech bust in 2001 and 2002.
But what about all the shiny new condos that have erupted just as wantonly on the Eastside as in Seattle? Washington Square, two towers and 26 townhouses completed in 2008, takes up an entire city block, with a total of 379 units. The recently completed Bellevue Towers has 540 units, and the Bravern, which will be ready for occupancy next year, will have 455 luxury units. As early as last summer, Eastside condo projects were being cancelled, delayed, or recast as apartments, which are considered safer bets in a soft market. Last July, Freeman decided to delay his Lincoln Square Two project, which was to have retail space, a hotel, offices, and 200 condos. And while the Bravern’s commercial space and, as of November, 75 percent of its retail space was spoken for, its residential towers are only 25 percent sold. Dan Ivanoff of Schnitzer West, the Bravern’s developer, expects its high-end stores to lure more buyers by the time the units are ready in 2010. “We’re sitting on top of Neiman Marcus, Wild Ginger, a French restaurant out of Manhattan,” he boasts—who could resist? But 2008 condo sales data assembled by Windermere realtor Leslie Ota paints a somewhat ominous picture: Of 117 pending Bravern sales from 2008, only four were signed in the third quarter. Sales at Bellevue Towers also trailed off; only seven of 188 came in the third quarter.
Published: February 2009
