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.

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Downtown Bellevue’s population, now estimated at 5,000, is projected to reach 14,000 by 2020. Barring utter ruin in the tech sector, all those new Microsoft workers will need places to live, shop, and eat, so Ivanoff’s optimism may yet be borne out. The picture in other Eastside cities is more mixed: Redmond’s mayor, John Marchione, says his city has seen an almost total halt in housing permits, but developers betting on an eventual upswing are still filing commercial permits. In Kirkland, one major mall redevelopment, Totem Lake, is in limbo, while another, downtown’s Parkplace, is moving forward. But in a move that sent nervous ripples across the Eastside, Google decided in November to occupy only two-thirds of its new downtown Kirkland campus and lease the rest. For now, all bets are riding on Microsoft. 

 

BUSINESS
Go East, Young Man
Charles Mount appreciated downtown Seattle’s lively atmosphere, and nine years ago, when he launched his first software start-up, he set up shop there. But he soon opted for cheaper office space and free employee parking on the Eastside. Now, for his third start-up, a file-sharing application maker called Onehub, Mount has offices just off I-90 in Bellevue’s Eastgate neighborhood and no thought of crossing back. “I go downtown about once a week for meetings,” he says. “But everything we need is on the Eastside.”

Mount’s experience reflects the change that’s come to Bellevue, Redmond, Kirkland, and Issaquah as they’ve outgrown being Seattle’s bedrooms, thanks in large part to Microsoft. Now urbanite entrepreneurs like Mount can happily work, play, eat well, and do most of their business there. For them, the Eastside has escaped Seattle’s orbit and matured into a self-sufficient economic machine.

“Some people argue that Microsoft alone is enough to make the Eastside a high-tech region of its own,” says -Bellevue’s economic development director, Robert Derrick, though he himself believes in a wider regional interdependence extending across Lake Washington and along Puget Sound. The Eastside has many of the ingredients of a high-tech superpower on the model of Silicon Valley. The brain trust is certainly there: Former Microsoft employees have spun off countless start-ups, and high-tech players like Nintendo and Google have set up operations to tap that talent. Bellevue’s gleaming office towers house an array of banking and legal services. Redmond mayor John Marchione, who grew up there when it was a very different town, says he’s seen a tectonic shift toward Eastside independence. “In 1970, when I was five, three out of four households on my block had fathers who worked for Boeing. Now three out of four of my kids’ friends have parents who work for Microsoft or a company that works with Microsoft.”

Bill McSherry, director of economic development at the Puget Sound Regional Council, contends that rumors of the demise of Seattle’s dominance are greatly exaggerated. “The Eastside is much more an integrated part of this region than Silicon Valley is of the San Francisco region.” Our region’s smaller, for one thing. And research institutions like the University of Washington and the Fred Hutchinson Cancer Research Center, which play Stanford to the Eastside’s Silicon Valley, are on the west side of the lake. “Many companies have started out as ideas somewhere on the UW campus,” notes McSherry. Plus, the venture capital lives in Seattle. “Except for Ignition Partners in Bellevue and a firm in Kirkland, most of the VC community is downtown,” says Mount.

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True, but ideas are flowing on the Eastside, too. Rebecca Lovell, program director at the Seattle-based Alliance of Angels, a “matchmaker” for entrepreneurs and investors, says a third of the latest start-ups to apply are in Bellevue. And many of the alliance’s individual investor members are likewise Eastsiders—“ex- or current Microsoft employees, or from the McCaw companies, or serial entrepreneurs.”

Eastside separatists and ardent regionalists agree, however, that unless the Puget Sound region can solve its transportation woes, the two sides of the lake will become further isolated from each other in a way that benefits neither. “Transportation is the number-one thing stifling growth on the Eastside,” McSherry says—not just because the Eastside needs to be connected to Seattle, “but because both need to be connected to each other.” Maybe that’s why Eastside voters—including a decisive 56 percent in Bellevue—rallied in November to endorse light rail to their once-sheltered enclave, their latest bet to get where they’re going.

 

RESOURCES
Water, Water, Anywhere
In 1998, then–Seattle mayor Paul Schell made waves when he threatened to deny water to “wasteful” new suburban developments. Schell’s staff backed away from his saber rattling the next day, but everyone knew who hizzoner was calling out: the Eastside, where explosive growth was squeezing regional infrastructure and developers were entering lotteries for water rights. Seattle, which supplies most of the Eastside’s water, said its system could be tapped out by 2020.

Eastsiders had tried before to escape Seattle’s water orbit, but every bid—notably an ill-starred 1980s scheme to dam the North Fork Snoqualmie River—failed. Now, alarmed by the water drama, they tried again. In 1999, nine cities and water districts, including Bellevue, Redmond, Mercer Island, and Issaquah, formed a consortium called the Cascade Water Alliance and began looking for a watershed that the Eastside could call its own. 

This spring eight remaining water rebels (Mercer Island dropped out, and two other cities that were considering joining didn’t) will complete the $39 million purchase of Lake Tapps, a former hydroelectric reservoir and popular recreational lake on Pierce County’s White River, from Puget Sound Energy. The water won’t start flowing from there until the mid-2020s, but some Eastside residents are already calling the deal a costly boondoggle. They complain that it will needlessly replace “pristine” Seattle water with a contaminated source—and raise rates in the bargain, thanks to a total price tag projected to approach $500 million.

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“The big concern is that Lake Tapps is surrounded by many, many homes, and a lot of them are on septic systems,” says longtime Bellevue antigrowth activist Geoffrey Bidwell, who in 2003 unsuccessfully petitioned to subject Cascade’s plans to a public referendum. Not only do people swim and motorboat in the lake, says Bidwell: That ring of septic systems is likely discharging excreted pharmaceuticals into the water. Although current federal regulations do not address the issue of drugs in drinking water, a 2008 Associated Press survey found that everything from sex hormones to ibuprofen had been detected in municipal supplies across the nation. And while it’s not clear whether the tiny concentrations—parts per billion or trillion—threaten human health, the EPA official in charge of water safety has called the issue “a growing concern.”

The state has not yet gauged the quality of Lake Tapps water, says state Office of Drinking Water regional manager Robert James, but when it does, the lake will likely get a “high-risk” rating. That may sound bad, but that rating—which covers only bacterial contamination, not other organisms or pharmaceuticals—merely indicates the type of sanitary treatment needed; it does not disqualify a watershed from municipal use. Other sources in the region—such as the Nooksack River, from which Ferndale and Lynden draw their water—also have high-risk ratings, says James.

Cascade board chair Lloyd Warren isn’t worried about the purity of Lake Tapps: “We’ve anticipated that the treatment we’re going to use will resolve any issues that could potentially be there. I don’t think that’s a particularly big issue.” It was in 2002, when concern over the lake’s water quality sank plans to link the Seattle, Tacoma, and Cascade water systems: Seattle agreed to commingle Tacoma’s Green River water with its own Cedar and Tolt supplies, but balked at adding Lake Tapps to the mix.

What’s more, says activist Bidwell, slowing population growth means the need for a new Eastside source may not be as great as it once seemed. Indeed, as far back as 2002, Seattle’s water utility estimated that it had enough water for the next 50 years—and that was before the Eastside finalized its withdrawal. Now, Seattle Public Utilities has “enough water for beyond 2060,” says spokesman Andy Ryan.

Projections like that lead activist Bidwell to conclude that the push to tap Lake Tapps reflects regional aspiration rather than proven need: “It’s really a power grab, as I see it. -Bellevue sees itself as going to be bigger than Seattle, and you really can’t be in a dominant position unless you control your infrastructure—i.e., water.” Predicting future demand is tricky, the Cascade Alliance’s Warren acknowledges, “but the need will be there at some point. It’s not a question of if, but more a question of when.”

 

DEVELOPMENT
Better Bel Than Red
A time traveler from Bellevue circa 1980, disoriented by downtown’s new skyscrapers, might get her bearings by walking a couple miles east to Bel Red Road, which links downtown Bellevue and Redmond. She would feel right at home amongst the drab warehouses and distribution plants, nondescript office parks, and aging shopping plazas along this key arterial.

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Despite Bel Red’s unaltered facade, change is coming to the district, slowly but inexorably. Light industry is trickling away to cheaper digs in South King County. In 2007, Safeway moved its regional distribution plant from Bel Red and 124th Avenue Northeast to Auburn, leaving behind a 36-acre vacancy. Some longtime businesses, like Angelo’s garden center on 156th Northeast, have shuttered; others, like Jax Stained Glass, were driven out when property changed hands and rents went up. “We were on Bel Red for 20 years,” says Jax owner John Miller, who moved to smaller quarters on Northup Way. “My costs would have more than doubled.” As a result, employment in the Bel Red district—which accounts for about 20 percent of Bellevue’s jobs—dropped 5 percent between 1995 and 2004, even as citywide employment grew 20 percent.

This month, the city plans to adopt a new land-use plan aimed at transforming a 900-acre swath along the Bel Red corridor into a mixed-use district of housing, shops, and offices (along with open space and restored streams, some of which miraculously still bear fish). Five thousand new housing units and 4.5 million square feet of new commercial space, in buildings up to 12 stories high, will cluster around transit “nodes” that the city hopes to see served by light rail one day.

“The market was signaling that it wanted to change the land use,” says Matt Terry, Bellevue’s director of planning and community development. The first major project to queue up is the redevelopment of the old Safeway plant into a huge mixed-use complex called the Spring District. The project is still in the early planning stages, with groundbreaking a couple years out. Its developer, Wright Runstad president Greg Johnson, says it will emphasize sustainable building practices: “We have a unique opportunity to start with 36 acres from scratch.”

Talk like that tends to pique anxieties about density and traffic that are never far below the surface in the suburbs. But Terry, the city planning director, reports that the Bel Red plan has drawn “very little public opposition.” Ken Schiring, a neighborhood activist and former Bellevue Planning Commission member who served on the committee that developed the Bel Red plans, affirms that: “As far as the neighborhood is concerned, I don’t see that much impact.” Some residents disagree: More than a dozen—including several in Schiring’s minority neighborhood—registered their opposition to plans to build a retirement community and two hotels on the site of the old Angelo’s nursery. Ellen Kerr, copresident of the nearby Bridle Trails Community Club, says she and most of her neighbors opposed the “massive development” in the works for the area.

Not all Bellevueites want to see the old blue-collar operations driven out. The new Bel Red zoning will allow existing light industrial uses to remain, and some larger operators like the Coca-Cola bottling plant will likely survive. But the long-term outlook for small businesses like auto shops is murkier, especially if they lease their space. “There are a lot of mom-and-pop businesses that have been there for 30 or 40 years,” says Kerr. “Our neighborhood uses those businesses. Once the development happens, they are not going to be able to compete because of the price of real estate, unless the city has some sort of incentive program.”

But some still dream of remaking all Bellevue in the image of its shimmering downtown—even if they have to drive to Auburn to get their cars fixed.

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POPULATION
Eastworld
When Alicia Martinez moved to the Eastside in 1991, it seemed like she and her husband were the only Latinos for miles around. “There was no TV in Spanish, and there were hardly any Latinos in the area,” says Martinez, a social worker who was born in Mexico City. “We didn’t have a community. Then St. Louise Church in Bellevue offered a mass in Spanish, and that brought Latinos from surrounding areas—but it was so small we all knew each other by name.”

A decade and a half later, immigrants from Latin America, Asia, and Africa have helped make St. Louise, with 4,300 parishioners, the largest church in the Archdiocese of Seattle. Three out of 10 -Bellevue residents are foreign born, and, like St. Louise, public institutions across the Eastside have changed how they operate to reflect that population. Visitors to the City of Bellevue’s Web site can now choose among Chinese, Korean, Spanish, Vietnamese, and Russian versions; in the cosmopolitan Crossroads neighborhood a “Mini City Hall” provides services in 10 languages. Hospitals, clinics, and police departments use telephone translation services: There’s no way they can hire personnel to cover the dozens of languages they’re likely to encounter.

Some institutions realize that language is far from the only barrier immigrants face. At the Health Care Access Clinic, a free weekly service for the uninsured offered by Kirkland’s Evergreen Hospital, a multilingual staff helps foreign patients navigate this country’s bewildering health care system. “We have social workers who explore all the possibilities of how we can provide care, see if [patients] qualify for Medicaid, find connections to permanent providers, and explain how the system works,” says clinic coordinator Cherie Green. At Bellevue’s Lake Hills Elementary, where 60 percent of students speak first languages other than English, a program called Wrap Around Services serves parents as well as kids, providing adult ESL classes, mental health care, cultural celebrations, and recreation programs in a multicultural setting. The 40-year-old Youth Eastside Services (YES), a social service agency for kids, set up a Newcomer Program to help young immigrants adjust to life in the United States.

But even as they try to reach out to immigrants, some Eastside institutions have lagged conspicuously behind the larger community in diversity. In 2001, a Bellevue police officer shot and killed an unarmed Guatemalan immigrant named Nelson Martinez Mendez, provoking angry protest from the Hispanic community. The Bellevue Police now have a diversity focus group and subsidizes officers who study Spanish at local schools. But only two of the department’s 101 patrol officers are Hispanic. Spokesman Greg Grannis said the department’s restrictive hiring standards are the reason: Recruits must be U.S. citizens and must have attended college. By contrast, Los Angeles and some other cities with large immigrant populations hire candidates whose citizenship applications have been accepted but who haven’t yet become citizens; the Seattle Police Department requires citizenship but not college.

With a shortage of qualified candidates in certain fields, YES director Patti Skelton-McGougan also struggles to make her agency reflect the community’s ethnic makeup: “Everybody is competing for the same people.” Elected officialdom is changing even more slowly. In 1994, when Bellevue’s population was 19 percent minority, Chinese immigrant Conrad Lee became the first nonwhite member elected to its city council. Fifteen years later, with the population about 30 percent nonwhite and 25 percent foreign born, Lee remains the lone elected minority member. (Last March, Hong Kong-born Patsy Bonincontri was appointed to serve out an unfinished term.) Lee laments that getting newcomers interested in local civic life can be an uphill battle: “If you go to Chinese New Year, you’ll see 600 Chinese Americans organizing successfully, but they don’t mix [with non-Chinese].” He acknowledges that immigrants may face particular financial and cultural barriers when they seek public office, but he’s still disappointed that others haven’t followed his lead: “It shouldn’t take more than four years for others to get interested. Once it reaches critical mass, it will catch fire fast—but before then, it’s a long, hard grind.”