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Originally published November 12, 2011 at 10:02 PM | Page modified November 13, 2011 at 9:23 AM

As viaduct comes down, opportunity rises

What's likely to happen to abutting properties when the Alaskan Way Viaduct comes down in 2016.

Seattle Times business reporter

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The downtown stretch of the Alaskan Way Viaduct won't be torn down until 2016. But Richard Reel already can smell the opportunities.

Reel owns the 120-year-old Washington Park Building, a four-story brick building on South Washington Street that stands just 30 feet east of the noisy elevated highway — literally in its shadow.

Today it's low-rent retail and office space. But a few years after the viaduct comes down, Reel says, he could convert the building to apartments or condos, perhaps even add a couple penthouse stories.

"I see it really transforming this area," Reel says of the viaduct's demise. "I couldn't be more pleased."

The viaduct's eventual full demolition is prompting owners of many neighboring properties to ponder how they might capitalize once the hulking concrete barrier is gone.

"Those buildings will go from feeling like they're on a back alley to feeling like they're on the waterfront," says Mickey Smith, whose firm, Martin Smith Inc., owns one of them.

Razing the viaduct could be just the beginning. City planners and downtown business leaders hope it will be the catalyst for a whole new waterfront: a boulevard, a seaside promenade, big lawns, maybe hot tubs and a beach.

Details, including financing, won't be worked out for years. But former Mayor Charles Royer, who is deeply involved in the effort, calls it "an investment that would literally suture the city back together."

Just the anticipation is influencing the market. Equity Residential, the country's biggest apartment developer, bought a 93-year-old office building next to the viaduct at University Street this year, calling it a "long-term redevelopment opportunity."

The promise of a viaduct-free future was a big part of the historic-landmark property's appeal, spokesman Marty McKenna says.

That promise may be affecting rents. The Puget Sound Regional Council's lease in another building next to the viaduct expires in less than three years, and, "We're not sure whether we're going to be priced out of the neighborhood," spokesman Rick Olson says.

Property values along the corridor are expected to climb when the viaduct's din, dirt and darkness disappear. Some old buildings could be torn down and replaced. More, like Reel's, are likely to be renovated and reinvented.

"People will want to live there," says Royer, who already does.

The highway's much-anticipated demise hasn't inspired any building boom yet. There's just one project in the development pipeline that abuts the viaduct: a planned four-story, 32-room hotel between Yesler Way and South Washington Street.

It has permits, but the owner needs to find financing and to make up with city officials, who say he demolished the historic building on the site without authorization.

Most property owners, who range from old Seattle families to S&P 500 companies, probably will sit tight until the viaduct falls, says Seattle land-use economist Matthew Gardner.

Meanwhile, they must withstand years of construction. "I'm more concerned right now about surviving that," says Smith.

But once that work is done, he adds, "It has the potential to be wonderful."

The post-viaduct future

Loading docks. Lots of 'em.

That's what you'll see to your right if you take a high-decibel hike along the viaduct's underside from South King Street up to Pike Street, where the elevated highway leaves the waterfront.

With few exceptions, the buildings that line the viaduct turn their backs to it. Many were built as warehouses, serving nearby piers, decades before the viaduct was constructed.

Now they're mostly modest, three- to seven-story office buildings, with a sprinkling of low-income apartments and high-end condos. Many have retail on the ground floor; furniture showrooms dominate north of Pioneer Square.

But their front doors and display windows face east, not west.

Thirteen-story Waterfront Place, an office-condo project built in 1984 that is the corridor's tallest — and probably newest — building, pays more attention to its viaduct side. There's a narrow patio with brick paving and evergreens in big pots.

But the two storefronts that face the patio are vacant. Restaurants once occupied both. One has been empty about six months, the other more than two years, says Jeremy Moller of JSH Properties, the listing agent.

"That's a very tough place for retail," he says. "You have the viaduct screaming overhead."

Once the screaming stops, however, "It's going to be a great place to be, no question."

Royer, Seattle planning director Marshall Foster and others involved in planning the new waterfront see lots of shops and cafes in the corridor's post-viaduct future, spilling out onto a broad, landscaped sidewalk.

"It ought to be as pleasant a place to walk as the waterfront itself," says architect Patrick Gordon, who serves with Royer on the city's waterfront planning committee.

The loading docks, with slightly elevated views of water and mountains, could become amenities, Foster says.

No one anticipates the old buildings will be replaced en masse by a wall of gleaming, high-rise condos. The constraints on development are too numerous.

Many buildings are protected by historic-preservation rules. Zoning limits building heights to 160 feet, tops — much shorter than just a block or two inland — and city officials don't seem inclined to change it.

That's unfortunate, says Hugh Hotson. His family has owned the Maritime Building, between Marion and Madison streets, since the 1960s.

"You could have a whole new city down there," he says. If left to his own devices, Hotson says, he'd build tall — "something between Hong Kong and Vancouver, but built for Seattle."

Most property owners, however, talk of working with what they have: fixing up their old buildings, perhaps changing their uses.

The historic Western Building, between Yesler Way and Columbia Street, housed inexpensive artists' lofts before it was deemed unsafe and vacated this fall. It will be stabilized at state expense to withstand the tunneling below.

After that's done, the owners are exploring renovating the building for apartments or offices, says Stanley Piha, their representative. The building's retail focus also is likely to shift to the now-neglected viaduct side, he adds.

Other building owners, including Reel, are considering a similar shift. "Instead of ignoring the west side of our building, we'd emphasize it," he says.

Construction potential

For all the limitations, there still could be some new construction along the corridor after the viaduct falls.

• Windermere Real Estate founder John Jacobi, whose family has owned the venerable Commuter Building at Marion Street since the 1970s, says he could build a 14- or 15-story tower on the site, probably residential.

But the tunnel will be built under a corner of the property, and Jacobi says that could limit his options.

• Kevin Daniels, co-owner of the Merrill Place condo-office complex that abuts the viaduct in Pioneer Square, says he and his partners could replace the development's 1980s garage with a residential, office or hotel building — if plans for a new, green waterfront pan out.

• The parking lots along the corridor are considered ripe for redevelopment. The largest, a full block between Seneca and Spring streets, has been owned for 17 years by Myrtle Woldson, a 101-year-old Spokane philanthropist who reportedly has rebuffed numerous offers to sell. Her representative declined to comment.

Some property owners, however, forswear any intention of redeveloping.

Columbia West Properties of Bellevue, for instance, owns a 35-stall parking lot at Yesler Way. The site's too small to build on, President Michelle Foreman Barnet says, the parking income too attractive.

Seattle Steam, whose pipes that heat much of downtown radiate from its plant next to the viaduct, can't relocate. "We're here for the long haul," says Chief Executive Officer Stan Gent.

Self-storage giant Public Storage rents out mini-warehouse space in the century-old building next door, at Union Street, and a spokesman says it's too profitable to be redeveloped or sold.

Goodman Real Estate co-owns the brick, six-story Market Square office building a few doors north. It's recently renovated and 100 percent leased, President and Chief Executive Officer George Petrie says. A blues club faces the viaduct.

Big changes aren't really needed, Petrie says — but when the barrier's gone, "We'll definitely see an increase in value."

The tax factor

So will all the properties in the viaduct's shadow, city officials and downtown business leaders say — and perhaps it's only fair to ask their owners to pay part of the cost of the promenade, lawns, beach and all the other new waterfront amenities.

There's talk of a special taxing district. It most likely would stretch blocks beyond the properties abutting the viaduct — but those owners might pay proportionally more.

That's fine with some. Others aren't so sure. The owners of the Western Building and neighboring Polson Building will lose income during tunnel construction, Piha says, "and no one's offered to give us anything back for the disruption."

Tunnel construction and the viaduct's demolition will be disruptive, "but, long-term, it's a big positive," says John Grassi.

He heads Spear Street Capital, a San Francisco real-estate investment company that bought the 83 King/505 First South office complex next to the viaduct in August for nearly $125 million. The promise of no viaduct and the potential impact on rents were factors, Grassi says.

His San Francisco office overlooks the Embarcadero, a waterfront neighborhood that enjoyed a renaissance after an elevated highway was torn down 20 years ago.

Grassi expects something similar in Seattle. "It's going to pull the city center closer to the water," he says

"Believe me, it's all going to change."

Eric Pryne: 206-464-2231 or epryne@seattletimes.com

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