Seattle Survives on Project Backlog With Few New Projects Slated

Seattle developers continue to invest in major projects, but contractors are surviving with pre-recessoin jobs.

By Deb Wood

The Joshua Green Building is undergoing a renovation to improve energy efficiency. (Photo courtesy of Lease Crutcher Lewis)

Seattle seems to be weathering the recession better than some areas, although private development has slowed.

“Consistent with other places, there has been an impact from the banking industry’s demise, which has caused the credit valves to shut,” says Grant Larsen, chairman of Associated Builders and Contractors Western Washington Chapter and president of Express Construction in Bellevue, Wash. “A lot of projects that were going to start the third and fourth quarter of last year are not proceeding.”

Larsen says corporate entities with cash are picking up opportunities to get projects done at less cost, which is generating renovation and tenant build-out work. He estimates that prices are coming in at 15% to 20% less than normal.

“We’re seeing a downturn, just like the rest of the world and nationally,” adds Bob Babitsky, executive vice president and Seattle general manager for Skanska USA Building, who expects volume will be lower in 2009 than 2008, remain relatively flat in 2010 and then gradually start increasing in 2011.

New starts on speculative office buildings and high-rise residential projectshave slowed, Babitsky adds. He says that Skanska’s special projects division allows it to provide regular clients, such as The Boeing Co. and Seattle University, with ongoing construction needs.

Health care remains strong, Babitsky says. Skanska has four hospital expansions under way in the state, including a $144-million, 340,000 sq ft, 18-story bed tower at Virginia Mason Medical Center in Seattle, scheduled for completion in 2010. The company is working with the University of Washington Medical Center in Seattle on preconstruction for an expansion.

Projects in South Lake Union are still going strong, including 2201 Westlake, a residential and office mixed use project. (Photo courtesy of Vulcan Real Estate)

Lee Kilcup of GLY Construction of Bellevue, Wash., and president of Associated General Contractors of Washington, says health care is one of the last strong market segments. GLY is working on a $36-million, 75,000 sq ft addition to Highline Medical Center in Burien. The company began the three-story Birch Wing project in July 2008 and expects to complete it in February. The project will add an emergency department with 32 treatment rooms, 31 patient rooms and a central energy plant.

“There is very little large private work getting started, but there’s a fair amount of small private work, tenant improvements and a fair amount of health care,” Kilcup says. “The Amazon project is a notable exception.”

GLY is building the fourth phase of the new Amazon headquarters complex at South Lake Union, to the north of downtown. It is also finishing a large West Campus project for Microsoft. Microsoft pegs its investment in the West Campus at $1 billion.

While acknowledging that construction activity is down, Bryce Taylor, director of business development at Lease Crutcher Lewis in Seattle, says, “We are still seeing opportunities in the marketplace. The dollar value and size of the projects are down in size and scope.”

Lease Crutcher Lewis is building phases IA and IB of the new Amazon headquarters campus. Taylor says the company takes a diversified approach to selecting projects and reports a backlog of work that will see it through this year. But he says architects and consultants are not busy, and that does not bode well for next year.

Historical renovation is an area Lease Crutcher Lewis has focused on. The company began an upgrade of the 10-story Joshua Green Building in 2008 and will complete the renovation this fall. Taylor would not release the cost.

South Lake Union

Vulcan Real Estate of Seattle owns nearly 60 acres in South Lake Union. The company’s holdings have a capacity for 10 million sq ft, about half completed or under way, including life-sciences facilities, offices and residential buildings. Vulcan holds approximately one-third of the former industrial area.

Amazon is one of the few corporations building new headquarter facilities.

Amazon’s new 11-building, 1.7 million sq ft headquarters campus represents Vulcan’s largest South Lake Union project to date. The six-phase project includes 100,000 sq ft of retail on the ground floor of the buildings and subterranean parking.

South Lake Union zoning precluded a high-rise structure to accommodate all of Amazon’s 4,000 employees. The sites are adjacent to each other. Vulcan secured “alley vacations,” which allowed for higher density and better positioning of some of the buildings to capture sunlight and provide open plaza space.

“We have three architects for the project because we wanted to make sure we had a varied landscape of buildings and design,” says Lori Mason Curran, Vulcan Real Estate spokesperson and market research manager.

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Lease Crutcher Lewis began construction in 2007 on the first three buildings and is renovating a historic structure on one of the two sites. NBBJ of Seattle designed the phase IA and IB structures and Schnitzer West of Seattle is a joint-venture partner.

Vulcan hired Sellen Construction Co. of Seattle to build the second and third phases, which contain three buildings designed by LMN Architects of Seattle.

GLY Construction will complete three new 12-story, steel-frame buildings and renovate a historic building in the fourth and fifth phases. Callison of Seattle designed these structures. The fifth phase has not yet started.

The final phase is expected to break ground next spring. Vulcan is targeting LEED gold on phases two through five. The first buildings are scheduled for completion in 2010, with full build-out planned for 2012. Vulcan would not release cost.

Vulcan Real Estate also is developing 2201 Westlake, a 450,000 sq ft, mixed-use project spanning a half city block that includes 300,000 sq ft of office space, 135 luxury condominiums, nearly 25,000 sq ft of street-level retail space and a six-level underground parking garage. The Seattle Streetcar stops in front of the project.

“This is a gateway to the neighborhood,” Mason Curran says. “It’s where downtown connects to the South Lake Union area.”

Sellen began construction early in 2007 on the 12-story office building and 19-story office and residential tower, designed by Callison. The project team aims for LEED gold on the concrete-frame structure, and completion is scheduled for this year.

Thornton Place

Lorig Associates and Stellar International Holdings, both of Seattle, are creating the $160-million Thornton Place, a six-acre mixed-use development with 50,000 sq ft of retail space, a 14-screen cinema, 109 condominiums and 278 apartments constructed above a 900-car post-tensioned concrete parking garage. The buildings surround a European-style plaza.

The site is adjacent to the city’s largest park-and-ride location and a future light-rail station, across the street from Northgate Mall. Developers have leased 350 parking spaces to King County Metro Transit for use during the day. Thornton Place will feature hourly car rentals onsite and encourage residents to use the nearby mass transit.

“We do a lot of transit-oriented developments,” says Jeff Cook, president and chief operating officer of Stellar International. “We like infills near a city center, and we like complicated projects with interesting aspects.”

Also at Thornton Place, but not owned by Lorig and Stellar, W.G. Clark Construction Co. of Seattle is building Aljoya, a 143-unit retirement community for Era Living of Seattle. The 245,682 sq ft, six-story above grade, two-level below grade complex includes a pool, wellness center, conference center and two dining facilities. For more information see the Top Contractor Story in this issue.

ESCALA

LEXAS Cos. of Seattle is developing the $350-million ESCALA, a 31-story, 850,000 sq ft, mixed-use condominium project with 275 units, ranging in size from 950 sq ft, one-bedroom city homes to 16,000 sq ft penthouses. Prices range from $600,000 to more than $4 million.

JE Dunn-Northwest of Portland broke ground on the concrete-frame building in January 2007. Scope of work includes construction of an eight-level, below-grade parking deck. Completion is scheduled for late 2009.

Looking ahead

ABC’s Larsen says that as current projects wrap up, “there is nothing to backfill.” He says his firm and fellow members are focused on working with clients to get the best value possible.

Kilcup says AGC of Washington has presented seminars about surviving in a down market, how to benefit from the stimulus and other topics to give members more knowledge to help their businesses through the turbulent times.

“We’re a lag industry, so even if the greater economy turns around in the third or fourth quarters as predicted, it will be awhile before it grows enough to create employment growth and drive the need for new space,” he says. “We’re looking at a pretty tough couple of years.”

Seattle Projects on the Web:

ESCALA
http://www.escalamidtown.com/

2201 Westlake
http://www.vulcanrealestate.com/TemplatePropertyPortfolio.aspx?contentId=75

South Lake Union
www.Vulcan.com
www.schnitzernorthwest.com