By Marc Stiles – Staff Writer, Puget Sound Business Journal
Oct 2, 1:44pm EDT
With Amazon and other tech companies expected to add tens of thousands of jobs on the Eastside in the coming years, developers of multifamily housing are swarming the area.
They may be a little early, however.
“I think there’s a lot of excitement in Bellevue, but I think people might be getting a little overly enthusiastic,” said appraiser Brian O’Connor of O’Connor Consulting Group, a Seattle company that advises multifamily developers.
Across the Puget Sound region, demand for multifamily housing has dropped significantly due to Covid-19 while supply increases, he said. The Eastside is not immune.
The Eastside apartment vacancy rate is 4.6% now, and O’Connor forecasts it could climb to 5.8% by the end of 2021. He thinks it will end up slightly higher in downtown Bellevue.
Still, this has not deterred developers.
“Demand will probably grow, but the development community — they don’t wait for it to grow, they just charge right in,” O’Connor said. “There’s already an oversupply, especially in the Totem Lake/Redmond area.”
The eagerness of developers is not misplaced. O’Connor said if they’re scouting for property now, they probably won’t be able to start building for at least 18 months to two years, with construction taking another 24 months.
“That gives time for the market to heal and the tech industry to ramp up,” he said.
In Bellevue, clients are looking for development sites in downtown and the Spring District.
“Everybody loves the Spring District,”
O’Connor said of the 36-acre development where Facebook will have enough space for an estimated 7,000 employees.
Nearly 800 apartment units already have been built in the district and there’s capacity for 400 more, according to developer Wright Runstad & Co.
It’s not just the Eastside that multifamily developers are circling. Interest is also mounting in Shoreline, where Sound Transit is building two light rail stations that are scheduled to open in 2024.
“We’re doing Shoreline job after Shoreline job. The action now tends to be there or on the Eastside and Tacoma,” O’Connor said.
On the Eastside, it’s “the Amazon effect,” said O’Connor, who has seen this play before.
About 10 years ago, when it became evident how much the company would grow in the city, multifamily developer money was pouring into the region.
“All they wanted to hear was the Amazon story. I would tell them, ‘Hey, you should look at Bellevue,’ and they were like ‘meh.’... The money (still) wants to follow the energy that Amazon creates, so I’m pretty bullish on it,” O’Connor said.
Apartment development in Bellevue
Under construction: 598 units in 4 buildings
Proposed: 5,748 units in 23 buildings
Bellevue – downtown 6.4%
Bellevue – suburban 5.4%
Properties offering concessions
Downtown Bellevue: 45%
Suburban Bellevue: 61%