Pacific Place -- Will Opening Of Downtown's Newest Shot In The Arm Be Clouded By Recession?
Seattle Times Business Reporter
Pacific Place, the retail-cinema-restaurant complex that will add glitz and variety to downtown Seattle, opens Thursday at Sixth Avenue and Pine Street.
It is the latest in a string of heavyweight retail developments to transform the heart of downtown, ranging from Westlake Center in 1988 to the NikeTown-GameWorks complex in 1996-97 to the new Nordstrom flagship store two months ago.
Even before its opening, Pacific Place is winning accolades for its street-friendly design and soaring public spaces. But its timing may be tricky, as the clouds of economic slowdown have formed on the horizon.
Conceived in 1993 as part of a $400 million revitalization of a three-block stretch of downtown, the 335,000-square-foot, five-story shopping center has landed such luxury-goods retailers as Cartier and Tiffany. It opens on the heels of the Aug. 21 debut of the $100 million Nordstrom flagship store in the former Frederick & Nelson building just west of Pacific Place.
The third leg of the triad will be the renovation of the old Nordstrom store at Fifth Avenue and Pine Street next year. The Bon Marche has temporarily leased two-thirds of the building's ground-floor space for its Holiday Lane Shop this Christmas. Permanent tenants have not yet signed on, and The Bon won't be one of them; it's planning a multimillion-dollar renovation of its own flagship store at Fourth and Pine next year.
Pacific Place, on the site of the old Systems Garage and Klopfensteins clothing store, has been under construction nearly two years. It has risen from a seven-story-deep hole to form a new retail complex with more than 40 stores and restaurants and a 1,200-car underground garage. Connected to Nordstrom by a pedestrian sky bridge over Sixth Avenue, Pacific Place is expected to generate $125 million to $150 million in annual sales.
"We have had a long road," said Matt Griffin, co-manager of Pine Street Development, Pacific Place's developer. "It is kind of hard to believe we are here, but we are here. We have one of the great downtowns in America."
Hurdles remain, however. In recent months, the local and national economies have gone from flush to worrisome as the stock market has swung wildly and as the Asian money crisis continues to dampen foreign travel.
On the eve of Pacific Place's opening, Griffin said he's wary of a recession. But he added that developments such as Pacific Place aren't built only for a year.
"They are built to have a lasting quality and basically ride through upturns and downturns," he said.
A three-year test
Seattle retail strategists Dick Outcalt and Pat Johnson say it will take about three years to fairly evaluate Pacific Place.
That is the time it usually takes new retailers in a market to break even and start turning a profit, even without the complication of a potential recession. It also takes time for consumers to change their shopping behavior, shifting from old retail allegiances to the new draw, they said.
The prospect of a downturn in the economy doesn't appear to be dampening the enthusiasm of high-end retailers, who some analysts predict would be hurt first.
"We're very optimistic. We're certainly not going to change our plan," said James Quinn, vice chairman of Tiffany & Co., the jewelry and luxury-goods chain. "Maybe economic conditions will have some adverse effects, but it won't be lasting."
Quinn said Tiffany began looking at Seattle four years ago because of the area's growing buying power. The company targets households that earn $50,000 or more annually, and "there are certainly a lot of those in the Seattle market," he said.
As was the case at the opening of the downtown Nordstrom in August and the Old Navy apparel store at Sixth and Pine in September, many retail observers expect Pacific Place to draw a large opening-day crowd. Those who have seen the mall say it may be more architecturally interesting than Nordstrom's remake of the old F&N building.
"Pacific Place has a grandeur about it. The interior space is almost basilica-like," said J'Amy Owens, president of The Retail Group, a Seattle-based design and retail consulting company.
Unlike earlier mall designs, where shops mostly faced an interior courtyard, Pacific Place will have 14 street entrances to draw in pedestrians. The exterior storefronts vary from shop to shop to make Pine Street a more interesting place to walk, said Griffin.
Inside, a 12,500-square-foot, crescent-shaped skylight tops a large atrium. The skylight lets in natural light and offers a glimpse of the city's skyline.
Griffin said he is shooting for about 80 percent of the retail space to be filled on opening day and 90 percent by Thanksgiving, the start of the holiday-shopping season. That means 30 to 35 stores will be ready to go when the first customers flow through the doors at 9 a.m. Thursday, he said.
Among the tenants are Tiffany and Cartier at the entrance near Sixth and Pine, a Williams-Sonoma Grand Cuisine, Barnes & Noble Booksellers, J. Crew, Bally, Coach, Pottery Barn, Restoration Hardware, Ann Taylor, Club Monaco, Helly Hansen, a half-dozen restaurants and an 11-screen General Cinema Theatres on the top floor.
Cutter & Buck, the Seattle-based designer of golf-inspired sportswear, chose Pacific Place for its first retail store, in large measure, because of the other stores that are moving in.
"Co-tenancy is very critical," said Scott Darkenwald, Cutter & Buck's director of retail development. Cutter & Buck, for example, will be next door to Williams-Sonoma. Both tend to draw the same upscale customers, said Jeffrey Buchman, Cutter & Buck's vice president of marketing.
No major new retailer
Pacific Place bundles a number of specialty retailers that previously were scattered throughout the downtown core, noted Outcalt and Johnson. But at the same time, it has not brought in a major new retailer such as a Bloomingdale's or Saks Fifth Avenue, they said.
That is why Nordstrom's relocation to the old F&N building was key to the project's success, said Jeffrey Rhodes, the Seattle investor/developer who conceived the redevelopment plan. Rhodes, with partners Tom Klutznick and Ken Himmel, developed Copley Place in Boston and Water Tower Place in Chicago.
Department stores are big generators of shopping traffic and no retail core can succeed without them, said Rhodes. For example, Water Tower Place in Chicago, with eight levels of retail shops anchored by Marshall Field and Lord & Taylor department stores, draws 28 million visitors a year.
"If Nordstrom was unwilling to stay downtown, it would have been extremely difficult to get other retailers to come downtown to Seattle," Rhodes said.
Retailers can be cautious. Rhodes noted it took about two years to fully lease Water Tower Place after it opened in 1975, since the idea of a vertical mall had never before been tested.
The Pacific Place project did not go forward without considerable controversy. Many citizens protested the reopening of Pine Street in front of the old Nordstrom store and Westlake Center, a move to free up traffic flow that the Nordstrom family had sought as a condition of moving to the Frederick & Nelson building.
Others took issue with the use of federal Housing and Urban Development money to clean up a so-called blighted area around the former Frederick & Nelson property, and the city's agreement to pay $23 million more for the Pacific Place garage than the estimated $50 million it cost to build. Supporters of the transaction say the garage, which the city will own, will be a significant source of revenue and well worth its price tag.
When Griffin joined the Pacific Place effort in 1994, Frederick & Nelson had been dark and dormant for two years and I. Magnin for one.
"Downtown Seattle wasn't so great. Here we have one of the great economies in the world and yet our downtown was slipping," he said.
Griffin, a former principal with the Wright Runstad real-estate-development company and co-owner of University Village, said some of the same families that brought the 1962 World's Fair to Seattle invested in the project.
He cited local investors such as William Bain Jr., a partner with NBBJ in Seattle; Jeff Brotman, chairman of Issaquah-based Costco; developer and philanthropist Herman Sarkowsky; Kenneth Gorelick, otherwise known as Kenny G, the renowned saxophonist; and, Starbucks Chairman Howard Schultz.
Other backers include the investment companies of Stan McDonald, founder of Princess Cruises and chairman of the Stellar International real-estate-investment company, and his family; telecommunications giant John McCaw Jr.; the family of the late developer Howard S. Wright; the descendants of timber pioneer R.D. Merrill, whose family includes Seattle arts patron Virginia Wright and Tacoma philanthropist Wendy Weyerhaeuser; and, the Behnke family, a group of Seattle philanthropists and business leaders.
The major owner of the project is the Washington, D.C.-based Multi-Employer Property Trust, a $1.1 billion real-estate-investment fund. Rhodes, Himmel and Klutznick sold their share in the project back to Pine Street Development on Oct. 16 for an undisclosed price.
The project's cost has gone over $180 million, above its long-quoted estimate of $175 million. But the investment group had a $10 million contingency fund to cover overruns, said Griffin.
A possible sale
While there is speculation that the investment group will sell the project when it is finished, Griffin said such talk is premature.
"We have to sit down with our investors now that it is open and decide what our long-term financing strategy is for the building," he said. Even if Pacific Place were to be sold, shoppers would notice no difference, Griffin said. The complex is managed by Urban Retail Properties of Chicago.
One issue for Pacific Place, and all of its tenants, is the increasingly uncertain times.
With some stores downtown pulling in 25 percent to 50 percent of their sales from out-of-town visitors, the Seattle-King County Convention and Visitors Bureau reports 1998 has been a historical high for convention business.
Approximately 370,000 people will pump an estimated $360 million into the local economy this year for hotels, restaurants, entertainment, transportation and other convention-related expenses, said Steve Morris, the convention and visitors bureau president. Projections for 1999 are in the $340 million to $350 million range, said Morris.
Pacific Place, Nordstrom, the Old Navy apparel store in the renovated former I. Magnin building, the Meridian West and East development that houses NikeTown and GameWorks, and other retail ventures are bound to help the Washington State Convention and Trade Center.
"All of that redevelopment is part of what we sell when are looking to draw new (convention) business here," said Morris. Likewise, convention delegates are likely to flock to nearby retail centers such as Pacific Place. "There is a synergy there that works in both directions," Morris said.
One dark spot is that the number of Asian tourists vacationing in the U.S. generally is down as the economic malaise in the Far East continues, said Anais Winant, the convention and visitors bureau's vice president of public relations. The Far East accounts for nearly 40 percent of international tourism in Washington state, sending 231,600 visitors here in 1995, the most recent year for which figures were available.
However, even there, the results are not uniform. Travel from Taiwan remains healthy, and the number of technical visits from Japan - small groups exploring specific business facets in the area - is up, said Winant.
And visitors from the western United States may be on the upswing. Bruce Brigham, a principal with the Planet Retail image and design studio in Seattle, said he and others are noticing more people flying in from Idaho, Montana, Nevada and Alaska to shop. These are tourists who might have flown to San Francisco in previous years.
Still, analysts are keeping an eye on some of the retail ventures that opened here only a few years ago. The Wall Street Journal recently reported on the financial problems of Planet Hollywood, the trendy, celebrity-backed chain that includes an outlet at Sixth Avenue between Pike and Pine streets in Seattle. If anything, Planet Hollywood will be facing even stiffer competition as new restaurants proliferate, including those at Pacific Place.
"Analysts have been saying for years now that the United States is over-retailed. However, good and exciting retail complexes are still able to be extraordinarily successful if they have something the customer wants and have a great setting," said Kate Joncas, president of the Downtown Seattle Association.
"It is not an indication of failure that tenants leave. It is an indication of trouble when you don't have new tenants who want to come in," she said.
Seattle Times business reporter Joe Heim contributed to this report.
Lee Moriwaki: 206-464-2320. E-mail: email@example.com ------------------------------- Pacific Place
Here are the stores and restaurants that have signed leases in the Pacific Place complex at Sixth Avenue and Pine Street. Some tenants will occupy multiple floors.
Concourse (garage) level:
Barnes & Noble Booksellers
AT&T Wireless Services
EBX Software, software, games, accessories
MaxMara, women's fashions
BC BG, women's fashions
Barnes & Noble
Tiffany & Co.
Body Shop, cosmetics, skin- and hair-care products
Crane & Co., stationers
Illuminations, candles and home accessories
Finish Line, athletic apparel and footwear
J. Peterman, men's and women's clothing, gifts and home furnishings
Cloudfire, Western-style housewares, art, jewelry, pottery and apparel
Club Monaco, men's and women's fashions
Gymboree, apparel for children
Colorado Pen Company .
Mezzanine level (along Sixth Avenue)
Il Fornaio Restaurant and Bakery
Washington Mutual Bank
Starbucks Espresso Bar .
Williams-Sonoma Grande Cuisine
Pavo Real, natural-fiber sweaters
Papyrus, cards and paper products
Helly Hansen, outdoor wear
Louie Permelia, women's apparel
Cutter & Buck, sportswear and casual clothing
Custom Shop Shirtmakers
General Cinema Theatres
Store of Knowledge, educational products
Jeremiah Tower's Stars Bar & Dining
Desert Fire: A Southwestern Grill
Gordon Biersch Brewery
General Cinema Theatres
Source: Pine Street Development
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