Tuesday, December 11, 2007 - Page updated at 12:00 AM

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South Lake Union growth goes full throttle

Seattle Times staff reporter

Colie Hough-Beck didn't imagine, even a few years back, that South Lake Union would become home to Microsoft, Group Health and Merck — never mind a supermarket, hardware store, Irish pub, German restaurant and Russian-themed vodka lounge.

"You had to bring your lunch to work every day," said Hough-Beck, a landscape architect who has worked 17 years in the Seattle neighborhood of warehouses and relatively inexpensive housing. "Now we don't have a lunch table in our office."

Led by Vulcan, Paul Allen's development firm, South Lake Union's extreme makeover is about one-quarter complete. All the new construction equals nearly two 76-story Columbia Centers, and adds about 6,500 employees and 3,800 residents.

That doesn't include 4,000 employees rumored to be coming. Mayor Greg Nickels said last week he expects an announcement soon about a "bookseller to be named later" moving to South Lake Union.

The growing Seattle neighborhood hasn't seen anything yet, said Homer Williams, a developer who transformed Portland's Pearl District with help from a new streetcar similar to the one scheduled to start running through South Lake Union on Wednesday.

"I am sure the streetcar is going to have a tremendous impact there," said Williams, estimating that his company tripled its development — to a total of $750 million in new buildings — because of the Portland streetcar.

Critics of taxpayer spending on the Seattle streetcar and other projects in "Allentown" have been muted as building after building goes up and the City Council votes again and again for zoning changes, tax breaks and park projects.

Still, some downplay Allen's success. The area hasn't quite become a biotech hub as touted, they say, and many of the new workers simply moved there from other parts of the city.

Others are sorry to see new offices where blue-collar warehouses stood, and pints of Rainier replaced by $7 margaritas.

And in the latest skirmish, City Councilmember Peter Steinbrueck contends Nickels' proposal to allow some Vulcan buildings to rise as high as 160 feet — almost 100 feet higher than now — comes with a special discount.

The mayor wants Vulcan to get the extra height in exchange for paying $5 million toward affordable housing for the neighborhood. To keep the rules for Vulcan consistent with those for other developers, Steinbrueck said, the Vulcan bill should be $7.6 million.

"I'm not prepared to carve out a special exception for one property owner," he said.

The consequence of Steinbrueck's stance isn't clear. Nickels is working on a compromise with council members.

Deputy Mayor Tim Ceis, who's been negotiating with Vulcan, is concerned that a big tenant and 4,000 jobs "could move out of Seattle to a suburban alternative" if the city demands too much.

"This thing is very fluid at this point," said Lyn Tangen, Vulcan's director of government and community affairs.

"5 years instead of 50"

With South Lake Union's location in the geographic center of Seattle, quick access to Interstate 5, Highway 99 and downtown, its redevelopment has been considered inevitable. But it took Vulcan, which assembled 60 acres stretching from Lake Union to Denny Way, to make it happen at warp speed.

"What happened is pretty much what everybody expected, but it's occurred in five years instead of 50," said Mike Foley, who was a neighborhood activist and sometime Vulcan critic until the company bought his property for $21 million in 2003.

Allen's vast holdings have allowed him to move faster and with a more cohesive vision than a mix of owners would have, Nickels has said. And Vulcan was able to start bringing in tenants in 2003, when the local economy was slumping.

"While his involvement is frequently attacked, Paul Allen is committed to the community and is recession-proof," Nickels said. "He can build for the long term, as opposed to many builders who have to get that immediate return. Having him as an anchor has been important."

Vulcan's enterprise gained visible momentum when it landed Whole Foods Market as a tenant in its 2200 Westlake project. The three-tower complex, at Denny Way and Westlake Avenue, features a hotel, shops, two restaurants and 261 condos, ranging in price from $300,000 to several million dollars. The streetcar will run by its front door.

Hough-Beck and her husband sold their house in View Ridge after their daughter went off to college. They bought a 735-square-foot, one-bedroom condo at 2200 Westlake. Now she calls Whole Foods her pantry, considers downtown her playground, and looks forward to taking the streetcar to a float plane on Lake Union and flying to her Hood Canal beach house without getting in a car.

Even with all the condos — and Vulcan is building 426 more of them — the mix of housing remains diverse, said Ada Healey, Vulcan's vice president of real estate.

Developers have recently built or are building 170 apartments for low-income and moderate-income residents. An additional 133 apartments are planned for low-income seniors and mentally ill homeless adults. A 12-story, 377-unit senior-housing complex is also under construction.

One-third of South Lake Union housing is considered affordable to low- and moderate-income, according to the city. But that's down 15 percent from a year ago.

Seattle has received "good public benefits" for its investment in the neighborhood, Nickels said, in the way of affordable housing, new tax revenues and private contributions to the street and parks.

That investment includes $26 million in the streetcar, $30 million to reconfigure Mercer Street, $9 million to renovate Lake Union Park, and $3 million in tax breaks for affordable housing. The city is also expected to spend roughly $150 million to build an electricity substation in the area, and Nickels is looking for about $100 million more to convert Mercer Street to a two-way, tree-lined boulevard.

"That would ... really be the crowning piece, along with the streetcar, in changing the neighborhood," Nickels said.

"Bonus" not big enough?

The latest flashpoint in the public-benefits debate is Vulcan's plan to build 1.5 million square feet of office space — the equivalent of another Columbia Center — for one tenant, expected to be Amazon.

To accommodate that tenant, Vulcan wants the city to quickly raise height limits on two blocks from 65 feet and 85 feet to 160 feet. Vulcan says it must start designing and permitting buildings soon so they'll be ready in 2011.'s leases at the Pacific Medical Center on Beacon Hill and in the Columbia Center expire in 2010.

For the added height, Vulcan would pay $5 million under the "bonus" formula used downtown, which allows developers to build taller if they contribute to public benefits such as affordable housing.

If it doesn't get the extra height, Vulcan has said, its big tenant would still come to South Lake Union. But Vulcan instead would build more squat buildings, of five or six stories — not the best use of land close to downtown, Vulcan and Nickels say.

Steinbrueck said Nickels is "leaving millions of dollars on the table" — $2.6 million, to be specific — because he is not strictly applying the downtown formula to Vulcan.

Instead, Nickels would more than double Vulcan's development capacity on two blocks but would charge affordable-housing fees on only about half.

Nickels would settle for other benefits — energy-efficient buildings, a plan to keep most workers from driving to work by themselves, extra setbacks from the sidewalk — for that first half of added development. The city's planning director estimates those benefits would cost Vulcan about $5 million.

While Vulcan and its tenant are not making any threats, every deal has a tipping point, said Vulcan's Tangen. "I don't know if $7.6 million would tip it over or not," she added.

If Vulcan did walk away from the 160-foot proposal and instead developed shorter buildings for its tenant, Ceis said, the city would get no money for affordable housing

So the decision, Ceis said, is not between getting $5 million, which would develop about 100 affordable apartments, or $7.6 million, which would produce 150 apartments. "It's whether to get $5 million or nothing."

Steinbrueck's committee took a preliminary vote last week to charge Vulcan the additional $2.6 million. The committee is scheduled to revisit the issue Wednesday. The full council is expected to vote next Monday.

Bob Young: 206-464-2174 or

Copyright © 2007 The Seattle Times Company


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